Datasets:

albertvillanova

/

legal_contracts

like 23

--------------------------------------------------------------------------------   [ TABLE OF CONTENTS ] Exhibit 10(b)     ASSET PURCHASE AGREEMENT   by and among PROCARE PHARMACY, INC. (and its Designated Affiliates), STADTLANDER OPERATING COMPANY, L.L.C., STADTLANDER LICENSING COMPANY, LLC, STADTLANDER DRUG OF CALIFORNIA, LP, STADTLANDER DRUG OF HAWAII, LP, AND BERGEN BRUNSWIG CORPORATION   DATED AS OF JULY 3, 2000         --------------------------------------------------------------------------------   [ COVER ]   TABLE OF CONTENTS         ARTICLE I CERTAIN DEFINITIONS 11         ARTILCE II ACQUISITION OF PURCHASED ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES BY BUYING GROUP 11           Section 2.1 Purchase and Sale 11           Section 2.2 Assumption of Obligations and Liabilities 11           Section 2.3 Base Purchase Price; Adjustments; AR Collection Excess Payment 12           Section 2.4 Payment of Purchase Price 13           Section 2.5 Closing Statements 14           Section 2.6 Sales and Transfer Taxes 15           Section 2.7 RX Count 15           Section 2.8 Accounts Receivable Collection Agreement 16           Section 2.9 Prorations 16         ARTICLE III CLOSING; TERMINATION 16           Section 3.1 Closing 16           Section 3.2 Deliveries by Selling Group Members and Parent at Closing 16           Section 3.3 Deliveries by Buying Group at Closing 18           Section 3.4 Inventory 18           Section 3.5 Change of Name 18         ARTICLE IV REPRESENTATIONS AND WARRANTIES BY EACH SELLING GROUP MEMBER AND PARENT 19           Section 4.1 Existence and Qualification 19           Section 4.2 Ownership of Selling Group Members; Interests in Other Entities 19           Section 4.3 Authorization; Enforceability 20           Section 4.4 No Breach or Violation 20           Section 4.5 Consents and Approvals 21           Section 4.6 Financial Statements; Rx Audition Information 21           Section 4.7 Inventory 22           Section 4.8 Accounts Receivable and Bad Debts 22           Section 4.9 Material Contracts and Obligations 22           Section 4.10 Obligations with Material Adverse Effect 24           Section 4.11 Employees 24           Section 4.12 Absence of Certain Developments 25           Section 4.13 Undisclosed Liabilities 26           Section 4.14 Tax Matters 26           Section 4.15 Real Property Owned and Leased 26           Section 4.16 Title to Purchased Assets; Condition of Assets; Necessary Property 27           Section 4.17 Proprietary Rights 27           Section 4.18 Necessary Licenses and Permits 28           Section 4.19 Environmental 28           Section 4.20 Corporate Documents, Books and Records 29           Section 4.21 Compliance with Law 29           Section 4.22 Litigation 29           Section 4.23 Indebtedness to and from Officers, Managers Partners and Others 29           Section 4.24 Labor Agreements and Employee Relations 29           Section 4.25 Brokers' Fees 30           Section 4.26 Major Product Lines, Customers and Suppliers 30           Section 4.27 All Material Information 30           Section 4.28 Employee Benefit Plans and Arrangements 30           Section 4.29 Arms Length Transactions; Conflicts of Interest 31           Section 4.30 Insurance 31           Section 4.31 Medicare and Medicaid; Reimbursement by Payors; Related Legislation and Regulations 32         ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYING GROUP 33           Section 5.1 Organization of each Buying Group Member 33           Section 5.2 Authorization 33           Section 5.3 No Breach or Violation 33           Section 5.4 Litigation 33           Section 5.5 Consents and Approvals 34           Section 5.6 Brokers' Fees 34         ARTICLE VI COVENANTS 34           Section 6.1 Access to Information; Financial Statements 34           Section 6.2 Employee Matters 34           Section 6.3 Conduct of Business 35           Section 6.4 Corrections Division 37           Section 6.5 Notices and Consents 38           Section 6.6 Further Assurances 38           Section 6.7 Cooperation; Access to Records After Closing 38           Section 6.8 Casualty Losses 39           Section 6.9 Environmental Studies 39           Section 6.10 No Shop 40           Section 6.11 Assignment of Rights 40           Section 6.12 Software Licenses 40         ARTICLE VII CONDITIONS PRECEDENT TO BUYING GROUP'S OBLIGATIONS 40           Section 7.1 Correctness of Representations and Warranties 40           Section 7.2 No Adverse Change in Business or Properties 40           Section 7.3 Prescriptions 40           Section 7.4 Compliance with Agreement 41           Section 7.5 Certificate of Selling Group Member 41           Section 7.6 Incumbency Certificate 41           Section 7.7 Absence of Litigation 41           Section 7.8 Consents 41           Section 7.9 Licenses, etc 41           Section 7.10 FIRPTA Certificate 41           Section 7.11 Customer Lists 42           Section 7.12 Certified Charter; Good Standing 42           Section 7.13 Related Agreements 42           Section 7.14 Proof of Action 42           Section 7.15 Leases 42           Section 7.16 ASD Contracts 42         ARTICLE VIII CONDITIONS PRECEDENT TO SELLING GROUP'S OBLIGATIONS 42           Section 8.1 Correctness of Representations and Warranties 42           Section 8.2 Compliance with Agreement 42           Section 8.3 Certificate of Buying Group 43           Section 8.4 Absence of Litigation 43           Section 8.5 Proof of Action 43           Section 8.6 Incumbency Certificate 43           Section 8.7 Related Agreements; Guaranty 43           Section 8.8 Proceedings and Documents 43           Section 8.9 Consents 43           Section 8.10 Good Standing Certificates 43         ARTICLE IX INDEMNIFICATION 43           Section 9.1 By Each Selling Group Member and the Parent 43           Section 9.2 Notice of Claims; Defense of Third Party Claims 44           Section 9.3 Set-off 45           Section 9.4 Limitations 45           Section 9.5 Buying Group 46           Section 9.6 Limitations - Buying Group 46         ARTICLE X TERMINATION 47           Section 10.1 Termination 47           Section 10.2 Effect of Termination 48         ARTICLE XI MISCELLANEOUS 48           Section 11.1 Assignment 48           Section 11.2 Payment of Fees and Expenses 48           Section 11.3 Further Acts by Each Selling Group Member and the Parent 48           Section 11.4 Entire Agreement, Construction, Counterparts, Effectiveness 48           Section 11.5 Notices 48           Section 11.6 Changes in Writing 49           Section 11.7 Severability 49           Section 11.8 Governing Law 50           Section 11.9 Consent to Jurisdiction 50           Section 11.10 Non-Competition by Selling Group/Parent 50           Section 11.11 Non-Competition - Buying Group 51           Section 11.12 Waiver of Jury Trial 52           Section 11.13 Publicity 52     --------------------------------------------------------------------------------     EXHIBITS     A - Accounts Receivable Collection Agreement   B - Primary Dealing Agreement   C - Transition Support Agreement   3.2(a)(i) - Bill of Sale   3.2(a)(ii) - Assignment of Leases   3.2(a)(iii) - Assignments of Intellectual Property   3.3 - Assumption Agreement   6.11 - Non-Exclusive Assignment Agreement   7.9 - Power of Attorney   7.10 - FIRPTA Certificate   --------------------------------------------------------------------------------   SCHEDULES   1(a) - ProCare Designated Affiliates   1(b) - AR Valuation Principles   1(c) - ASD Injectibles Business Contracts   1(d) - Bonus Plan   1(d)(d) - Form of Rx Report   1(e) - Employment Agreements   1(f) - Excluded Assets   1(g) - Transferred Assets to ASD from OPCO   1(h) - May 31 Agreed Balance Sheet   1(i) - Retained Independent Contractors and Employees   1(j) - Permitted Liens   1(k) - Profit Sharing Plan   1(l) - Fixed Assets   1(m) - Jointly Used Purchased Assets   3.4 - Inventory Cost Factors   4.1 - Jurisdictions in which Selling Group is Qualified to do Business   4.2(b) - Selling Group Entity Information   4.2(c) - Equity Interests in Others   4.2(d) - Required Investments in Others   4.4(a) - Parent's No Breach or Violation   4.4(b) - Selling Group Member's No Breach   4.5 - Third Party Consents   4.6(a) - September 30th Balance Sheet   4.6(b) - Historical Financial Statements   4.7 - All Inventory of Selling Group   4.8 - Accounts Receivable and Bad Debts   4.9 - Material Contracts and Obligations   4.11 - List of Employees   4.12 - Absence of Certain Developments   4.15 - Real and Personal Property Leases   4.16(a) - List of Liens on Purchased Assets   4.16(b) - List of Assets Owned by or Leased to a Selling Group Member, Parent or     respective Affiliates   4.17 - Proprietary Rights   4.18 - Necessary Licenses and Permits   4.21 - Compliance with Law   4.22 - Litigation   4.23 - Selling Group Member Indebtedness   4.24 - Labor Agreements   4.25 - Brokers' Fees   4.26(a) - Selling Group Member's Twenty-five (25) Largest Customers   4.26(b) - Selling Group Member's Twenty-five (25) Largest Suppliers   4.26(c) - Bonding or Financial Security Arrangements   4.29 - Conflicts of Interest   4.30 - Insurance   4.31(a) - Medicare and Medicaid Jurisdictions   4.31(b) - Medicare and Medicaid Provider Numbers   4.31(c) - Offsets Against Future Reimbursements   4.31(d) - Medicare and Medicaid Cost Reports   5.5 - Consents and Approvals   6.2(a) - Employee Matters   6.3(c) - Collection of Accounts Receivable   6.11 - Third Parties granting indemnification rights to Selling Group Members   7.8 - Consents   7.9 - Transferred Governmental Consents   8.9 - Governmental Approvals     --------------------------------------------------------------------------------   [ COVER ] || [ TABLE OF CONTENTS ]     ASSET PURCHASE AGREEMENT                THIS AGREEMENT is made and entered into as of the 3rd day of July, 2000 by and among: (i) ProCare Pharmacy, Inc., a Rhode Island corporation ("ProCare"), and its designated Affiliates listed on Schedule 1(a) attached hereto (collectively, the "Buying Group" and each individually, a "Buying Group Member"); (ii) Stadtlander Operating Company, L.L.C., a Delaware limited liability company ("OPCO"); (iii) Stadtlander Licensing Company, LLC, a Delaware limited liability company ("Licensing Company"); (iv) Stadtlander Drug of California, LP, a Delaware limited partnership ("California LP"); (v) Stadtlander Drug of Hawaii, LP, a Delaware limited partnership ("Hawaii LP," and together with OPCO, Licensing Company, and California LP, collectively the "Selling Group" and each individually, a "Selling Group Member"); and (vi) Bergen Brunswig Corporation, a New Jersey corporation (the " Parent"). R E C I T A L S              WHEREAS, Selling Group is engaged in, among other things, the specialty retail pharmacy and the specialty mail order pharmacy business (such businesses, other than the Corrections Division Business (as hereinafter defined) collectively, the " Business");              WHEREAS, Parent, directly or indirectly, owns all of the issued and outstanding equity interests of each Selling Group Member;              WHEREAS, Selling Group desires to sell and assign to Buying Group, and Buying Group desires to purchase and assume from Selling Group, substantially all of Selling Group's assets and business operations and certain of its liabilities on the terms and subject to the conditions hereinafter set forth; and              WHEREAS, in order to induce Selling Group and Parent to enter into this Agreement, CVS Corporation, a Delaware corporation, has entered into as of the date hereof a guaranty of Buying Group's obligations hereunder (the "CVS Guaranty").              NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS              (a)      As used herein, the following terms shall have the following meanings in addition to those additional terms as defined herein:              Accounts Receivable Collection Agreement. The term "Accounts Receivable Collection Agreement" shall mean that certain Accounts Receivable Collection Agreement entered into by and between ProCare and OPCO, at the Closing, a copy of which is attached hereto as Exhibit A.              Acquired Net Asset Value. The term "Acquired Net Asset Value" shall mean the difference (positive or negative) between (a) the book value of the Purchased Assets, excluding (i) Net Accounts Receivable, and (ii) goodwill (if any) attributable to the Purchased Assets, and (b) the Balance Sheet Assumed Liabilities, all as reflected on the Closing Balance Sheet prepared in accordance with GAAP and consistent with the practices utilized in the preparation of the May 31, 2000 Agreed Balance Sheet.              Affiliate. The term "Affiliate" of any Selling Group Member or any other specified Person (the "Specified Person") shall mean any other Person that directly or indirectly controls, is controlled by or is under common control with a Selling Group Member or other Specified Person. For purposes of this definition, the term "control" means the power, whether direct or indirect, to direct or cause the direction of the management or policies of a Person, whether through the ownership of securities, by contract or otherwise.              Agreement. The term "Agreement" shall mean this Asset Purchase Agreement, and any and all amendments, modifications and supplements hereto entered into in accordance with the terms hereof.              ARC Securities. The term "ARC Securities" means the equity securities owned by the Selling Group in Advanced Reproductive Care, Inc., a Delaware corporation, including the warrant to purchase 685,000 shares of its common stock.              AR Valuation Principles. The term "AR Valuation Principles" means the accounting principles set forth on Schedule 1(b) hereto used in the preparation of the May 31, 2000 Agreed Balance Sheet and to be used by Buying Group and Selling Group in determining the value of the Net Accounts Receivable.              ASD. The term "ASD" means ASD Specialty Healthcare, Inc., a Delaware corporation.              ASD Injectibles Business Contracts. The term "ASD Injectibles Business Contracts" shall mean the ASD contracts described on Schedule 1(c) attached hereto.              Assumed Agreements. The term "Assumed Agreements" shall mean all Contracts of any Selling Group Member that relate to the Business: (i) which are listed in Schedule 4.9 hereto as items which shall constitute Assumed Agreements (including Assumed Leases) or (ii) which, pursuant to the terms of Section 4.9 hereof, are not required to be disclosed on Schedule 4.9 but which have been entered into by a Selling Group Member in the ordinary course of business, including without limitation, sales orders, sales contracts, purchase orders, purchase contracts, quotations and bids.              Assumed Leases. The term "Assumed Leases" shall mean all leases of any Selling Group Member that relate to real estate currently used in the Business and which are listed on Schedule 4.9 as leases being assumed.              Assumed Liabilities. The term "Assumed Liabilities" shall mean the obligations and liabilities of the Selling Group expressly assumed by Buying Group pursuant to Section 2.2 hereof and no others.              Bonus Plan. The term "Bonus Plan" shall mean each Selling Group Member's bonus plan or plans, as more particularly described on Schedule 1(d) hereto.              Business Day. The term "Business Day" means a day on which national banks are open for business in New York.              Buying Group. The term "Buying Group" and "Buying Group Member" shall have the meanings set forth in the preamble hereof and shall include any Affiliate of any Buying Group Member as may be designated in writing to Selling Group prior to the Closing Date.              Buying Group's Accountants. The term "Buying Group's Accountants" shall mean KPMG LLP.              Closing. The term "Closing" shall mean the closing of the transactions contemplated herein.              Closing Balance Sheet. The term "Closing Balance Sheet" shall mean the consolidated balance sheet of Selling Group (excluding the Corrections Division Business) as of the end of the business day immediately preceding the Closing Date, which shall be prepared in accordance with GAAP, consistent with the practices utilized in the preparation of the May 31 Agreed Balance Sheet, and finally determined in accordance with Section 2.5 hereof.              Code. The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder.              Competing Business. The term "Competing Business" means the business of providing comprehensive specialty pharmacy care in the following disease states: HIV, transplant, infertility and Serious Mental Illness (such disease states collectively referred to as "Disease States"). Competing Business means specifically with respect to Serious Mental Illness, the provision of anti psychotrophic medicines to patients suffering from Serious Mental Illnesses who are under the active treatment or care of a mental health institution or case worker. Each of the foregoing disease states shall be included within the definition of "Disease States" only so long as any Buying Group Member is engaged in the business of providing comprehensive specialty pharmacy care in that particular disease state. The parties agree that none of the following activities by any Selling Group Member, Parent or any of their Affiliates, including without limitation, Besse Medical Services, Inc., ASD Speci alty Healthcare, Inc., ASD Direct and PharMerica, Inc., shall be deemed a Competing Business: (a) the sale or distribution of pharmaceuticals, medical, surgical and laboratory supplies and products and health and beauty products (collectively, " Pharmaceuticals and Products") to hospitals, alternate sites, pharmacies (closed, open, retail and mail order) and infusion centers where such Pharmaceuticals and Products will be used for resale or to physicians offices where such Pharmaceuticals and Products will be used in office administration, including without limitation, Pharmaceuticals and Products used in the treatment of Disease States; (b) operating a comprehensive specialty pharmacy business relating to any disease states other than the Disease States; (c) engaging in the medical injectibles business (excluding the injectibles business derived from the scope of the ASD Injectibles Business Contracts, other than hemophilia); (d) engaging in the Corrections Division Business; (e) the fulfillment fo r or on behalf of any Internet Supplier of any orders for Pharmaceuticals or Products to any customers of such Internet Supplier or to users of such Internet Supplier's website; (f) the acquisition of any equity or the provision of management, consulting or administrative services to, or the development, launching or operation, or otherwise becoming an Affiliate of, an Internet Supplier; and (g) entering into any agreement or business arrangement with respect to or otherwise participating in any joint marketing arrangement, joint venture, strategic marketing alliance, cooperative or group purchasing organization, or any other contractual or partnering arrangement with any Person; provided, however, that the entity that is contracted with does not provide a comprehensive specialty pharmacy business in the Disease States as a result of such agreement, arrangement or joint venture.              Competing Corrections Division Business. The term "Competing Corrections Division Business" means an institutional pharmacy business that provides patient specific medications, medical and surgical supplies and commissary goods to inmates detained in either public or private correctional facilities, including prisons, jails and juvenile detention centers. The parties agree that the following activities by any Buying Group Member or any of their Affiliates shall not be deemed a Competing Corrections Division Business: engaging in an institutional pharmacy business for inmates detained in the State of Illinois correctional facilities.              Corrections Division Business. The term "Corrections Division Business" means the institutional pharmacy business of OPCO and its Affiliates that provides patient specific medications, medical and surgical supplies and commissary goods to inmates detained in either public or private correctional facilities, including prisons, jails and juvenile detention centers.              Daily Rx Average. The term "Daily Rx Average" means, for any specified period, the aggregate number of retail and mail order prescriptions filled, shipped and billed by Selling Group for the Business (other than from the San Francisco Wellness Centers located at Castro Street and 18th Street) during such period, as reflected on the SPARC's daily prescription report, the KALOS' daily prescription report, and the Stadtlander returns report issued in the forms attached as Schedule 1(d)(d), less returns, divided by the number of Business Days during such period. The Daily Rx Average for April and May 2000 is 10,347.4.              Employment Agreements. The term "Employment Agreements" shall mean those certain employment agreements (or assignments of existing employment or consulting agreements) between a Buying Group Member and the employees of the Business listed on Schedule 1(e) hereto.              Excluded Property. The term "Excluded Property" shall mean all of the Selling Group's right, title and interest in each of the following:              (a)       the cash or cash equivalents of each Selling Group Member;              (b)       the seals, certificates of formation, minute books, partnership records, equity ownership ledgers, or other records having to do with the organization or formation of any Selling Group Member;              (c)       the rights which accrue or will accrue to a Selling Group Member under this Agreement and the Related Agreements;              (d)       OPCO's membership interests in Stadt Solutions, LLC and the Stadt Solutions, LLC Operating Agreement;              (e)       all capital stock, partnership interests and other equity interests in any Person held by OPCO or its Affiliates, other than the ARC Securities;              (f)       [intentionally omitted];              (g)       the assets used primarily in the Corrections Division Business and the business of the Corrections Division Business as a going concern;              (h)       all right, title and interest in and under all contracts with any Selling Group Member relating to the Excluded Property;              (i)       all intercompany receivables;              (j)       all the consulting agreements and employment agreements entered into by a Selling Group Member that are not Assumed Agreements;              (k)       the assets and properties or rights set forth on Schedule 1(f) hereto, including assets jointly used by Selling Group and Parent and/or Parent's Affiliates as set forth on Schedule 1(f) hereto.              (l)       any claim which Parent, the Selling Group or any other Affiliate of Parent may have against Counsel Corporation or its Affiliates arising out of the negotiation, execution and performance of the Purchase Agreement, dated as of January 21, 1999, by and among the parties hereto (the "Counsel Litigation");              (m)       Tax refunds for periods ending on or before the Closing Date or straddling the Closing Date, other than tax refunds of property and ad valorem taxes to the extent such taxes are (i) imposed with respect to the Purchased Assets and (ii) the obligation of the Buying Group with respect to a portion of a Straddle Tax Period; and              (n)       those assets to be transferred to ASD from OPCO as set forth on Schedule 1(g) hereto.              Family Member. The term "Family Member" shall mean, as applied to any Person who is an individual, such individual's spouse, parent, sibling, child, grandchild or other lineal descendant thereof and each trust, limited partnership and limited liability company created for the exclusive benefit of one or more of such Persons.              Generally accepted accounting principles or "GAAP" means United States accounting principles which are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors and other recognized principle setting bodies, in effect from time to time.              Governmental Authority. The term "Governmental Authority" shall mean the Federal Government, or any state or political subdivision thereof, or any agency or body of the Federal Government or any state or other political subdivision thereof, or any court asserting jurisdiction over any Selling Group Member or Parent, which is exercising executive, legislative, judicial, regulatory or administrative functions.              Internet Supplier. The term "Internet Supplier" means any Person in the business of selling or distributing, procuring orders for, conducting auctions of, or operating an exchange or marketplace for the purchase and sale of Pharmaceuticals and Products, or any website on or through which such functions are performed, provided that such business is performed or such website is enabled primarily through the Internet, including any now or hereafter existing website of Parent, any Selling Group Member or any of their Affiliates, and provided further that such Person is not engaged in the business of providing comprehensive specialty pharmacy care in the Disease States.              Laws. The term "Laws" shall mean all federal, state, local or foreign laws, treaties, regulations, rules, orders or administrative or judicial determinations having the effect of law.              Liens. The term "Liens" shall mean all liens, pledges, charges, encumbrances, security interests, mortgages, leases, options, conditions, community property rights or other adverse claims of any kind or description.              Material Adverse Change. The term "Material Adverse Change" means, with respect to a Person, a material adverse change in the business, condition (financial or otherwise), prospects, properties, assets, liabilities or results of operations of such Person and its subsidiaries, taken as a whole. When evaluated in the context of any Selling Group Member, the term "Material Adverse Change" shall take into account all of the Selling Group Members taken as a whole. When evaluated in the context of the Buying Group, the term "Material Adverse Change" shall take into account all of the Buying Group Members taken as a whole.              Material Adverse Effect. The term "Material Adverse Effect" means: (a) an adverse effect on the validity or enforceability of this Agreement or any of the Related Agreements in any material respect, (b) an adverse effect that would reasonably be expected to result in a Material Adverse Change, or (c) an impairment of the ability of any Selling Group Member to fulfill its obligations under this Agreement or any of the Related Agreements in any material respect.              May 31, 2000 Agreed Balance Sheet. The term "May 31, 2000 Agreed Balance Sheet" shall mean that certain unaudited consolidated balance sheet of the Business at May 31, 2000 prepared in accordance with GAAP and as agreed upon by Selling Group and Buying Group, a copy of which is attached hereto as Schedule 1(h).              Net Accounts Receivable. The term "Net Accounts Receivable" shall mean, with respect to any date, the accounts receivable of the Selling Group (other than those constituting Excluded Assets) determined on a consolidated basis as of such date, net of reserves for bad debt, all as determined in accordance with GAAP and in accordance with the AR Valuation Principles.              Non-Assumed Liabilities. The term "Non-Assumed Liabilities" shall mean any obligation or liability of a Selling Group Member not expressly assumed by Buying Group pursuant to Section 2.2 of this Agreement, including without limitation the following:              (i)       any obligation or liability of any Selling Group Member to Parent or any Affiliate of Parent (whether by contract, lease or otherwise), other than those certain accounts payable due Parent or an Affiliate of Parent more particularly described on Schedule 2.2(a), representing unpaid purchase price of inventory acquired in the ordinary course of business of the Business;              (ii)       any obligation or liability of any Selling Group Member: (x) arising prior to or as a result of the Closing to any employees (including, but not limited to, any severance, bonus or vacation pay obligations), agents or independent contractors of such Selling Group Member identified on Schedule 1(i) hereto, or (y) arising as a result of the termination by Selling Group at the Closing of any Rehired Employees, or (z) any obligation or liability to any Rehired Employee for vacation pay on account of any period ending on or prior to the Closing Date, except to the extent accrued on the Closing Balance Sheet and included in the Acquired Net Asset Value;              (iii)       any obligation or liability of any Selling Group Member in connection with (x) any Profit Sharing Plan or Bonus Plan (or their respective terminations), except to the extent of any performance bonus for Rehired Employees accrued on the Closing Balance Sheet and included in the Acquired Net Asset Value, or (y) in accordance with any "stay bonus," "completion bonus," or other change in control bonus or payment that may be triggered by the transactions contemplated by this Agreement;              (iv)       any obligation or liability of any Selling Group Member for any expenses (including without limitation, fees of attorneys, accountants, financial or other advisors to any Selling Group Member) incurred in connection with the transactions contemplated hereby;              (v)       any obligation or liability arising out of or resulting from non-compliance by any Selling Group Member (or their respective predecessors) with any Law (including Medicare and Medicaid programs), or any third-party claims related thereto;              (vi)       any obligation or liability of any Selling Group Member relating to any product liability claims (whether based upon negligence, breach of warranty, strict liability or otherwise), or relating to any litigation, claim, proceeding or other dispute, whether presently existing or threatened or hereafter arising out of any act or omission taken, or omitted to be taken, or condition or state of facts existing, or arising out of any products (or component parts) which were manufactured or sold, or in respect of services which were performed, on or before the Closing Date, including those with respect to "script fill" liability;              (vii)       any obligation or liability of any Selling Group Member arising out of, resulting from, or related to any Excluded Property or the Corrections Division Business;              (viii)       any obligation or liability of any Selling Group Member, Parent or Parent's Affiliates for Taxes for any period, including, but not limited to, those Taxes incident to or arising as a consequence of the consummation of the transactions contemplated hereby; provided, that Buying Group shall be responsible for property and ad valorem taxes which are imposed on the Purchased Assets for any tax period ending after the Closing Date; provided, further, that for any such tax period beginning before and ending after the Closing Date (a "Straddle Tax Period"), Buying Group shall only be responsible for such taxes to the extent they are imposed with respect to the portion of such Straddle Tax Period which begins on the Closing Date, by applying to the total tax due for the entire Straddle Tax Period a ratio determined by calculating the number of days from the Closing Date (inclusive) to the end of the Straddle Tax Period and dividing that numbe r of days by the total number of days in the Straddle Tax Period and, provided further, that in computing the portion of such Taxes for which Selling Group is responsible, any post-Closing Date adjustment to asset values shall be disregarded;              (ix)       any indebtedness of any Selling Group Member for borrowed money or any guarantees in respect of borrowed money;              (x)       any brokerage, success, placement or finder's fee payable by any Selling Group Member in connection with the transactions contemplated hereby;              (xi)       any obligation or liability of any Selling Group Member arising out of this Agreement or any Related Agreement;              (xii)       any obligation or liability arising out of any litigation, investigation or review, pending or threatened, or any audit or recoupment by any Governmental Authority with respect to any Selling Group Member or Parent relating to or arising from actions or omissions occurring on or prior to the Closing Date by any Selling Group Member, Parent or their respective predecessors, including, but not limited to, the litigation, investigations and reviews disclosed on Schedule 4.21, 4.22 or 4.31 hereto; and              (xiii)       any obligation or liability of any Selling Group Member in connection with any claim of overpayment or refund (except to the extent specifically provided for on the Closing Balance Sheet and in the calculation of Net Accounts Receivable on the Closing Date and as reflected on the Statement of Credit Balances), rebate, recoupment, settlement, off-set or the like, with respect to the operation of the Business prior to the Closing, including, without limitation, any third-party claims related thereto.              Ordinary course of business. The term "ordinary course of business" means, with respect to any entity, actions which are (a) consistent with the past practices of the designated entity, (b) similar in nature and style to actions customarily taken by the designated entity, and (c) do not require, and in the past have not received, specific authorization by the Board of Directors, Board of Managers, or such similar entity, of the designated entity.              Permitted Liens. The term "Permitted Liens" shall mean (x) Liens for Taxes due but not yet payable as of the applicable date, (y) Liens arising by operation of law in the ordinary course of business, such as mechanics' liens, materialmen's liens, carriers' liens, warehouseman's liens, and similar liens, none of which are substantial in character, amount or extent and none of which materially detract from the value or materially interfere with the present use of the asset to which such Lien attaches, and (z) Liens described on Schedule 1(j) hereto.              Person. The term "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof.              Primary Dealing Agreement. The term "Primary Dealing Agreement" means that certain Primary Dealing Agreement between ProCare and Bergen Brunswig Drug Company to be executed at the Closing, a copy of which is attached hereto as Exhibit B.              Profit Sharing Plan. The term "Profit Sharing Plan" shall mean any Selling Group Member's defined contribution retirement plan, as more particularly described on Schedule 1(k) hereto.              Purchased Assets. The term "Purchased Assets" shall mean all of the Selling Group's right, title and interest in and to (i) the business of each Selling Group Member as a going concern other than the business of the Corrections Division Business, (ii) the name "Stadtlanders" and any derivatives thereof, and (iii) all of the properties, assets, and rights of any kind, whether tangible or intangible, real or personal, of each Selling Group Member or in which each Selling Group Member has any interest (other than assets constituting Excluded Property) on the Closing Date, wherever situated and whenever acquired, including without limitation, the following:              (a)       any and all accounts receivable;              (b)       any and all notes, debentures, and other receivables;             (c)      any and all Intellectual Property including, without limitation, the Intellectual Property identified on Schedule 4.17 hereto, and any and all applications for any of the foregoing, together with any and all rights to use any or all of the foregoing, and any and all goodwill associated with any of the foregoing;              (d)       any and all, discoveries, improvements, processes, methods, formulae (secret or otherwise), data, trade secrets, confidential information, technology, know-how, computer software (whether fully developed or in process and including documentation and related object and source codes) and ideas (including without limitation, those in the possession of third parties), whether patentable or not, licenses and other similar rights, and any and all drawings, records, books or other indicia, however evidenced, of the foregoing, together with any and all rights to use any or all of the foregoing, and any and all goodwill associated with any of the foregoing;              (e)       any and all rights existing under the Assumed Agreements;              (f)       any and all machinery, equipment (including without limitation, all transportation, laboratory, testing, and office equipment), vehicles, trade fixtures, computer hardware, world wide web or Internet sites (including without limitation "www.Stadtlander.com" and "www.Stadtassist.com"), domain names, data processing equipment, and furniture, and any and all interests in all leasehold improvements, including without limitation, the fixed assets more particularly described in Selling Group's fixed asset ledger attached as Schedule 1(l) hereto (other than fixed assets on such ledger which are disposed of in the ordinary course of business prior to the Closing Date in accordance with this Agreement);              (g)       any and all office, production or data processing supplies, spare parts, other miscellaneous supplies, and other tangible property of any kind, including without limitation, any and all tangible property located in any warehouse, office or other space;              (h)       any and all raw materials, work-in-process, finished goods, consigned goods and other supplies or inventories;              (i)       any and all deposits and prepayments (other than prepaid expenses) and the value of revenues from pharmaceutical manufacturers' agreements received by the Business prior to the Closing Date that pertain to any period after the Closing Date;              (j)       except to the extent arising from Excluded Property, any and all claims, causes of action, choses in action, rights of recovery and rights of setoff of any kind, including without limitation, any liens, mechanic's liens or any rights to payment or warranties or to enforce payment or warranties in connection with work performed or goods delivered on or prior to the Closing Date, and any and all claims to insurance proceeds due or to become due under Selling Group's applicable insurance policies in connection with any Assumed Liabilities, and in connection with any damage or loss to any Purchased Asset occurring on or prior to the Closing Date;             (k)     any and all records (including prescription files and records) and lists pertaining to customers, suppliers or Rehired Employees and any and all books, ledgers, files and business records;              (l)       any and all advertising materials and other printed or written materials;           (m)    any and all governmental and other licenses, permits, franchises, concessions, authorizations, approvals and certificates (to the extent transferable);              (n)       any and all goodwill as a going concern (excluding goodwill attributable to the Excluded Property) and any and all other intangible properties;              (o)       any and all telephone listings, switches and hardware;              (p)       the ARC Securities;              (q)       the ASD Injectibles Business Contracts;              (r)       those assets used in the operation of the Business that are used jointly by a Selling Group Member and Parent that are described on Schedule 1(m) hereto; and              (s)       any and all other assets of Selling Group not referred to in (a)-(r) above, whether or not reflected on the Closing Balance Sheet, to the extent such assets are not Excluded Property.              Related Agreements. The term "Related Agreements" shall mean the Accounts Receivable Collection Agreement, the Assumption Agreement, the Bill of Sale, the Primary Dealing Agreement and the Transition Support Agreement.              Selling Group's Accountants. The term "Selling Group's Accountants" shall mean Deloitte & Touche LLP.              Selling Group's Knowledge. The term "Selling Group's Knowledge" shall mean the good faith actual knowledge of each of Steve Collis, Kent Harms, William A. Jones, Diana Long, Nathaniel Lord, Rudy Molinet, Milan Sawdei, Shafi Shilad, Gordon Vanscoy, and David Weidner after due and proper inquiry and such due diligence as is reasonably required for such Person to make an informed representation or warranty as to such Person's "knowledge" of a matter.              Selling Group and Selling Group Member. The terms "Selling Group" and "Selling Group Member" have the meanings set forth in the Preamble to the Agreement.              Serious Mental Illness. The term "Serious Mental Illness" means bipolar, schizophrenic and other serious mental illnesses but does not include depression and neurological disorders.              Stadt Solutions, LLC. The term "Stadt Solutions, LLC" means Stadt Solutions, LLC, a Delaware limited liability company.              Statement of Credit Balances. The term "Statement of Credit Balances" means the certificate of Selling Group as to patient/payor credit balances included in Net Accounts Receivable as of the Closing Date, delivered pursuant to Section 3.2(ix) hereof.              Taxes. The term "Taxes" shall mean, with respect to any Person, all foreign, federal, state and local taxes (including deficiencies, interest, additions to tax and penalties relating thereto) of any kind, including, without limitation (x) all income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupancy, social security, Medicare, premium, property or windfall profits tax, customs, duty or other taxes or governmental fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing authority (domestic or foreign) upon such Person and (y) all liabilities of any Person for the payment of any amount of the type described in the immediately preceding clause (x) as a result of being a party to any tax sharing agreement or purchase and sale agreement or as a result of any express or implied oblig ation (including, but not limited to, an indemnification obligation).              Tax Returns. The term "Tax Returns" shall mean all returns, declarations, reports, workpapers, estimated returns and information returns and statements of any Person required to be filed or sent by or with respect to it in respect of any Taxes.              Transition Support Agreement. The term "Transition Support Agreement" means that certain Transition Support Agreement between ProCare and Parent to be executed at the Closing, a copy of which is attached hereto as Exhibit C.              (b)       In addition, the following terms shall have the meanings ascribed to them in the corresponding Section of this Agreement: Term Section Accounts Receivable Adjustment 2.3(c) Arbitrator 2.5(b)(iii) AR Collection Excess Payment 2.3(c)(iii) Asserting Party 9.2 Assignment 6.11 Assumption Agreement 3.3(a)(ii) Balance Sheet Assumed Liabilities 2.2(a) Base Purchase Price 2.3(a) Bill of Sale 3.2(a)(i) Business Recitals California LP Preamble Closing Balance Sheet Adjustment 2.3(b) Closing Date 3.1 Closing Statements 2.5(a) Contracts 4.9 Counsel Litigation See definition of Excluded Property CVS Guaranty Recitals Defending Party 9.2 Disease States See definition of Competing Business Disposal Date 6.7(b) Employee Benefit Plan 4.28 Environmental Laws 4.19(a) Existing Employment Contracts 4.9(iii) Hawaii LP Preamble Hazardous Substances 4.19(b) Historical Financial Statements 4.6(a) HSR Act 6.5(a) Indemnified Buyer Party 9.1 Intellectual Property 4.17 Interim Financial Statements 6.1(b) Interim Period 6.1(b) Licensing Company Preamble LLC 5.1 OPCO Preamble Outside Date 10.1(e) Parent Preamble Physical Inventory 3.4 Premises 6.9 ProCare Preamble Programs 4.31(b) Purchase Price 2.3(a) Rehired Employees 6.2(a) Restrictive Period 11.10(a) Rx Adjustment 2.3(d) Rx Count 2.7(a) Rx Arbitrator 2.7(b) Selling Group Plans 6.2(c) Straddle Tax Period See definition of Non-Assumed Liabilities Territory 11.10(a)   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE II ACQUISITION OF PURCHASED ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES BY BUYING GROUP              Section 2.1 Purchase and Sale. At the Closing, upon the terms and conditions set forth in this Agreement, each Selling Group Member shall grant, sell, convey, assign, transfer and deliver to Buying Group, and Buying Group shall purchase, accept and receive from each Selling Group Member, all of Selling Group's right, title and interest in and to all of the Purchased Assets, free and clear of any and all Liens other than Permitted Liens, at the price and in the manner set forth herein, such transaction to be effective as of 12:01 a.m., Eastern Time, on the Closing Date.              Section 2.2 Assumption of Obligations and Liabilities. On the Closing Date, Buying Group shall assume the following, and only the following, obligations and liabilities (the "Assumed Liabilities") of Selling Group:              (a)       those current liabilities and obligations of the Selling Group arising in the ordinary course of business of the Business described on the Schedule of Assumed Liabilities attached hereto as Schedule 2.2(a) and properly recorded on the Closing Balance Sheet in accordance with GAAP, consistent with the practices utilized in the preparation of the May 31 Agreed Balance Sheet, expressly excluding, however, any such liabilities or obligations described in clauses (i) - (xiii) in the definition of Non-Assumed Liabilities (subject to such exceptions, the "Balance Sheet Assumed Liabilities");              (b)       the liabilities and obligations of each Selling Group Member in respect of the Assumed Agreements, except that Buying Group shall not be required to assume or agree to pay, discharge or perform any such liabilities or obligations arising out of any breach by a Selling Group Member on or prior to the Closing Date of any provision of any Assumed Agreement, including but not limited to, liabilities or obligations arising out of a Selling Group Member's failure to perform in accordance with its terms on or prior to the Closing; provided , however, that Buying Group's assumption of the liabilities and obligations of any Selling Group Member described in this Section 2.2 shall not be deemed to limit or affect the indemnification, if any, to which Buying Group may be otherwise entitled pursuant to Section 9.1 hereof.              Section 2.3 Base Purchase Price; Adjustments; AR Collection Excess Payment.              (a)       In reliance on the representations, warranties, covenants and agreements of Selling Group contained herein, and upon the terms and subject to the conditions hereinafter set forth, Buying Group shall pay to Selling Group an amount equal to One Hundred Twenty Four Million Dollars ($124,000,000) (the "Base Purchase Price"), subject to adjustments as provided in paragraphs (b), (c), and (d) below (as adjusted, the "Purchase Price").              (b)       The Base Purchase Price shall be subject to adjustment upon final determination of the Closing Statements in accordance with Section 2.5 hereof, as follows (the "Closing Balance Sheet Adjustment"):          (i)        the Base Purchase Price shall be increased by the amount by which the Acquired Net Asset Value as of the Closing Date is greater (i.e., a positive number or less negative number) than negative Eight Hundred and Fifteen Thousand Dollars (-$815,000); or             (ii)      the Base Purchase Price shall be decreased by the amount by which the Acquired Net Asset Value as of the Closing Date is less (i.e., a more negative number) than negative Eight Hundred and Fifteen Thousand Dollars (-$815,000).              (c)      The Base Purchase Price shall be subject to further adjustment upon final determination of the Closing Statements in accordance with Section 2.5 hereof, as follows (the "Accounts Receivable Adjustment"):          (i)       The Base Purchase Price shall be decreased by the amount, if any, by which Thirty-Nine Million Dollars ($39 million) exceeds Net Accounts Receivable as of the Closing Date; or              (ii)       The Base Purchase Price shall be increased by the amount, if any, by which Net Accounts Receivable as of the Closing Date exceeds Thirty-Nine Million Dollars ($39 million). Buying Group or its Affiliates shall pay to Selling Group the AR Collection Excess Payment (as such term is defined in the Accounts Receivable Collection Agreement).              (d)      The Base Purchase Price shall be subject to further adjustment upon final determination of the Rx Count in accordance with Section 2.7 hereof, as follows (the "Rx Adjustment"):         (i)        The Base Purchase Price shall be increased if the Daily Rx Average for the sixty (60) day period ending on the fifth Business Day preceding the Closing Date is greater than 105% of the Daily Rx Average for April and May 2000 as follows:         (x)        If the percentage increase in the Daily Rx Average for such sixty (60) day period exceeds 5% but is less than or equal to 10%, then the Base Purchase Price shall be increased by an amount which is equal to the product of (a) the amount by which the percentage increase exceeds 5%, times (b) the Base Purchase Price (prior to any adjustment under this Section 2.3);             (y)        If the percentage increase in the Daily Rx Average for such sixty (60) day period exceeds 10%, the Base Purchase Price shall be increased by an amount which is equal to the sum of (A) the product of 5% times the Base Purchase Price (prior to any adjustment under this Section 2.3) plus (B) the product of (i) 1.5 times (ii) the amount by which the percentage increase over 10% exceeds 10% (up to a maximum increase of 1.5 x 10%), times (iii) the Base Purchase Price (prior to any adjustment under this Section 2.3).             (ii)        The Base Purchase Price shall be decreased if the Daily Rx Average for the sixty (60) day period ending on the fifth Business Day preceding the Closing Date is less than 95% of the Daily Rx Average for April and May, 2000 as follows:         (x)        If the percentage decrease in the Daily Rx Average for such sixty (60) day period is more than 5% but is less than or equal to 10%, the Base Purchase Price shall be decreased by an amount which is equal to the product of (a) the amount by which the percentage decrease exceeds 5%, times (b) the Base Purchase Price (prior to any adjustment under this Section 2.3);             (y)        If the percentage decrease in the Daily Rx Average for the sixty (60) day period is more than 10%, the Base Purchase Price shall be decreased by an amount equal to the sum of (A) the product of 5% times the Base Purchase Price (prior to any adjustment under this Section 2.3) plus (B) the product of (i) 1.5 times (ii) the amount by which the percentage decrease over 10% exceeds 10% (up to a maximum decrease of 1.5 x 10%), times (iii) the Base Purchase Price (prior to any adjustment under this Section 2.3). There shall be no Rx Adjustment to the Base Purchase Price to the extent that the Daily Rx Average for the sixty (60) day period ending on the fifth Business Day preceding the Closing Date is not less than 95%, and not greater than 105%, of the Daily Rx Average for April and May, 2000.              Section 2.4 Payment of Purchase Price.              (a)       On the Closing Date, Buying Group shall deliver to Selling Group by one (1) or more wire transfers of immediately available funds, to such account as Selling Group shall designate in writing, an aggregate amount equal to the Base Purchase Price as adjusted by the Rx Adjustment, if any, in accordance with Section 2.3(d).              (b)       Upon final determination of the Closing Balance Sheet Adjustment and the Accounts Receivable Adjustment in accordance with Section 2.5 hereof, the Buying Group shall pay to Selling Group, or Selling Group shall pay to Buying Group, as the case may be, within five (5) Business Days after such determination, the net amount due based on adjustments to the Base Purchase Price as provided in Section 2.3(b) and (c) hereof by wire transfer of immediately available funds, together with interest at the "Prime Rate" in effect from time to time as published by the Wall Street Journal, computed from the Closing Date until paid in full.              Section 2.5 Closing Statements.              (a)      Not later than sixty (60) days after the Closing Date, Buying Group and Buying Group's Accountants shall cause to be prepared and delivered to Selling Group a proposed Closing Balance Sheet, accompanied by (i) notes which specifically identify (x) all Excluded Property and (y) the Purchased Assets and the Balance Sheet Assumed Liabilities reflected on the Closing Balance Sheet and (ii) a detailed schedule setting forth Buying Group's calculation of the Closing Balance Sheet Adjustment and, by utilizing the AR Valuation Principles (which shall include as credit balances only those credit balances set forth on the Statement of Credit Balances), the Accounts Receivable Adjustment (collectively, the " Closing Statements"). In preparing the Closing Statements and accompanying notes and schedules, Buying Group shall consult with Selling Group, and will permit Selling Group to review, upon its request, all workpapers, schedules and calculations related thereto .              (b)      If Selling Group does not dispute within forty-five (45) days after receipt of Buying Group's Closing Statements any item included in the proposed Closing Balance Sheet and/or the calculation of the Closing Balance Sheet Adjustment or the Accounts Receivable Adjustment, the proposed Closing Statements delivered by Buying Group shall be deemed to be the final "Closing Statements" and appropriate payment shall be made by Buying Group or Selling Group, as the case may be, pursuant to Section 2.4(b) hereof. In the event Selling Group has a dispute with regard to the appropriateness of any item included in Buying Group's Closing Statements and/or the calculation of the Closing Balance Sheet Adjustment or the Accounts Receivable Adjustment, payment to the extent of amounts not in dispute shall be made promptly (but in no event later than the fifth Business Day following the expiration of said forty-five (45) day period) by Buying Group or Selling Group, as t he case may be, pursuant to Section 2.4(b) hereof, with any dispute to be resolved in the following manner:                           (i)       Selling Group shall notify Buying Group in writing within forty-five (45) days after Selling Group's receipt of Buying Group's proposed Closing Statements which notice shall specify in reasonable detail the nature of the dispute;                           (ii)       during the thirty (30) day period following Buying Group's receipt of such notice, Buying Group and Selling Group and their respective representatives shall attempt in good faith to resolve such dispute and to determine the appropriateness of the disputed items included in Buying Group's proposed Closing Statements and/or the proposed Closing Balance Sheet Adjustment or the Accounts Receivable Adjustment. During such thirty (30) day period, Buying Group and Selling Group and their respective representatives shall each have access to the working papers and accompanying notes and schedules prepared in connection with the proposed Closing Statements;                           (iii)       if during such thirty (30) day period specified in subsection (ii) above, Buying Group and Selling Group reach a written agreement with respect to such dispute or Selling Group has withdrawn is objection, such proposed Closing Statements shall be deemed to be the final Closing Statements. If at the end of the thirty (30) day period specified in subsection (ii) above, Buying Group and Selling Group shall have failed to reach a written agreement with respect to such dispute or Selling Group has not withdrawn its objection, the matter shall be referred to a mutually agreeable nationally recognized accounting firm (the "Arbitrator"), which shall act as an arbitrator and shall issue its report resolving all disputes as to the appropriateness of Buying Group's proposed Closing Statements or the proposed Closing Balance Sheet Adjustment or proposed Accounts Receivable Adjustment within sixty (60) days after such dispute is referred to it. Each party may also fu rnish to the Arbitrator such other information and documents as it deems relevant with appropriate copies or notification being given to the other parties. The Arbitrator shall utilize the AR Valuation Principles (which shall include as credit balances only those credit balances set forth on the Statement of Credit Balances) for the Accounts Receivable Adjustment. The Arbitrator may conduct a conference concerning any disagreement between Buying Group and Selling Group, at which conference each party shall have the right to present additional documents, materials and other evidence and to have present its or their advisors, counsel or accountants. The proposed Closing Statements, as modified by any agreements reached by the parties hereto and adjustments determined to be appropriate by the Arbitrator, shall be deemed to be the final "Closing Statements," and the Arbitrator's calculation of the "Closing Balance Sheet Adjustment " or "Accounts Receivable Adjustment" shall be fi nal and binding. Each of the parties hereto shall bear all costs and expenses incurred by it in connection with such arbitration, except that the fees and expenses of the Arbitrator hereunder shall be shared equally by the parties. This provision for arbitration shall be specifically enforceable by the parties and the decision of the Arbitrator in accordance with the provisions hereof shall be final and binding and there shall be no right of appeal therefrom;                           (iv)       Nothing herein will be construed to authorize or permit the Arbitrator to determine any question or matter whatsoever under or in connection with this Agreement except the determination of what adjustments, if any, must be made in one or more of the disputed items reflected on the proposed Closing Statements delivered by Buying Group in order for the final Closing Statements to be determined in accordance with the provisions of this Agreement.             Section 2.6 Sales and Transfer Taxes. All sales, use and transfer taxes including those relating to bulk sales, if any, arising from the transfer of the Purchased Assets shall be borne solely and timely paid by the Selling Group, including, without limitation, any Taxes due with the filing of New York State Department of Taxation and Finance Form TP-584, Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate, and City of New York Department of Finance Form NYC-RPT, Real Property Transfer Tax Return.             Section 2.7 Rx Count.              (a)      At the close of business on the fourth Business Day preceding the Closing Date, Buying Group and Selling Group shall calculate the Daily Rx Average for the sixty (60) day period ended on the fifth Business Day preceding the Closing Date (the "Rx Count"), using the same methodology as was utilized to calculate the Daily Rx Average for April and May 2000.              (b)      If Selling Group and Buying Group agree on the Rx Count prior to the Closing Date, at the Closing, appropriate payment, if any, shall be made by Buying Group or Selling Group, as the case may be, pursuant to Section 2.4(a) hereof. In the event Selling Group and Buying Group have a dispute with regard to the Rx Count, Selling Group and Buying Group agree to submit to immediate arbitration and to use their best efforts to resolve the Rx Count prior to the scheduled Closing Date. A mutually agreeable firm will arbitrate the dispute (the "Rx Arbitrator"), and shall issue its report resolving the dispute, and determine the Rx Count. The scheduled Closing Date will be postponed until the day on which the Rx Arbitrator issues its report setting forth the Rx Count. Each of the parties hereto shall bear all costs and expenses incurred by it in connection with such arbitration, except that the fees and expenses of the Rx Arbitrator hereunder shall be shared equally by the parties. This provision for arbitration shall be specifically enforceable by the parties and the decision of the Rx Arbitrator in accordance with the provisions hereof shall be final and binding and there shall be no right of appeal therefrom.              Section 2.8 Accounts Receivable Collection Agreement. At the Closing, Buying Group will enter into the Accounts Receivable Collection Agreement with Parent and/or Affiliate of Parent.              Section 2.9 Prorations. All payments required to be made by a Selling Group Member under the Assumed Leases, including without limitation all rents, assessments, personal property taxes, real estate taxes, utility charges and heating fuels, shall be apportioned to the best of the parties' abilities between Buying Group and Selling Group as of the Closing and appropriate payments or credits shall be reflected on the Closing Statements. When the actual amounts become known, such prorations shall be recalculated by Buying Group and Selling Group, and Buying Group or Selling Group shall make any additional payments or refunds, as the case may be, not later than sixty (60) days after the Closing Date. Any disputes with respect to such payments or refunds shall be determined by the Arbitrator in accordance with the dispute provisions set forth in Section 2.5 hereof.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE III CLOSING; TERMINATION              Section 3.1 Closing. The Closing shall take place at the offices of Edwards & Angell, LLP, 2800 BankBoston Plaza, Providence, Rhode Island, 02903, at 10:00 a.m., Eastern Time, on a date mutually acceptable to Parent and ProCare, which date (the "Closing Date") is not more than ten (10) Business Days after the date that the final conditions precedent to each of the parties' obligations to consummate the transactions contemplated by this Agreement as set forth in Articles VII and VIII hereof, to the extent such conditions precedent are capable of being satisfied prior to the Closing Date, have been satisfied or waived in writing by the party entitled to grant such waiver, or such other date as mutually agreed upon by the parties .              Section 3.2 Deliveries by Selling Group Members and Parent at Closing.              (a)      To effect the transfer referred to in Section 2.1 hereof, Selling Group or Parent, as the case may be, shall, on the Closing Date, deliver to Buying Group:                   (i)       a bill of sale and general assignment in substantially the form attached hereto as Exhibit 3.2(a)(i) (a "Bill of Sale");                   (ii)       assignments of leases in substantially the form attached hereto as Exhibit 3.2(a)(ii) transferring all of Selling Group's interest in the Assumed Leases listed on Schedule 4.9;                   (iii)       assignments of all of the Intellectual Property included in the Purchased Assets in the forms attached hereto as Exhibit 3.2(a)(iii);                   (iv)       all of Selling Group's books, records and files included in the Purchased Assets;                   (v)       the original Assumed Agreements (or copies to the extent originals are not in Selling Group's possession);                   (vi)       original certificates representing the ARC Securities, duly endorsed or accompanied by appropriate stock powers or other instruments of assignment with all necessary transfer stamps affixed or accompanied by funds sufficient for the purchase of such tax stamps;                   (vii)       original title certificates to vehicles, duly endorsed, which are included in the Purchased Assets;                   (viii)       such lien releases and UCC-termination statements or payoff letters providing for the delivery of such documents as may be necessary to permit the conveyance of the Purchased Assets free and clear of all Liens (other than Permitted Liens) as contemplated hereunder;                   (ix)       a certificate of the chief financial officer of Selling Group listing by specific patient or payor the credit balances of each such patient or payor to be reflected on the Closing Balance Sheet and in the Net Accounts Receivable as of the Closing Date;                   (x)       such agreements, certificates, and other documents and instruments referred to in Article VII hereof; and                   (xi)       all such other instruments and agreements (including the Related Agreements to which any Selling Group Member is a party) as reasonably shall be requested by Buying Group to vest in Buying Group title in and to the Purchased Assets in accordance with the provisions hereof.             All instruments to be delivered to Buying Group pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to Buying Group, sufficient to vest all right, title and interest of Selling Group in the Purchased Assets in Buying Group and, where appropriate, sufficient to be recorded or filed, but shall not function to increase or decrease the assets being transferred to Buying Group hereunder or the liabilities and obligations to be assumed by Buying Group hereunder.              (b)       Simultaneously with the delivery of items referenced in paragraph (a) above, Selling Group shall take all steps as may be required to put Buying Group in actual possession and operating control of the Purchased Assets, free of all tenants and occupants other than as contemplated by this Agreement or the Related Agreements.              (c)      Notwithstanding anything contained in this Agreement to the contrary, this Agreement shall not constitute an assignment of any right, title or interest in, to or under any Assumed Agreements or permits or any claim or right of any benefit arising thereunder or resulting therefrom if an attempted assignment or transfer thereof, without the consent of a third party, would constitute a breach thereof or in any way adversely affect the rights of the Buying Group or Selling Group thereunder, unless any such required consent or waiver has been obtained and is in full force and effect. Parent shall use its reasonable commercial efforts to obtain (provided neither Parent nor any Selling Group Member shall be obligated to make any payments or incur any liabilities in connection therewith), and ProCare agrees to cooperate with Parent in its efforts to obtain (including, without limitation, the submission of reasonable financial and other information concerning ProCare and the Bu ying Group and the execution and delivery of any assumption agreements or similar documents reasonably requested by a third party, provided that such assumption agreement or similar document does not enlarge or expand the liabilities and obligations to be paid, observed or performed in respect of such Assumed Agreement or permit), the consent of or waiver by any such third party (other than from third parties to agreements relating to indebtedness for borrowed money) to the assignment or transfer thereof to the Buying Group in all cases in which such consent or waiver is required for assignment or transfer. To the extent that the consents and waivers referred to herein are not obtained by Parent, or until the impracticalities of transfer thereof are resolved to ProCare's reasonable satisfaction, Parent shall use reasonable commercial efforts (x) to provide to the Buying Group the benefits of any Assumed Agreement or permit intended to be included in the Purchased Assets, (y) to cooperate in any arrangement, reasonable and lawful as to Parent and ProCare, designed to provide such benefits to Buying Group and (z) at ProCare's request, to enforce for the account and at the expense of ProCare any rights of the Selling Group arising from the Assumed Agreements and permits intended to be included among the Purchased Assets, including the right to elect to terminate or not renew in accordance with the terms thereof on the advice of ProCare, which termination shall, upon becoming effective, relieve Parent of any further obligation under this Section with respect to such Assumed Agreement or permit, and (ii) after the Closing, ProCare shall use reasonable commercial efforts to perform the obligations of the Selling Group arising under such Assumed Agreements and permits, to the extent ProCare receives the benefit thereof pursuant to this Section 3.2(c). Parent and ProCare shall cooperate with each other to take such actions, including entering into services agreements or similar arrangements, as are reasonably calcula ted to effectuate the intent of the preceding sentence. The Purchase Price shall not be reduced or increased by reason of the non-assignability or subcontracting of any of the Assumed Agreements. Nothing contained herein shall be deemed to waive or excuse any obligation on the part of a Selling Group Member or any condition for the benefit of Buying Group to obtain any necessary consents to the transfer or assignment of any of the Assumed Agreements or other Purchased Assets required to be transferred or assigned hereunder.              (d)      Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement by Selling Group to transfer to Buying Group any of the Excluded Property.              Section 3.3 Deliveries by Buying Group at Closing.              (a)      To effect the purchase and assumption referred to in Sections 2.1 and 2.2 hereof, on the Closing Date, Buying Group shall deliver to Selling Group:          (i)   the Base Purchase Price in accordance with Section 2.4(a);             (ii)     an agreement of assumption in substantially the form attached hereto as Exhibit 3.3 (an "Assumption Agreement") evidencing Buying Group's assumption of the Assumed Liabilities; and             (iii)     such agreements, certificates and other documents and instruments referred to in Article VIII hereof              All instruments to be delivered to Selling Group pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to each Selling Group Member, but shall not function to increase or decrease the assets being transferred to Buying Group hereunder or the liabilities and obligations to be assumed by Buying Group hereunder.              Section 3.4 Inventory. A physical inventory count (the "Physical Inventory") of the Business shall be taken (at Buying Group's expense) by a mutually agreed firm on the day preceding the Closing Date, at which inventory count Buying Group's Accountants and Selling Group's Accountants shall be entitled to observe. The value of the inventory at the Physical Inventory shall be determined in accordance with the methods and cost factors listed on Schedule 3.4 hereto.              Section 3.5 Change of Name. On the Closing Date, each Selling Group Member shall deliver to Buying Group all such executed documents as may be required to change each Selling Group Member's name on that date to another name reasonably acceptable to Buying Group which bears no similarity to "Stadtlanders" or any confusingly similar name, including but not limited to a name change amendment to be filed with the appropriate secretary of state in the applicable jurisdictions. Each Selling Group Member hereby appoints Buying Group as its attorney-in-fact to file all such documents at or after the Closing. Buying Group hereby grants to each Selling Group Member a royalty-free, fully-paid, non-exclusive license to use the tradename "Stadtlanders" for the six-month period immediately following the Closing, solely in connection with the Corrections Division Business. In addition, each Selling Group Member agrees that upon expiration of the six-month period immediately following the Closing, it will cease forever any and all use of the name "StadtRelease" and any confusingly similar name, for any purpose.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE IV REPRESENTATIONS AND WARRANTIES BY EACH SELLING GROUP MEMBER AND PARENT              In order to induce Buying Group to enter into this Agreement and purchase the Purchased Assets, each Selling Group Member and Parent hereby jointly and severally represent and warrant to each Buying Group Member as set forth in this Article IV.             Section 4.1 Existence and Qualification.              (a)      Parent (i) is a corporation, duly incorporated, validly existing and in good standing under the laws of its state of formation, and (ii) has all corporate power and authority and all governmental licenses, permits, authorizations, consents and approvals to own and lease its properties and assets and to carry on its business as presently conducted.              (b)      Each Selling Group Member: (i) is a limited liability company or limited partnership, duly organized, validly existing and in good standing under the laws of its state of formation, (ii) has all limited liability company or partnership power and authority and all governmental licenses, permits, authorizations, consents and approvals to own and lease its properties and assets and to carry on the Business as presently conducted, and (iii) is qualified as a foreign entity to do business and is in good standing under the laws of each jurisdiction in which the conduct of its business or where the ownership or leasing of its properties or assets requires such qualification, except for such jurisdictions where the failure to be so qualified or to have such licenses, permits, authorizations, consents or approvals would not have a Material Adverse Effect. The jurisdictions in which each Selling Group Member is qualified to do business are set forth on Schedule 4.1 hereto .              Section 4.2 Ownership of Selling Group Members; Interests in Other Entities.              (a)      BBC Operating Sub, Inc. and Bergen Brunswig Drug Company are the sole members of OPCO; BBC Licensing Sub, Inc. is the sole member of Licensing Company; OPCO and Bergen Brunswig Drug Company are the sole partners of each other Selling Group Member, and no other Person owns any equity interest (or any interest convertible or exchangeable into such an equity interest) in OPCO, Licensing Company or any other Selling Group Member.              (b)      The following information for each Selling Group Member is set forth in Schedule 4.2(b) hereto, as applicable: (i) its name and jurisdiction of incorporation or formation; and (ii) the number of issued and outstanding shares of capital stock or share capital or other equity interest, the record owner(s) thereof and the number of issued and outstanding shares of capital stock or share capital or other equity interest beneficially owned, directly or indirectly, by Parent, Parent's subsidiaries or a Selling Group Member.              (c)      Except as set forth in Schedule 4.2(c) hereto, no Selling Group Member owns, directly or indirectly, beneficially or of record, any stock, partnership interest, option, warrant or other equity interest in any Person.              (d)      Except as set forth on Schedule 4.2(d) hereto, no Selling Group Member is subject to any obligation or requirement to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.             Section 4.3. Authorization; Enforceability.              (a)      Parent has full corporate power and authority to enter into this Agreement and the Related Agreements to be executed by it, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder (other than approvals required by the HSR Act). The execution, delivery and performance of this Agreement and the Related Agreements to be executed by Parent and the consummation by Parent and each Selling Group Member of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Parent. This Agreement and the Related Agreements have been or will be duly executed and delivered by Parent and constitutes or will constitute the valid and binding obligation of Parent, enforceable against Parent in accordance with their respective terms.              (b)      Each Selling Group Member has full limited liability company or partnership power and authority to enter into this Agreement and the Related Agreements to be executed by it, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Related Agreements to be executed by each Selling Group Member and the consummation by each Selling Group Member of the transactions contemplated hereby and thereby have been duly authorized by all requisite member, manager and partner action on the part of each Selling Group Member. This Agreement and the Related Agreements have been or will be duly executed and delivered by each Selling Group Member and constitute or will constitute valid and binding obligations of each Selling Group Member, enforceable against each Selling Group Member in accordance with their respective terms.              Section 4.4 No Breach or Violation.              (a)      Except as set forth on Schedule 4.4(a) hereto, Parent's execution and delivery of this Agreement and the Related Agreements, its compliance with and fulfillment of the terms of this Agreement and such Related Agreements, and the consummation of the other transactions contemplated hereby and by any of the Related Agreements, do not and will not, with notice or passage of time or both, after giving effect to consents described on Schedule 7.8 attached hereto which shall be obtained prior to the Closing: (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any Lien upon any of Parent's assets pursuant to, (iv) give any Person the right to accelerate any obligation under, or (v) result in a violation of, (a) any Law applicable to Parent, (b) Parent's certificate of incorporation or by-laws, (c) any material franchise, permit, license, authorization, concession, order , judgment, writ, injunction or decree to which Parent is subject, or by which any of its assets, properties or rights are bound, or (d) any material lease, mortgage, indenture, deed of trust, trust agreement, note agreement or other agreement, contract, understanding or instrument to which Parent is subject, or by which any of its assets, properties or rights are bound.              (b)      Except as set forth on Schedule 4.4(b) hereto, each Selling Group Member's execution and delivery of this Agreement and the Related Agreements, its compliance with and fulfillment of the terms of this Agreement and such Related Agreements, the sale and delivery of the Purchased Assets to the Buying Group and the assumption of the Assumed Liabilities by the Buying Group, and the consummation of the other transactions contemplated hereby and by any of the Related Agreements, do not and will not, with notice or passage of time or both, after giving effect to consents described on Schedule 7.8 attached hereto which shall be obtained prior to the Closing: (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any Lien upon the Purchased Assets pursuant to, (iv) give any Person the right to accelerate any obligation under, or (v) result in a violation of, (a) any Law app licable to such Selling Group Member, (b) certificate of formation, operating agreement or partnership agreement, (c) any material franchise, permit, license, authorization, concession, order, judgment, writ, injunction or decree to which a Selling Group Member is subject, or by which any of their respective assets, properties or rights are bound, or (d) any material lease, mortgage, indenture, deed of trust, trust agreement, note agreement or other agreement, contract, understanding or instrument to which a Selling Group Member is subject, or by which any of their respective assets, properties or rights are bound.              Section 4.5 Consents and Approvals. Except as set forth on Schedule 4.5 hereto, no material consent, approval, exemption, audit, waiver, order or authorization of, or registration, qualification, designation, declaration, notice or filing with, any governmental or regulatory authority (foreign or domestic), or any other Person, is required in connection with the execution, delivery and performance of this Agreement and the Related Agreements or the sale or delivery of the Purchased Assets or the assumption of the Assumed Liabilities, or the other transactions contemplated by this Agreement and any of the Related Agreements. There are no existing agreements, options, commitments or rights with, of or to any Person to acquire any Selling Group Member's assets, properties or rights included in the Purchased Assets or any interest therein, except for those Contracts for the sale of inventory entered into by a Selling Group Member in the ordinary course of business. Section 4.6 Financial Statements; Rx Audit Information.              (a)      Attached hereto as Schedule 4.6(a) are true and complete copies of (i) the unaudited consolidated balance sheet of the Business (and the Corrections Division Business) at September 30, 1999, and the related statements of operation and cash flows for the fiscal year then ended, prepared by Selling Group and (ii) the unaudited consolidated balance sheet of the Business (and the Corrections Division Business) at March 31, 2000, and the related statements of operation and cash flows of the Business (and the Corrections Division Business) for the six-month period then ended, prepared by Selling Group and (iii) the unaudited consolidated balance sheet of the Business (and the Corrections Division Business) at May 31, 2000 ((i), (ii), and (iii), collectively, "Historical Financial Statements").              (b)      Except as set forth in detail on Schedule 4.6(b) hereto, Selling Group's Historical Financial Statements: (i) are complete and correct in all material respects, (ii) have been prepared in accordance with GAAP and consistent with past practices, and (iii) present fairly in all material respects the financial position of the Business at the dates indicated and the results of operations and cash flows of the Business for the periods indicated therein, subject to year-end audit adjustments which are solely of a normal, recurring and immaterial nature.              (c)      Each Selling Group Member has made and kept books, records and accounts in reasonable detail, which accurately and fairly reflect in all material respects its activities and transactions and the purchase and disposition of any of its assets. Selling Group has not engaged in any material transaction with respect to the Business which is not reflected in such books, records and accounts.              (d)      No unrecorded funds or assets of Selling Group have been established for any purpose; no accumulation or use of funds of Selling Group has been made without being properly accounted for in the respective books and records of Selling Group; all payments by or on behalf of Selling Group have been duly and properly recorded and accounted for in Selling Group's books and records; no false or artificial entry has been made in the books and records of Selling Group for any reason; no payment has been made by or on behalf of Selling Group with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and Selling Group has not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign, or any contribution, gift, bribe, rebate, payoff, influence payment or kickback, whether in cash, property or services, to any individual, corporati on, partnership or other entity, to secure business or to pay for business secured.              (e)      All books, records, and other information provided by each Selling Group Member in connection with the calculation of the Daily Rx Average for April and May 2000 are accurate and complete and, with respect to the calculation of the Daily Rx Average for the sixty (60) day period ending on the day preceding the Closing Date, will be accurate and complete when provided.              Section 4.7 Inventory. All inventory of Selling Group used or useful in the conduct of the Business reflected on Selling Group's Historical Financial Statements or acquired since May 31, 2000 was acquired and has been maintained by each Selling Group Member in the ordinary course of business; is of good and merchantable quality; consists substantially of a quality, quantity and condition usable, or saleable within six (6) months in the ordinary course of business; is valued at the lower of cost or market on a weighted average basis and otherwise in accordance with GAAP and consistent with past practices; and is not subject to any material write-down or write-off for which appropriate reserves have not been included in the Historical Financial Statements and for which appropriate reserves will not be included in the Closing Balance Sheet. Except as described on Schedule 4.7 hereto, no Selling Group Member is under any liability or obligation with respect to the return of inventory of a Se lling Group Member in the possession of its customers. Except as listed and described on Schedule 4.7 hereto, no Selling Group Member has any obsolete or slow-moving inventory (i.e., inventory which, based upon the historical sales rate of such items by Selling Group could not reasonably be expected to be sold within six (6) months) or inventory which is not fit for the purpose for which it is intended to be used. Since May 31, 2000, no inventory item of any Selling Group Member has been sold or disposed of except in the ordinary course of business.              Section 4.8 Accounts Receivable and Bad Debts. The accounts receivable of Selling Group arising from the conduct of the Business as reflected on Selling Group's Historical Financial Statements or arising since May 31, 2000, are valid and genuine; have arisen solely out of bona fide sales of goods delivered to and accepted by the customers of Selling Group, or the performance of services or other business transactions of Selling Group in the ordinary course of business; and except as reflected in the reserves therefor, are not subject to valid defenses, set-offs or counterclaims. The allowance for collection losses on the Historical Financial Statements has been, and on the Closing Balance Sheet will be, determined in accordance with GAAP and consistent with past practices. The accounts receivable of the Selling Group pertaining to the Business reflected on the May 31, 2000 Agreed Balance Sheet and to be reflected on the Closing Balance Sheet are reasonably expected to be collected at the full recorded amount thereof, less the recorded allowance for collection losses thereon. Set forth on Schedule 4.8 hereto is a true, complete and accurate list as of May 31, 2000 of: (i) the current accounts receivable of each Selling Group Member, those which have not been paid within 30 days of the date of billing and those which have not been paid within 60 days and 90 days of the date of billing and (ii) with respect to obligations owed to each Selling Group Member which have been classified as bad debts, the name of each debtor and the total amount due from each such debtor. Such Schedule 4.8 shall be updated at the Closing.              Section 4.9 Material Contracts and Obligations. Attached hereto as Schedule 4.9 is a true, complete and accurate, categorized by subject matter, together with an indication by an asterisk (*) if the same shall constitute an Assumed Agreement, of all of the following contracts, agreements, plans, leases and commitments, whether written or oral, entered into by a Selling Group Member or by which a Selling Group Member is bound ("Contracts"):                   (i)      all purchase orders and Contracts for the purchase of goods or supplies which are for a term of more than three (3) months, or which involve or are reasonably expected to involve aggregate payments by a Selling Group Member of more than $50,000 during any fiscal year of such Selling Group Member, or which were entered into other than in the ordinary course of business;                   (ii)       all sales agreements and other sales orders (including sales by any Selling Group Member to any governmental authority) and Contracts for the sale of goods or provision of services which are for a term of more than three (3) months, or which involve or are reasonably expected to involve aggregate payments to a Selling Group Member of more than $50,000 during any fiscal year of such Selling Group Member, or which were entered into other than in the ordinary course of business;                   (iii)       all Contracts with any officer, director, consultant or employee of the Business (the "Existing Employment Contracts") or any management contract;                   (iv)       all Contracts or arrangements providing for the grant of equity interests, equity appreciation rights, bonuses, pensions, severance payments, deferred or incentive compensation, retirement payments, profit-sharing, insurance or other benefit plan or program for any employees;                   (v)       all Contracts for construction or for the purchase of real estate, improvements, equipment, and other items which under GAAP constitute capital expenditures or which involve or are reasonably expected to involve expenditures in the aggregate in excess of $50,000 during any fiscal year;                   (vi)       all Contracts relating to the rental or use of equipment, vehicles, other personal property or fixtures, or relating to the provision of services, which involve or are reasonably expected to involve payment of rentals or sums in the aggregate in excess of $50,000 during any fiscal year;                   (vii)      all Contracts relating in any way to direct or indirect indebtedness for borrowed money or evidenced by a bond, debenture, note or other evidence of indebtedness (whether secured or unsecured) of or to a Selling Group Member, including but not limited to, indebtedness by way of lease or installment purchase arrangement, guarantee, reimbursement obligations pertaining to letters of credit, repurchase agreements, purchase price discount obligations, other intercompany account agreements, or other undertakings on which others rely in extending credit, or otherwise, and all mortgages, pledges, conditional sales contracts, chattel and purchase money mortgages and other security arrangements with respect to any real estate, improvements, equipment, other personal property or fixtures in excess of $50,000;                   (viii)     all Contracts substantially limiting the freedom of a Selling Group Member to engage in or to compete in any line of business of a Selling Group Member, or with any Person or in any geographical area in connection therewith, or to use or disclose any information relating to a Selling Group Member in its possession;                   (ix)       all license agreements, either as licensor or licensee, franchise agreements, either as franchisor or franchisee, and agreements pertaining to any website for the Business, including all linking and hosting agreements;                   (x)       all joint venture Contracts, whether or not involving a sharing of profits;                   (xi)      all Contracts between a Selling Group Member and any member, partner or any Affiliate of a Selling Group Member or Parent;                   (xii)     all Contracts with HMO organizations, insurance companies, third party administrators or payors, pharmacy providers, state and local governments, pharmaceutical manufacturers, and clinics and foundations with respect to the Business;                   (xiii)     all Contracts involving purchase price discounts in excess of $50,000 in any fiscal year of a Selling Group Member offered by a Selling Group Member based on purchase volume;                   (xiv)     all Contracts which are presently expected to result in any loss upon completion or performance thereof;                   (xv)      all Contracts involving research and development efforts on behalf of a Selling Group Member;                   (xvi)     all Contracts for any charitable or political contribution in excess of $5,000;                   (xvii)    all Contracts not made in the ordinary course of business; and                   (xviii)  all other Contracts, except those which are (i) cancelable on 30 days or less notice without any penalty or other financial obligation or (ii) if not so cancelable, involve or are reasonably expected to involve aggregate payments by or to a Selling Group Member of $50,000 or less during any fiscal year of a Selling Group Member.             Except as set forth on Schedule 4.9, all Contracts required to be disclosed to Buying Group pursuant to this Section 4.9 are valid, binding and in full force and effect and neither Selling Group Member, nor, to Selling Group's Knowledge, any other party thereto, is in breach or violation of, or default under, nor, to Selling Group's Knowledge, is there any valid basis for such a claim of breach or violation of, or default under, the terms of any such Contract, and no event has occurred which constitutes or, with the lapse of time or the giving of notice or both, would constitute, such a breach, violation or default by a Selling Group Member thereunder. Each Selling Group Member has enforced, or attempted to enforce, all material rights in favor of Selling Group with respect to the Contracts described in Schedule 4.9.             Section 4.10 Obligations with Material Adverse Effect. To Selling Group's Knowledge, there is no term or provision of any Contract required to be disclosed to Buying Group pursuant to Section 4.9, nor any franchise, permit, license, concession or other authorization to conduct the Business to which a Selling Group Member is a party or by which it or any of their respective properties or assets are bound, nor any provision of any Law, or any judgment, writ, injunction, decree or order applicable to or binding upon a Selling Group Member, which is reasonably expected to have a Material Adverse Effect.             Section 4.11 Employees. Each Selling Group Member has complied in all material respects with all applicable Laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining, age, pregnancy, disability, sex, race, national origin and other forms of unlawful discrimination and the payment and withholding of social security and other Taxes due in respect thereof. Set forth in Schedule 4.11 hereto is a list of the names and titles of and current annual base salary or hourly rates for all employees of each Selling Group Member, together with a statement of the full amount and nature of any bonuses and other compensation paid or payable to or accrued for each such employee during the two preceding fiscal years of each Selling Group Member and the vacation to which each such employee is entitled.             Section 4.12 Absence of Certain Developments. Except as set forth on Schedule 4.12 hereto, since May 31, 2000, no Selling Group Member has:              (a)      incurred any liabilities, other than liabilities incurred in the ordinary course of business, or discharged or satisfied any lien or encumbrance or paid any liabilities, other than in the ordinary course of business, or failed to pay or discharge when due any liabilities of which the failure to pay or discharge has caused or would reasonably be expected to cause any material damage or risk of material loss to the Business or any of its assets or properties;              (b)       sold, assigned or transferred any assets or properties which would have been included in the Purchased Assets if the Closing had been held on May 31, 2000 or on any date since then, except for the sale of inventory in the ordinary course of business and for the disposition of assets in the ordinary course of business which are worn-out, in need of substantial repair, or are obsolete and which do not have a market value in excess of $50,000 in the aggregate for all such assets;              (c)       created, incurred, assumed or guaranteed any indebtedness for borrowed money, or mortgaged, pledged or subjected any of its assets to any mortgage, lien, pledge, security interest, conditional sales contract or other encumbrance of any nature whatsoever in an aggregate amount exceeding $50,000 or other than in the ordinary course of business;              (d)       made or suffered any material amendment or termination of any Contract to which it is a party or by which it is bound, or canceled, modified or waived any material debts or claims held by it or waived any rights of material value, whether or not in the ordinary course of business;              (e)       suffered any damage, destruction or loss, whether or not covered by insurance, of any item or items carried on its books of account individually or in the aggregate at more than $50,000 or suffered any repeated, recurring or prolonged shortage, cessation or interruption of supplies or utilities or other services required to conduct the operations of the Business;              (f)      suffered any Material Adverse Effect;              (g)       received notice or obtained knowledge of any actual or threatened labor trouble, strike, union organizing efforts, or other occurrence, event or condition of any similar character;              (h)      made any acquisition of substantial assets or any commitments or agreements for capital expenditures or capital additions or betterments exceeding $50,000 individually or in the aggregate, except such as may be involved in ordinary repair, maintenance or replacement of assets in the ordinary course of business;              (i)       other than in the ordinary course of business consistent with past practices, increased the salaries or other compensation of, or made any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of their respective employees or made any increase in, or any addition to, other benefits to which any of their respective employees may be entitled;              (j)      changed any of its accounting principles or the methods of applying any such principles or any practice involving customer credit terms or collection or payment of accounts;              (k)      entered into or amended any Contract with any of their respective Affiliates;              (l)      made any distributions to the Parent; or              (m)    entered into any transaction other than in the ordinary course of business.             Section 4.13 Undisclosed Liabilities. To Selling Group's Knowledge, no Selling Group Member has any liabilities or obligations, whether accrued, absolute, contingent or otherwise, due or to become due, or whether direct or indirect, arising out of any action or inaction, or with respect to or based upon transactions or events occurring, or any state of facts or condition existing, in connection with such Selling Group Member's conduct of the Business, and, to each Selling Group's Knowledge, there is no basis for any claim against any Selling Group Member for any such liability or obligation, except: (i) to the extent specifically described in this Agreement or disclosed in the Schedules hereto, (ii) to the extent fully reflected or reserved against on the Historical Financial Statements, (iii) liabilities and obligations arising or incurred in the ordinary course of business under any Contract disclosed on Schedule 4.9 or not required to be disclosed because of the term or amount involved, and (iv) liabilities or obligations arising or incurred in the ordinary course of business since May 31, 2000 and which will have been paid or discharged as of the Closing Date or which will be appropriately reflected or reserved against on the Closing Balance Sheet if and to the extent required by GAAP.             Section 4.14 Tax Matters. (a) All income and franchise tax returns with respect to the Purchased Assets that are required to be filed on or prior to Closing Date have been duly filed on a timely basis and all taxes thereon have been timely paid; (b) all income and franchise tax returns with respect to the Purchased Assets for periods ending on or before the Closing Date but that are not required to be filed until after the Closing Date will be timely filed and all income and franchise taxes reflected thereon will be timely paid; (c) none of the Purchased Assets is subject to any Lien (other than a Permitted Lien) for payment of any unpaid Taxes or levy proceedings; (d) all income and franchise taxes which any Selling Group Member is (or was) required by Law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper taxing authorities to the extent due and payable; (e) no Selling Group Member is a party to any agreement that would require it to make any payment that would constitute an "excess parachute payment" for purposes of Sections 280G and 4999 of the Code; (f) no Selling Group Member is a "foreign person" as such term is defined in the Code; (g) no Selling Group Member has any express or implied obligation (including, but not limited to, an indemnification obligation) with respect to the payment of Taxes for any party other than a Selling Group Member; and (h) no Selling Group Member has received any notice of any additional assessments with respect to the Taxes of that Selling Group Member since the date of any Tax Return of that Selling Group Member nor has any Selling Group Member received any notice of any audit or review of any Tax Return that includes that Selling Group Member.             Section 4.15 Real Property Owned and Leased. No Selling Group Member owns any real property and the real property leased by each Selling Group Member related to the Business has never been owned by a Selling Group Member. Set forth on Schedule 4.15 are true and accurate listings of all real property leases to which a Selling Group Member is a party setting forth: (i) the name of the Selling Group Member that is the lessee; (ii) the name of the lessor, (iii) a description of the property leased, and (iv) whether such premises are currently being used for the operation of the Business. Except as set forth on Schedule 4.15: (i) all of the leases set forth on such Schedule are in full force and effect and are valid, binding and enforceable in accordance with their respective terms, (ii) all accrued and currently payable rents and other payments required by such leases have been paid, (iii) each Selling Group Memb er and, to each Selling Group's Knowledge, each other party thereto has complied with all respective covenants and provisions of such leases in all material respects, (iv) neither Selling Group Member nor, to Selling Group's Knowledge, any other party is in default in any material respect under any such leases, (v) no party has asserted any defense, set off, or counter claim thereunder, (vi) no waiver, indulgence or postponement of any obligations thereunder has been granted by any party, and (vii) the validity or enforceability of any such lease will be in no way affected by the sale of the Purchased Assets to Buying Group, provided all required consents have been obtained from the other parties to such lease.             Section 4.16 Title to Purchased Assets; Condition of Assets; Necessary Property.              (a)      Set forth on Schedule 4.16(a) are true, correct, and complete listings of all Liens on the Purchased Assets. Each Selling Group Member has, and will convey to Buying Group at Closing, good title to the Purchased Assets, free and clear of all Liens other than Permitted Liens. The tangible property included among the Purchased Assets is in good working order and repair, reasonable wear and tear excepted, have been maintained and repaired on a regular basis so as to preserve their utility and value, are usable in the ordinary course of business, and conform in all material respects to all applicable Laws relating to their construction, use and operation.              (b)      Schedule 4.16(b) sets forth a list of all assets which are owned by or licensed to a Selling Group Member, Parent, or their respective Affiliates and which are used in the Business and in any other business of Parent or an Affiliate of Parent (including the Corrections Division Business). None of the joint use assets set forth on Schedule 1(f) are used principally in the Business. No Person other than Selling Group owns, leases or has any rights in any Purchased Assets. The Purchased Assets, including the Assumed Agreements, constitute all of the real and personal property, whether tangible or intangible, owned, leased, or licensed (other than Excluded Property), which is necessary in the conduct of the Business in the manner and to the extent presently conducted by Selling Group. No other real or personal property, whether tangible or intangible, owned, leased, or licensed, is required for the conduct of the Business in the manner and to the extent pr esently conducted by Selling Group.             Section 4.17 Proprietary Rights. The Purchased Assets include all patents, trademarks, tradenames, domain names, world wide web or Internet sites (including without limitation "Stadtlander.com" and "Stadtassist.com"), service marks, logos, copyrights, including, in each case, applications for registrations therefor, inventions, and all other proprietary rights (all such items being hereinafter referred to as "Intellectual Property") presently used or held for use in the conduct of the Business. Each Selling Group Member owns or possesses adequate licenses or other rights to use its Intellectual Property. Except as otherwise set forth on Schedule 4.17 hereto, no royalties or fees are payable by any Selling Group Member to any Person by reason of the ownership or use of any of the Intellectual Property. Except as set forth on Schedule 4.17, each Selling Group Member has the sole a nd exclusive right to use its Intellectual Property and, to the Selling Group's Knowledge, there are no licenses, sublicenses or agreements relating to the use by any other Person of any of Selling Group's Intellectual Property now in effect, and to Selling Group's Knowledge there is no infringement upon the Intellectual Property by any other Person. No charge or claim is pending or, to Selling Group's Knowledge, threatened, nor has any charge or claim been made within the past two years to the effect that, nor to Selling Group's Knowledge, does, the operation of the Business, sale of any of their respective products or any formula, method, process, or material employed in connection therewith, infringe upon or conflict in any way with any rights or properties of the type enumerated above owned or held by any other Person. All patents, patent registration applications, registered trademarks, trademark registration applications, trade names, registered service marks, service mark registration applications, logos, licenses and registered copyrights, copyright registration applications and domain names owned by a Selling Group Member are set forth on Schedule 4.17 and have been duly registered in, filed in, or issued by the United States Patent and Trademark Office, United States Register of Copyrights, Network Solutions, Inc. (or other authorized domain name registry) or the corresponding offices of any other country, state, or other jurisdiction to the extent set forth on Schedule 4.17, and have been properly maintained or renewed in accordance with all applicable provisions of Law and administrative regulations in the United States and in each such other country, state, or other jurisdiction. Schedule 4.17 accurately sets forth with respect to each patent, patent registration application, registered trademark, trademark registration application, trade name, service mark, service mark registration application, logo, license, copyright and copyright registration application owned by or lic ensed to each Selling Group Member: (i) the owner thereof, (ii) the date of expiration, if any, for owned Intellectual Property, (iii) whether such ownership or licensing rights are exclusive, and (iv) to Selling Group's Knowledge, any other licensee of such rights. Except as set forth on Schedule 4.17, no present or former employee of any Selling Group Member and to Selling Group's Knowledge, no other Person owns or has any proprietary, financial or other interest, direct or indirect, in whole or in part, in any Intellectual Property which Selling Group owns or uses in the conduct of the Business as now or heretofore conducted.             Section 4.18 Necessary Licenses and Permits. Each Selling Group Member possesses all licenses, permits, consents, concessions and other authorizations of governmental, regulatory or administrative agencies or authorities, whether foreign, federal, state, or local, required to own and lease the Purchased Assets, to sell and/or service any inventory of Selling Group or to otherwise conduct the Business as presently conducted and as proposed to be conducted by Selling Group. Schedule 4.18 hereto sets forth a list of each such license, permit, consent, concession or other authorization so required. Except as specified in Schedule 4.18, no registrations, filings, applications, notices, transfers, consents, approvals, audits, qualifications, waivers or other action of any kind are required by virtue of the execution and delivery of this Agreement, the Related Agreements, or of the consummation of the transactions c ontemplated hereby or thereby: (a) to avoid the loss or termination of any such license, permit, consent, concession or other authorization described on Schedule 4.18 or any asset, property or right used or useful pursuant to the terms thereof, or to avoid the violation or breach of any Law applicable thereto or (b) to enable Buying Group to acquire, hold and enjoy the same after the Closing Date. All such licenses, permits, consents, concessions and other authorizations are renewable by Buying Group pursuant to their terms or in the ordinary course of business.             Section 4.19 Environmental.              (a)      At all times prior to the Closing, each Selling Group Member has complied and at the Closing will be in compliance, in all material respects, with all Environmental Laws, and no Selling Group Member has received any notice, report, or information (including information that any litigation, investigation or administrative or other proceedings of any kind are pending or threatened) regarding any liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise), or any corrective, investigatory, or remedial obligations, arising under Environmental Laws. For the purposes of this Agreement, "Environmental Laws" means all present governmental requirements relating to the discharge or release of air pollutants, water pollutants, process waste water, petroleum products or hazardous substances, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Occupational Safety and Health Ac t of 1970, as amended, the Federal Resource Conservation and Recovery Act, as amended, the Federal Clean Water Act, as amended, the Toxic Substances Control Act, as amended, the Federal Clean Air Act, as amended, the Superfund Amendments and Reauthorization Act, as amended, and any and all other comparable state or local laws relating to public health and safety or work health and safety.              (b)      No Hazardous Substances have been, or are currently, located at, in, or under or emanating from either the Purchased Assets or any other property currently or previously owned or operated by a Selling Group Member in a manner which: (i) violates any applicable Environmental Laws, or (ii) requires response, remedial, corrective action or cleanup of any kind under any applicable Environmental Law, the cost of which would be material. For purposes of this Agreement, "Hazardous Substances" has the meaning set forth in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, in the Federal Resource Conservation and Recovery Act, as amended, and applicable state law and regulation, and shall also expressly include petroleum, crude oil and any fraction thereof.             Section 4.20 Corporate Documents, Books and Records. The books, records and accounts of each Selling Group Member accurately and fairly reflect in all material respects the transactions and the assets and liabilities of each Selling Group Member. No Selling Group Member has engaged in any transaction with respect to the Business, maintained any bank account for the Business, or used any of the funds of Selling Group in the conduct of the Business, except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of Selling Group.             Section 4.21 Compliance with Law. Except as may be set forth in Schedule 4.21 or 4.31 hereto, no Selling Group Member is in default under, or in violation of, nor has such Selling Group Member violated (and not cured) any Law (including, without limitation, Laws relating to the issuance or sale of securities, anti-trust, restraint of trade, or occupational safety, or any Law or any activities which are prohibited under federal Medicare and Medicaid statutes (including 42 U.S.C. 1320a-7, 1320a-7a, and 1320a-7b), the Federal False Claims Act (31 U.S.C. 3729 et seq.), statutes regarding physician self-referrals (42 U.S.C. 1395nn and 1396b(s)), and the Federal Controlled Substances Act (21 U.S.C. 801 et seq.), or the regulations promulgated pursuant to such statutes or related federal, state or local statutes or regulations), or any licenses, franchises, permits, authoriza tions or concessions granted by, or any judgment, decree, writ, injunction or order of, any governmental or regulatory authority, applicable to such Selling Group Member or any of the Purchased Assets. Except as disclosed on Schedule 4.21 or 4.31, no investigation or review by any governmental authority with respect to any Selling Group Member (or any of their respective predecessors) is pending or, to the Selling Group's Knowledge, threatened, nor to the Selling Group's Knowledge, has any Governmental Authority indicated in writing an intention to conduct the same, other than those the outcome of which would not reasonably be expected to result in a Material Adverse Change.             Section 4.22 Litigation. Except as set forth in Schedule 4.22 hereto, there is no suit, claim, action, proceeding or investigation pending or, to Selling Group's Knowledge, threatened against or affecting a Selling Group Member, or in connection with any of the Purchased Assets, or the consummation of the transactions contemplated hereby, at law or in equity or before any Governmental Authority or instrumentality or before any arbitrator of any kind. Except as set forth on Schedule 4.22, no Selling Group Member has been a party to any such suit, claim, action, proceeding or investigation during the past two years, and to Selling Group's Knowledge, no such suit, claim, action, proceeding or investigation has been threatened. No pending or threatened suit, claim, action, proceeding or investigation is reasonably expected to have a Material Adverse Effect on Selling Group or their relations with their respective customers, dealers, distributors, suppliers or employees. No Selling Group Member is a party or subject to any judgment, order, writ, injunction or decree applicable to the Business or the Purchased Assets. Section 4.23 Indebtedness to and from Officers, Managers, Partners and Others. Except as set forth on Schedule 4.23 hereto, no Selling Group Member is indebted to Parent, any director, officer, member, manager, partner, employee or agent of any Selling Group Member or any Affiliate of such Selling Group Member or Parent, except for amounts due as normal salaries, wages, or reimbursement of ordinary business expenses, and no Parent, director, officer, member, manager, partner, employee or agent of any Selling Group Member, any Affiliate or Parent, is indebted to a Selling Group Member.             Section 4.24 Labor Agreements and Employee Relations. Except as set forth on Schedule 4.24, no Selling Group Member is a party to any collective bargaining or similar agreement covering any of their respective employees. Except as set forth on Schedule 4.24, no labor organization or group of employees of any Selling Group Member has made a demand for recognition, has filed a petition seeking a representation proceeding or given a Selling Group Member notice of any intention to hold an election of a collective bargaining representative. No Selling Group Member has suffered any strike, slowdown, picketing or work stoppage by any group of employees affecting the Business during the past five years.             Section 4.25 Brokers' Fees. Except for the broker fee payable to the Persons set forth on Schedule 4.25 hereto, no Selling Group Member nor any Person on such Selling Group Member's behalf has retained any broker, finder or agent or agreed to pay any brokerage fee, finder's fee or commission with respect to the transactions contemplated by this Agreement.             Section 4.26 Major Product Lines, Customers and Suppliers.              (a)      Set forth on Schedule 4.26(a) is a list of each Selling Group Member's twenty-five (25) largest third party payors, together with a breakdown of the sales volume to each such payor, for fiscal years 1998 and 1999 and on a year-to-date basis for 2000. No Selling Group Member has received any written or oral communications from any such payor indicating its intention to materially reduce its purchases from such Selling Group Member, whether by reason of the consummation of the transactions contemplated by this Agreement or otherwise.              (b)      Set forth on Schedule 4.26(b) hereto is a list of each Selling Group Member's twenty-five (25) largest suppliers based upon the dollar amount of purchases, together with a breakdown of the purchases from each such supplier, for fiscal year ended 1999 and on a year-to-date basis for 2000. No Selling Group Member has received any written or oral communication from any such supplier indicating the possibility of a material price increase on items purchased by such Selling Group Member, whether by reason of the consummation of the transactions contemplated by this Agreement or otherwise, other than in the ordinary course of business consistent with past practice. With regard to each Selling Group Member's vendors supplying key products or components in connection with the Business, no Selling Group Member has received any oral or written communication, nor has such person any reason to believe that it will receive any such communication, from any such vendor indica ting an intention of such vendor to discontinue or diminish its relationship as a supplier to such Selling Group Member, whether by reason of the consummation of the transactions contemplated hereby or otherwise.              (c)      Except as set forth on Schedule 4.26(c), no Selling Group Member is required to provide any bonding or other financial security arrangements in connection with any transactions with any of its distributors, other customers or suppliers.             Section 4.27 All Material Information. All material facts concerning Selling Group, the Business and the Purchased Assets have been disclosed to Buying Group and no representation or warranty made herein by a Selling Group Member, and no statement contained in any certificate or other instrument furnished or to be furnished to Buying Group in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state any material facts necessary in order to make any statement therein not misleading.             Section 4.28. Employee Benefit Plans and Arrangements.              Except as set forth on Schedule 4.28:              (a)      No Selling Group Member maintains or contributes (or has an obligation to contribute) to: (i) any "employee benefit plan" (as defined in Section 3(3) of ERISA), whether a single employer, a multiple employer or a multiemployer plan, for the benefit of employees or former employees of such Selling Group Member, or (ii) any other plan, policy, program, practice or arrangement providing compensation or benefits under which any Selling Group Member has any obligation or liability to any employee or former employee of a Selling Group Member (or any dependent or other beneficiary thereof) including, without limitation, incentive, bonus, deferred compensation, vacation, holiday, medical, severance, disability, death, option, purchase or other similar benefit (individually, an "Employee Benefit Plan" and collectively, the "Employee Benefit Plans").              (b)      Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been so qualified and no event has occurred since the date of such determination that would adversely affect such qualification; each trust created under any such Employee Benefit Pan is exempt from tax under Section 501(a) of the Code and has been so exempt during the period from creation to date. Selling Group has provided Buying Group with access to the most recent determination letters from the Internal Revenue Service relating to such Employee Benefit Plans and such determination letter includes any new or modified requirements under the Tax Reform Act of 1986 and subsequent legislation enacted thereafter to the extent the remedial amendment period with respect to such legislation has expired.              (c)      No Selling Group Member: (i) has within the past six years contributed to, or been under any obligation to contribute to, any multiemployer plan (as defined in Section 3(37) of ERISA) and (ii) is not liable, directly or indirectly, with respect to any such plan for a complete or partial withdrawal (within the meaning of Title IV of ERISA) or due to the termination or reorganization of such a plan or an employee benefit plan subject to the minimum funding requirements of ERISA. (d) No Selling Group Member has ever maintained or contributed, or had an obligation to contribute, to a defined benefit plan subject to Title IV of ERISA or an employee benefit plan subject to the minimum funding requirements of the Code or ERISA.              (e)      No Selling Group Member has engaged in any transaction that could subject any Selling Group Member to either a civil penalty assessed pursuant to Section 4.09 or Section 5.02(i) of ERISA or a Tax imposed pursuant to Sections 4975, 4976 or 4980(b) of the Code.             Section 4.29 Arms Length Transactions; Conflicts of Interest. Except as set forth on Schedule 4.29 hereto, all transactions by a Selling Group Member relating to the Business are and have been conducted on an arms length basis, and there is no transaction, and no transaction has been proposed, between a Selling Group Member and Parent, any officer and director, member or manager of any Selling Group Member or an Affiliate of any such Person. To Selling Group's Knowledge there is no favorable pricing, purchase or lease arrangements which will not continue to be available to Buying Group after the Closing on substantially equivalent terms. Except as disclosed in Schedule 4.29, no Parent, director, officer or employee of Selling Group or of any Affiliate of Selling Group or any such Person, has any interest in: (i) any property, real or personal, tangible or intangible, including, but not limited to, any Intelle ctual Property, used or useful in connection with or pertaining to the Business or (ii) any creditor, supplier, manufacturer, dealer, distributor or representative of a Selling Group Member.             Section 4.30 Insurance. Schedule 4.30 hereto contains a description of all policies of title, liability, fire, flood and other hazard, business interruption, worker's compensation and other forms of insurance (including bonds) insuring the products, properties, assets, employees of each Selling Group Member relating to the Business. Except as set forth in Schedule 4.30, the coverage under all policies listed in Schedule 4.30 shall continue in full force and effect after the Closing Date with respect to occurrences prior to the Closing Date. Also set forth in Schedule 4.30 is a summary description of all claims made with respect to each Selling Group Member's workers' compensation insurance during each of the past three years.             Section 4.31 Medicare and Medicaid; Reimbursement by Payors; Related Legislation and Regulations.              (a)      For each Selling Group Member, Schedule 4.31(a) contains a list of those jurisdictions in which each is licensed under Medicare or Medicaid. Except as set forth on Schedule 4.31(a), the Selling Group Members have not received any notice of investigation, evaluation, or suspension of any such licenses, permits, orders, approvals or authorizations. To the Selling Group's Knowledge, no suspension or cancellation of any such licenses, permits, orders, approvals and authorizations has been threatened or is contemplated.              (b)      One or more of the Selling Group Members participate in Medicare and Medicaid Programs (the "Programs"). Schedule 4.31(b) contains a list of all Medicare and Medicaid provider numbers assigned to the Selling Group Members and other documents evidencing such participation.              (c)      Except as set forth in Schedule 4.31(c), the Selling Group Members have not received notice of any offsets against future reimbursements under or pursuant to the Programs. To the Selling Group's Knowledge, no factual basis for any such offsets exist. Except as set forth in Schedule 4.31(c), there are no pending appeals, adjustments, challenges, audits, litigation and notices of intent to recoup past or present reimbursements with respect to the Programs. Except as set forth in Schedule 4.31(c), the Selling Group Members have not been subject to, or threatened with, loss or waiver of liability for utilization review denials with respect to the Programs during the past 12 months, nor have the Selling Group Members received notice of any pending, threatened or possible decertification, or audit, offset, other action or other loss of participation in any of the Programs. Except as set forth in Schedule 4.31(c), to the Selling Group's Knowledg e, no validity review or program integrity review related to any of the Selling Group Members has been conducted by any Governmental Authority in connection with any of the Programs and no such review, audit or audit assessment is scheduled, pending or threatened against any of the Selling Group Members, their businesses or their assets.              (d)      Except as set forth in Schedule 4.31(d), (i) the Selling Group Members have not failed to file cost reports or other documentation or reports, if any, in connection with applicable contractual provisions and/or laws, regulations and rules, and (ii) there are no claims (including notices of any offsets against future reimbursements) pending or, to the Selling Group's Knowledge, threatened or scheduled before any Person, including without limitation any intermediary, carrier, the Health Care Financing Administration, or any other state or federal agency with respect to Medicare or Medicaid Claims filed by the Selling Group Members, or program compliance matters, in either case (i.e., clause (i) or clause (ii)) which would result in a Material Adverse Change. The Selling Group Members have delivered to Buying Group accurate and complete copies of any claims, actions, inquiries or other correspondence or appeals listed in Schedule 4.31(d).              (e)       To the Selling Group's Knowledge, (i) the Selling Group Members deliver goods and services, charge rates and bill for services which are in all material respects legal and proper, (ii) the Selling Group Members in all material respects properly pay any appropriate refunds, bill and use all reasonable efforts to collect deductibles and co-payment amounts and apply all payments received, (iii) the Selling Group Members have not engaged in any activities in connection with the Businesses which are prohibited under, and have complied in all material respects with, the Controlled Substances Act, 21 U.S. C. Section 801 et seq., all legislation relating to the Programs and regulations promulgated pursuant to such statutes and any related state or local statutes or regulations concerning the dispensing and sale of controlled substances and the provision of healthcare products and service to the general public and (iv) the Selling Group Members have complie d in all material respects with all laws and regulations pertaining to the return of pharmaceutical products.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYING GROUP              Each Buying Group Member hereby makes the following representations and warranties to each Selling Group Member and the Parent:             Section 5.1 Organization of each Buying Group Member. Each Buying Group Member (a) is a corporation or limited liability company ("LLC") duly organized, validly existing and in good standing under the laws of their respective jurisdictions of organization, (b) has all necessary power and authority and all governmental licenses, permits, authorizations, consents and approvals to own and lease its properties and assets and to carry on its business as presently conducted, and (c) is qualified as a foreign corporation or LLC to do business and is in good standing under the laws of each jurisdiction in which the conduct of its business or where the ownership or leasing of such properties or assets requires such qualification, except for such jurisdictions in which the failure to be so qualified or to have such licenses, permits, authorizations, consents or approvals would not have and would not reasonably be expected to have a Material Adverse Effect.             Section 5.2 Authorization. Each Buying Group Member has full authority and all approvals required by applicable Laws to enter into this Agreement and the Related Agreements, to consummate the transactions contemplated hereby and thereby, and to perform its obligations hereunder and thereunder (other than approvals required by the HSR Act). The execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby by each Buying Group Member have been duly authorized by all requisite action on the part of each Buying Group Member. This Agreement and the Related Agreements have been duly executed and delivered by each Buying Group Member and constitute valid and binding obligations of each Buying Group Member, enforceable against each Buying Group Member in accordance with their respective terms.             Section 5.3 No Breach or Violation. Each Buying Group Member's execution and delivery of this Agreement and the Related Agreements, its compliance with and fulfillment of the terms of this Agreement and the Related Agreements, and its consummation of the other transactions contemplated hereby and thereby, do not and will not, with notice or passage of time or both, after giving effect to consents described on Schedule 5.5 attached hereto which shall be obtained prior to Closing: (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any Lien upon the capital stock or assets, properties or rights of each Buying Group Member pursuant to, (iv) give any Person the right to accelerate any obligation under, or (v) result in a violation of, (a) any Law, (b) their respective charter and by-laws, (c) any material franchise, permit, lic ense, authorization, concession, order, judgment, writ, injunction or decree to which a Buying Group Member is subject, or by which any of its assets, properties or rights are bound, or (d) any material lease, mortgage, indenture, deed of trust, trust agreement, note agreement or other agreement or instrument to which a Buying Group Member is subject, or by which any of its assets, properties or rights are bound.             Section 5.4 Litigation. There is no suit, claim, action, proceeding or investigation pending or, to the knowledge of Buying Group, threatened against or affecting a Buying Group Member or the consummation by each Buying Group Member of the transactions contemplated hereby or by the Related Agreements, at law or in equity or before any Governmental Authority or instrumentality or before any arbitrator of any kind. No Buying Group Member is a party to or subject to any judgment, writ, injunction, order or decree.             Section 5.5 Consents and Approvals. Except as set forth on Schedule 5.5 hereto, no material consent, approval, exemption, audit, waiver, order or authorization of, or declaration, qualification, designation, notice, filing or registration with, any governmental or regulatory authority (foreign or domestic) or any other Person, is required on the part of any Buying Group Member in connection with the execution, delivery and performance of this Agreement and the Related Agreements, or the consummation of the transactions contemplated hereby and thereby.              Section 5.6 Brokers' Fees. No Buying Group Member nor anyone acting on its behalf has retained any broker, finder or agent or agreed to pay any brokerage fees, finder's fee or commission with respect to the acquisition contemplated by this Agreement.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE VI COVENANTS             Section 6.1 Access to Information; Financial Statements.              (a)      Until the Closing or the earlier termination of this Agreement, Selling Group shall afford to Buying Group, and to its officers, employees and authorized representatives, full access, during normal business hours, to all properties, books, records and corporate documents relating to the Purchased Assets, Assumed Liabilities and the Business as may be reasonably requested. Until the Closing or earlier termination of this Agreement, Buying Group shall hold all non-published and confidential information obtained from Selling Group in confidence and shall not disclose any such information to persons other than those of its officers, directors, employees and representatives who have a need to know, or make any commercial use thereof whatsoever. If this Agreement is terminated prior to Closing for any reason, all such information and copies thereof shall be returned to Selling Group within thirty (30) business days or shall be destroyed. Selling Group will cause Selling Gr oup's Accountants to furnish the Buying Group and Buying Group's Accountants all workpapers applicable to the Business relating to any of the periods covered by the Historical Financial Statements.              (b)       Selling Group agrees that during the period after the date of this Agreement and prior to the Closing (the "Interim Period"), Selling Group shall provide to Buying Group, within fifteen (15) days of the end of each calendar month, Selling Group's unaudited consolidated and consolidating balance sheet and income statement for such month ("Interim Financial Statements"). The Interim Financial Statements will be true and correct in all material respects, will be prepared using the same accounting methods and procedures as used in the preparation of the Historical Financial Statements, except for the absence of footnotes, will be subject to normal recurring audit adjustments, and will present fairly the financial position of Selling Group as of the date indicated and the results of Selling Group's operations for such period.              (c)       Selling Group agrees that within fifteen (15) days of the date of this Agreement, Selling Group will prepare and deliver to Buying Group a form of Statement of Credit Balances to be delivered at the Closing. Buying Group and Selling Group agree to discuss the form in good faith and to implement such changes as the parties may reasonably agree upon in order to finalize such form prior to the Closing.       Section 6.2 Employee Matters.              (a)       Buying Group will offer terms of employment to all of Selling Group's employees who work in the Business (including employees on short term disability or other approved leaves of absence as long as such employees return to work within the time periods provided for such leaves under Selling Group Member's leave policies or as required by applicable law), as part of the transactions contemplated herein, other than the employees listed on Schedule 1(i) hereto (the employees who accept offers of employment are hereinafter referred to as "Rehired Employees"). The offers to be extended will include compensation and titles substantially similar to those provided by Selling Group on the date hereof, and otherwise shall be on terms and conditions comparable to the terms and conditions offered by Buying Group to its current employees of like position; provided, however, that no such offer of employment shall be construed to limit the ability of Bu ying Group to terminate any such employee following the Closing Date for any reason; and provided further that nothing contained in such offer or this Agreement (other than as and to the extent provided in the Employment Agreements) shall be construed as an employment contract between the Buying Group and any Rehired Employee. Each Selling Group Member shall terminate the employment of all Rehired Employees immediately prior to the Closing and any cost, expense or liability resulting from, or incurred in connection with, such terminations (including, but not limited to, any severance, bonus, or other termination pay obligation) shall be the sole responsibility of Selling Group. Each Selling Group Member and Parent shall use its best efforts prior to the Closing to assist Buying Group in entering into employment arrangements satisfactory to Buying Group with each of the key employees of Selling Group listed on Schedule 6.2(a).              (b)       Buying Group agrees that each Rehired Employee shall receive full credit for service with Selling Group for purposes of determining such employee's eligibility for and determining the amount of benefit entitlement for holidays, sick days, vacations, and also for purposes of determining eligibility (including, without limitation, waiting periods under group health plans), vesting and benefits provided under any other employee benefit plan, program, policy or other arrangement covering such employee established, continued or otherwise sponsored by Buying Group or an Affiliate of Buying Group after the Closing Date; provided, however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit for any such period of service and must be permitted under the applicable plan of Buying Group or its Affiliates.              (c)       Prior to the Closing Date, the Selling Group and Parent shall cause the applicable defined contribution plans of the Selling Group and Parent in which Rehired Employees are eligible to participate ("Selling Group Plans") to provide for the distribution from the Selling Group Plans of the account balances of Rehired Employees as a result of the transactions contemplated by this Agreement. As soon as practicable following the Closing Date, the Selling Group and Parent shall cause the Selling Group Plans to make distributions of the account balances of Rehired Employees, subject to submissions by said Rehired Employees of appropriate distribution forms and compliance with other administrative procedures of the Selling Group and/or Parent.        Section 6.3 Conduct of Business.              (a)       From the date hereof through the Closing Date or earlier termination of this Agreement, each Selling Group Member shall operate its business in the ordinary course of business and shall not take any action inconsistent with this Agreement or which may interfere with, delay or prevent the consummation of the Closing.              (b)       Without limiting the generality of the foregoing, each Selling Member shall:                    (i)       keep in full force and effect its corporate, limited liability company, or partnership existence, as the case may be, and all material rights, franchises and goodwill relating to the Business;                    (ii)      endeavor to retain its employees and preserve its present relationships with customers, suppliers, contractors, distributors, and others with whom it has business dealings;                   (iii)      use its best efforts to maintain its Intellectual Property so as not to affect adversely the validity or enforcement thereof;                    (iv)     continue to maintain insurance reasonably comparable to that in effect on the date of this Agreement;                    (v)       promptly notify Buying Group in writing if any of the representations and warranties contained in Article IV cease to be accurate and complete in any material respect.              (c)      Without limiting the generality of the foregoing, no Selling Group Member shall, except as specifically contemplated by this Agreement or consented to in writing by ProCare, which consent shall not be unreasonably withheld:                    (i)       enter into, extend, materially modify, terminate, or waive any material right under any Assumed Agreement or Assumed Lease, except in the ordinary course of business;                    (ii)       sell, assign, transfer, convey, lease, mortgage, pledge or otherwise dispose of or encumber any of the Purchased Assets (other than the sale of inventory in the ordinary course of business), or any interests therein, except for sales or dispositions in the ordinary course of business that do not exceed $25,000 in the aggregate and the transfer by the Selling Group to ASD of the assets described on Schedule 1(g) hereto, as contemplated by this Agreement;                    (iii)       merge or consolidate with, purchase substantially all of the assets of, or otherwise acquire any business or any proprietorship, firm, association, limited liability company, corporation or other business organization (other than the transfer to the Selling Group of the ASD Injectibles Business Contracts, as contemplated by this Agreement);                    (iv)       increase or decrease the rate of compensation of, or pay any unusual compensation to, any officer, employee or consultant of or to any Selling Group Member (other than regularly scheduled increases in base salary or compensation and annual bonuses consistent with prior practice);                    (v)       enter into any collective bargaining agreement, or create or modify any pension or profit-sharing plan, bonus, deferred compensation, death benefit, or retirement plan, or any other Employee Benefit Plan (except as required by Law), or increase the level of benefits under any such plan, or increase or decrease any severance or termination pay benefit or any other fringe benefit;                    (vi)       make any capital expenditures other than those expressly disclosed in Schedule 4.9 hereto;                    (vii)      incur any trade accounts payable other than in the ordinary course of business or make any commitment to purchase quantities of any item of inventory in excess of quantities normally purchased by Selling Group in the ordinary course of business;                    (viii)    fail to maintain or purchase inventory consistent with its past practices and in the ordinary course of business;                    (ix)      fail to pay its accounts payable, or fail to pay or discharge when due any other liabilities, in the ordinary course of business, other than in connection with a good faith dispute by a Selling Group Member as to the validity of such liability;                    (x)       adopt or implement any change in any of its accounting principles or practices (including any change in the determination of its bad debt reserve), except as required by GAAP;                    (xi)       institute any change in its collection activities with respect to any patient account receivable recorded on the Business' KMS System, or any patient account receivable recorded on the Business' KALOS system which has aged more than 180 days past invoice date, other than pursuant to mutually acceptable policies developed in good faith by Buying Group and Selling Group within fifteen (15) days of the date hereof, or institute any material change in its other practices or policies regarding collection of its accounts receivable, other than as described on Schedule 6.3(c);                    (xii)      fail to maintain its assets in substantially their current state of repair, excepting normal wear and tear;                    (xiii)    make any loans or advances to any Person except for expense reimbursements incurred by agents or employees in the ordinary course of business;                    (xiv)      intentionally do any other act which would cause any representation or warranty of any Selling Group Member or Parent in this Agreement to be or become untrue in any material respect;                    (xv)      adopt or implement any change (other than routine and insignificant changes) in any of its marketing, referral or business development practices (including without limitation, any programs involving waiver of co-pays or the offer of special rebates or incentives); or                    (xvi)      enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder.             Section 6.4 Corrections Division. For a period of five years following the Closing Date, unless sooner terminated by a successor owner of the Corrections Division Business following a "change of control" (as defined below) of the Corrections Division Business, Selling Group agrees that it will take all appropriate and lawful actions as may be necessary to distribute brochures and/or other written advertisements to inmates who have received services as part of the Corrections Division Business, immediately prior to their discharge from prison or other correctional institution, apprising such inmates of the availability of specialty mail order and specialty retail pharmacy services through ProCare, and identifying ProCare as the preferred provider of such services, provided that any such materials shall indicate that each inmate retains the right to obtain pharmacy services from the provider of his or her choice. For purposes hereof, the term "change of control" shall mean (x) a sale of stock (other than pursuant to a public offering), reorganization, recapitalization or merger of the Corrections Division Business as a result of which the beneficial owners of the then outstanding shares of common stock of the Corrections Division Business and of any other then outstanding voting securities of the Corrections Division Business entitled to vote generally in the election of directors, immediately prior to such sale of stock, reorganization, recapitalization or merger, do not, immediately following such sale of stock, recapitalization, reorganization or merger, beneficially own in the aggregate, directly or indirectly, more than 50% of the then outstanding shares of common stock and of any other then outstanding voting securities entitled to vote generally in the election of directors of the Person resulting from such sale of stock, reorganization, recapitalization or merger, or (y) the sale or other disposition of all or substantia lly all of the assets of the Corrections Division Business to a Person the voting securities of which immediately following such sale are held by individuals or entities in such proportion so as to effect a change in the beneficial ownership of voting rights of the Corrections Division Business to the extent contemplated by the change in control described in clause (x) above.             Section 6.5 Notices and Consents.              (a)      Selling Group will give the notices to third parties, and up to and after the Closing (to the extent not obtained at Closing) will use its commercially reasonable efforts to obtain the third party consents described on Schedule 4.5, provided, however, that Selling Group shall use its best efforts to obtain the consents described as requiring best efforts on Schedule 7.8. Each of the parties will give the notices to, make the filings with, and use its commercially reasonable efforts to obtain the authorizations, consents, and approvals of governments and governmental agencies described on Schedule 4.5. Without limitation of the preceding two sentences, the parties shall each cooperate and use their reasonable best efforts to prepare and file with the U.S. Federal Trade Commission and the U.S. Department of Justice and other regulatory authorities as promptly as possible, all requisite applications and amendments thereto together with related information, data and exhibits necessary to satisfy the requirements of the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"). Each party shall submit its initial filing under the HSR Act within 10 days from the date hereof. The parties shall share equally all filing fees in connection with compliance with the HSR Act.              (b)      To the extent Selling Group is unable prior to Closing to obtain a consent described on Schedule 4.5 necessary to transfer any Purchased Asset (each a "Non-Transferable Asset"), each Selling Group Member agrees to execute and deliver to Buying Group at such time as any such consent to the transfer of any such Non-Transferable Asset is obtained by such Selling Group Member after the Closing, an assignment and assumption agreement reasonably satisfactory to the parties and any such other documents or instruments as may be reasonably necessary or advisable to transfer to Buying Group all of Selling Group's interest in and title to such Non-Transferable Asset.              Section 6.6 Further Assurances. Upon the terms and subject to the conditions contained herein, each of the parties hereto agrees (a) to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Related Agreements, (b) to execute any further documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated hereunder, and (c) to cooperate with each other in connection with the foregoing. In addition, subject to Section 3.2(c), Selling Group agrees that prior to Closing it will take all actions necessary to transfer legal or record ownership of assets of Stadt Solutions, LLC to OPCO or cause ownership of such assets to be transferred to Buying Group at the Closing, so as to include such assets in the Purchased Assets.             Section 6.7 Cooperation; Access to Records After Closing.              (a)       Buying Group will cooperate with Selling Group to obtain any and all approvals and consents necessary to effect the transactions contemplated by this Agreement.              (b)       The Buying Group Members recognize that subsequent to the Closing they may have information and documents which relate to the Selling Group with respect to the period prior to the Closing, including, without limitation, information pertaining to Taxes, the Business, the Assumed Liabilities, the Non-Assumed Liabilities, the Purchased Assets, the Excluded Property and the Selling Group's respective employees, and to which Parent may need access subsequent to the Closing. The Buying Group shall provide Parent and its representatives access, during normal business hours on reasonable notice, to all such information and documents (but excluding attorney work product or other privileged communication), and to such of its employees, which Parent reasonably requests. The Buying Group agrees that prior to the destruction or disposition of any such documents or any books or records pertaining to or containing such information at any time within five (5) years after the Closing the Buying Group shall provide not less than thirty (30) calendar days prior written notice to Parent of any such proposed destruction or disposal, provided, that in any matter involving Taxes, if Buying Group receives a written request from Selling Group not earlier than ninety (90) days before, but not later than, the end of such five-year period (the "Disposal Date"), the destruction or disposition of such Tax documents, books or records shall be deferred for one (1) year after the Disposal Date. Thereafter, the destruction or disposition of such Tax documents, books or records shall be deferred for successive one (1) year periods, provided that Buying Group receives annually a similar written request from Selling Group not earlier than ninety (90) days before, but not later than, the anniversary of the Disposal Date. In no event, however, shall the destruction or disposition of such Tax documents, books or records be deferred beyond the later of the expiration of all applicable statutes of l imitations (including extensions thereof) or the conclusion of all litigation (including exhaustion of all appeals relating thereto) with respect to such Taxes. If Parent desires to obtain any such documents, it may do so by notifying the Buying Group in writing at any time prior to the scheduled date for such destruction or disposal. Such notice must specify the documents which Parent wishes to obtain. Parent and the Buying Group shall then promptly arrange for the delivery of such documents. All out-of-pocket costs associated with the delivery of the requested documents shall be paid by Parent.              (c)       With respect to audits conducted by federal, state and local taxing authorities, the Buying Group agrees to cooperate with Parent to the extent it has any information required by Parent to respond to information document requests presented by such taxing authorities as promptly as practicable. Such information document requests may include, but shall not be limited to, all tax matters related to the Selling Group Members and their respective Affiliates for all tax years currently open under the relevant jurisdictions' statute of limitations. All out-of-pocket costs associated with the delivery of the requested documents shall be paid by Parent.              (d)       With respect to the Counsel Litigation and any other litigation, investigation or review by any Governmental Authority or other Person involving a Selling Group Member or Parent with respect to the Business or the Purchased Assets, Buying Group agrees to reasonably cooperate with such Selling Group Member or Parent to the extent it has any information required by such Person which may relate to such litigation, investigation or review. In furtherance of the foregoing, Buying Group shall: (i) furnish or cause to be furnished to such Selling Group Member or Parent such documents, records, and other data as such Selling Group Member shall reasonably request from time to time, and (ii) make available to Selling Group Member or Parent from time to time certain Rehired Employees upon reasonable prior notice and during regular business hours, provided that such access to such Rehired Employees does not unreasonably affect such Rehired Employees' employment responsibilities o r Buying Group's operation of the Business following the Closing as reasonably determined by Buying Group. All fees and expenses, including without limitation out-of-pocket costs and reasonable attorneys fees, associated with such cooperation by Buying Group shall be paid by Parent.              Section 6.8 Casualty Losses. In the event that there shall have been suffered between the date hereof and the Closing Date any casualty loss relating to the Purchased Assets, Selling Group will promptly notify Buying Group of such event and, if the Closing occurs, shall assign to Buying Group all of the right, title and interest of Selling Group in and to insurance proceeds payable as a result of the occurrence of the event resulting in such loss or damage.              Section 6.9 Environmental Studies. Prior to the Closing, Buying Group shall have the right, at its expense, to undertake such environmental studies of each of the premises at which any of the Selling Group Members perform the Business (the "Premises"), including reviewing records, inspecting the properties and testing the air, subsoil, groundwater and building materials at the Premises, as it shall deem necessary to determine whether the Premises are in compliance with all applicable Environmental Laws and whether any Hazardous Substances are present at the Premises, but shall indemnify and hold each Selling Group Member harmless from any loss, cost, or damage proximately caused by such inspection. Such inspection shall be scheduled and performed so as not to unreasonably interfere with the business of the Selling Group.              Section 6.10 No Shop. Prior to the Closing or earlier termination of this Agreement, none of the Selling Group Members nor Parent nor any of their respective Affiliates, advisors or representatives shall, directly or indirectly, solicit, encourage or initiate any contact with, negotiate with, or provide any information to, endorse or enter into any agreement with respect to, or take any other action, directly or indirectly, to facilitate any person or group, other than Buying Group and its representatives, concerning any inquiries or the making of any proposals concerning any merger or combination with a Selling Group Member, or a purchase or sale of all or substantially all of the assets of a Selling Group Member, or purchase or sale of a substantial equity interest in any Selling Group Member or any similar transaction involving any Selling Group Member or Parent (other than solely with respect to the Corrections Division Business).              Section 6.11 Assignment of Rights. At the Closing, each Selling Group Member shall execute a non-exclusive assignment (the "Assignment"), in the form attached hereto as Exhibit 6.11, pursuant to which such Selling Group Member shall assign to Buying Group, on a non-exclusive basis, all the rights of indemnification relating to the Business or the Purchased Assets that such Selling Group Member shall have received from the third-parties identified on Schedule 6.11 hereto to the extent that such Selling Group Member has the right to effect such assignments. At the Buying Group's request, each Selling Group Member will use commercially reasonable efforts to obtain any necessary consents to each such Assignment.              Section 6.12 Software Licenses. Notwithstanding Selling Group's disclosure on Schedule 4.17 with respect to an insufficient number of software licenses, Selling Group and Buying Group agree that Selling Group retains all liability arising out of such unlicensed use through the Closing Date and is responsible for procuring a sufficient number of such licenses to cure such deficiency prior to the Closing Date after consultation with Buying Group as to its future needs.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE VII CONDITIONS PRECEDENT TO BUYING GROUP'S OBLIGATIONS              Buying Group's obligation to consummate the transactions contemplated by this Agreement is subject to the fulfillment or satisfaction (or waiver in whole by Buying Group in writing) on or before the Closing Date (or such sooner date as may be specified) of each of the following conditions:              Section 7.1 Correctness of Representations and Warranties. Each of the representations and warranties of each Selling Group Member and Parent contained herein and in the certificates and other documents delivered to Buying Group pursuant hereto shall be true and correct in all material respects as of the Closing Date with the same force and effect as if made on and as of the date hereof (except those representations and warranties qualified by materiality, which shall be true and correct in all respects).              Section 7.2 No Adverse Change in Business or Properties. No Material Adverse Change shall have occurred with respect to the Business since May 31, 2000; provided, however, that any adverse change in the Daily Rx Average shall be governed by Section 7.3 and not this Section 7.2.              Section 7.3 Prescriptions. The Daily Rx Average for the sixty (60) days ended on the fifth Business Day preceding the Closing Date shall not be less than eighty percent (80%) of the Daily Rx Average for April and May, 2000.              Section 7.4 Compliance with Agreement. Each Selling Group Member and Parent shall have performed and complied in all material respects with their respective agreements, covenants and obligations under this Agreement required to be performed or complied with on or prior to the Closing Date.              Section 7.5 Certificate of Selling Group Member. Each Selling Group Member shall have delivered to Buying Group, a certificate of its chief executive officer, dated the Closing Date, certifying in such officer's capacity as an executive officer, in such form as Buying Group may reasonably request, as to the fulfillment of the conditions set forth in Section 7.1, 7.2, 7.3, 7.4 above.              Section 7.6 Incumbency Certificate. Buying Group shall have received from each Selling Group Member, an incumbency certificate, dated the Closing Date, signed by a duly authorized officer thereof and giving the name and bearing a specimen signature of each individual authorized to sign, in the name and on behalf of each Selling Group Member, this Agreement and each of the Related Agreements to which each Selling Group Member is or is to become a party, and to give notices and to take other action on behalf of each Selling Group Member under each of such documents.              Section 7.7 Absence of Litigation. No suit, action, investigation, inquiry or other proceeding shall be pending before any court or Governmental Authority to restrain or prohibit, or to obtain damages or other relief in connection with, or to question the validity or legality of, this Agreement or the consummation of the transactions contemplated hereby, or to restrict or impair the ability of Buying Group to operate the Business.              Section 7.8 Consents. The consummation of the transactions contemplated by this Agreement shall not be prohibited by any Law or Governmental Authority, and shall not subject any Buying Group Member to any penalty. All consents, approvals and waivers of Governmental Authorities that are set forth on Schedule 7.8 hereto shall have been obtained, and any applicable waiting periods imposed by such Governmental Authorities shall have expired. All consents, approvals and waivers of third parties that are set forth on Section 7.8 hereto (including, without limitation, consents to assignment from all landlords who are parties to the Assumed Leases, including the leases of the facilities in Pittsburgh, Pennsylvania, which shall not impose any change in rental required thereunder or any other more onerous terms than is currently the case in the respective leases) shall have been obtained. Notwithstanding the preceding sentence, the consent, approval or waiver of any third party shall not be a condition precedent to Buying Group's obligations to close the transactions contemplated herein if such consent, approval or waiver has been offered by such third party and the failure to obtain such consent, approval or waiver is due to (i) the failure by Buying Group to accept the existing terms of any contract, lease or other agreement requiring consent, approval or waiver which is set forth on Schedule 7.8 or (ii) CVS's failure to guarantee the performance of any Buying Group Member under any Assumed Lease if required by the landlord thereunder as a condition to such landlord's consent to assignment.              Section 7.9 Licenses, etc. All licenses, permits, consents, concessions and other authorizations of Governmental Authorities to be transferred by Selling Group as described on Schedule 7.9 shall have been duly transferred or issued to Buying Group, all on terms which impose no greater economic hardship on any Buying Group Member than those which existed or would have been imposed upon the Selling Group Member but for such transfer or issuance, or each Selling Group Member shall have executed a power of attorney in the form attached hereto as Exhibit 7.9 or otherwise satisfactory to Buying Group permitting Buying Group to use such licenses and permits pending transfer or reissuance.              Section 7.10 FIRPTA Certificate. Each Selling Group Member shall provide the Buying Group with a duly executed and dated Foreign Investment in Real Property Tax Act ("FIRPTA") Non-foreign Seller Certificate, substantially in the form required by U.S. Treasury Regulation Section 1.1445-2(b)(2)(iii)(B) as set forth in Exhibit 7.10 attached hereto.              Section 7.11 Customer Lists. Each Selling Group Member shall have delivered to Buying Group computer files containing true and complete lists of each of Selling Group Member's customers with respect to the Business (including computer profiles of each customer which shall include such customer's name, address, third party information, and refill information for the past five years or such shorter period as required by applicable law).              Section 7.12 Certified Charter; Good Standing. Each Selling Group Member shall have delivered to each Buying Group Member: (i) a copy of the articles of incorporation or certificate of formation of each Selling Group Member which have been certified by the appropriate Secretary of the States of Delaware, Hawaii, and California, (ii) limited liability company and tax good standing certificates from the States of Delaware, Hawaii, and California, and (iii) corporate good standing certificates from those jurisdictions in which it is qualified to do business. Such certificates shall be dated a date not more than fifteen (15) days prior to the Closing Date.              Section 7.13 Related Agreements. Each Selling Group Member and the other parties thereto (other than Buying Group) shall have executed and delivered the Related Agreements.              Section 7.14 Proof of Action. Buying Group shall have received from each Selling Group Member, copies, certified by a duly authorized officer thereof to be true and complete as of the Closing Date, of the records of all partnership and member action taken to authorize the execution, delivery and performance of this Agreement and each of the Related Agreements to which a Selling Group Member is a party.              Section 7.15 Leases. Lessors under the Assumed Leases (expressly excluding those leases with respect to any closed stores) shall have entered into lease assignment agreements and executed estoppel certificates upon terms and conditions reasonably satisfactory to ProCare.              Section 7.16 ASD Contracts. ASD shall have transferred to a Selling Group Member the ASD Injectibles Business Contracts upon terms and conditions satisfactory to ProCare.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE VIII CONDITIONS PRECEDENT TO SELLING GROUP'S OBLIGATIONS        Selling Group's obligation to consummate the transactions contemplated by this Agreement are subject to the fulfillment or satisfaction (or waiver in whole by Selling Group in writing) on or before the Closing Date (or such sooner date as may be specified) of each of the following conditions:              Section 8.1 Correctness of Representations and Warranties. Each of the representations and warranties of each Buying Group Member contained herein and in the certificates and other documents delivered to Selling Group pursuant hereto shall be true and correct in all material respects as of the Closing Date (except those representations and warranties qualified by materiality, which shall be true and correct in all respects).              Section 8.2 Compliance with Agreement. Each Buying Group Member shall have performed and complied in all material respects with its agreements, covenants and obligations under this Agreement required to be performed or complied with on or prior to the Closing Date.              Section 8.3 Certificate of Buying Group. Each Buying Group Member shall have delivered to Selling Group a certificate of the President of each Buying Group Member, dated the Closing Date, certifying in such officer's capacity as an executive officer, in such form as Selling Group may reasonably request, as to the fulfillment of the conditions set forth in Sections 8.1 and 8.2 above.              Section 8.4 Absence of Litigation. No suit, action, investigation, inquiry or other proceeding shall be pending before any court or Governmental Authority to restrain or prohibit, or to obtain damages or other relief in connection with, or question the validity or legality of, this Agreement or the consummation of the transactions contemplated hereby.              Section 8.5 Proof of Action. Selling Group shall have received from each Buying Group Member, copies, certified by a duly authorized officer, member or manager thereof to be true and complete as of the Closing Date, of the records of all requisite action taken to authorize the execution, delivery and performance of this Agreement and each of the Related Agreements to which a Buying Group Member is a party.              Section 8.6 Incumbency Certificate. Each Selling Group Member shall have received from each Buying Group Member, an incumbency certificate, dated the Closing date, signed by a duly authorized officer thereof and giving the name and bearing a specimen signature of each individual authorized to sign, in the name and on behalf of each Buying Group Member, this Agreement and each of the Related Agreements to which each Buying Group Member is or is to become a party, and to give notices and to take other action on behalf of each Buying Group Member under each of such documents.              Section 8.7 Related Agreements; Guaranty. Each Buying Group Member and the other parties thereto (other than Selling Group) shall have executed and delivered the Related Agreements. CVS Corporation shall have executed the CVS Guaranty.              Section 8.8 Proceedings and Documents. All requisite action with respect to the transactions contemplated hereby and all documents incident thereto shall be satisfactory in form and substance to Selling Group and its counsel.              Section 8.9 Consents. The consummation of the transactions contemplated by this Agreement shall not be prohibited by any law or Governmental Authority, and shall not subject any Selling Group Member to any penalty. All consents, approvals and waivers of Governmental Authorities and of any other Persons that are set forth on Schedule 8.9 hereto shall have been obtained, and any applicable waiting periods imposed by such Governmental Authorities or other Persons shall have expired.              Section 8.10 Good Standing Certificates. Each Buying Group Member shall have delivered to Selling Group a good standing certificate from the jurisdiction of its incorporation dated a date not more than fifteen (15) days prior to the Closing Date.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE IX INDEMNIFICATION              Section 9.1 By Each Selling Group Member and the Parent. From and after the Closing Date, and regardless of any investigation made at any time by or on behalf of Buying Group, but subject to the limitations of this Article IX, each Selling Group Member and the Parent, on a joint and several basis, agree to reimburse, indemnify and hold harmless each Buying Group Member and their respective successors and assigns, and any director, shareholder, employee or officer thereof (an " Indemnified Buyer Party" and collectively the "Indemnified Buyer Parties") against and in respect of costs of investigations and any and all damages, losses, claims, deficiencies, liabilities, suits, demands, judgments, diminution in value, costs and expenses (including costs of investigations and reasonable attorneys' fees (each a "Loss" and collectively "Losses") incurred or suffered by any Indemnified Buyer Party arising from or relating to:              (a)       any and all Non-Assumed Liabilities;              (b)       any and all litigation, investigations and reviews described in Schedules 4.21, 4.22 and 4.31, including, without limitation, the Counsel Litigation, and any and all other actions, suits, claims, or legal, administrative, arbitration, governmental or other proceedings or investigations (including any audits and recoupments) against any Indemnified Buyer Party that arise out of omissions or events occurring prior to the Closing Date and that relate to a Selling Group Member in their capacity as such or any of their respective predecessors or any shareholder, manager, member, officer, employee, agent, distributor, supplier, representative or subcontractor of any Selling Group Member;              (c)       any misrepresentation, breach or inaccuracy in or omission from any representation or warranty made by a Selling Group Member or Parent under this Agreement or any certificate, schedule, statement, document or instrument furnished to a Buying Group Member pursuant hereto;              (d)       any breach or non-fulfillment of any agreement or covenant on the part of a Selling Group Member or Parent under this Agreement to be performed on or following the Closing Date;              (e)       without limiting any of the foregoing indemnification provisions, (x) any misrepresentation, breach or inaccuracy in or omission from any representation or warranty made by a Selling Group Member or Parent under Section 4.14 [Tax Matters] of this Agreement, and (y) any and all liabilities of the Selling Group for the payment of any Tax owed by Parent, Parent's Affiliates and all Selling Group Members and any Tax incident to or arising as a consequence of the consummation of the transactions contemplated hereby, including without limitation any interest, additions to tax and penalties that may be assessed with respect thereto; or              (f)       without limiting any of the foregoing indemnification provisions, the failure of a Selling Group Member to comply with the bulk sales law and any other similar laws in any applicable jurisdiction in respect of the transactions contemplated by this Agreement.              Section 9.2 Notice of Claims; Defense of Third Party Claims. A party claiming indemnification under this Article IX (the "Asserting Party") must notify (in writing and in reasonable detail) the party from which indemnification is sought (the "Defending Party") of the nature and basis of such claim for indemnification. If such claim relates to a claim, suit, litigation or other action by a third party against the Asserting Party or any fixed or contingent liability to a third party (a "Third Party Claim"), the Defending Party may elect to assume and control the defense of the Third Party Claim at its own expense with counsel selected by the Defending Party from and after such time as the Defending Party unconditionally agrees in writing to accept, as against the Asserting Party, all liabilities on account of such Third Party Claim. Assumption of such liability, as against the Asserting Party, shall not be deemed an admission of liability as against any such third p arty. Notwithstanding the foregoing, the Defending Party may not assume or control the defense if the named parties to the Third Party Claim (including any impleaded parties) include both the Defending Party and the Asserting Party and representation of both parties by the same counsel (in such counsel's reasonable determination) would be inappropriate due to actual or potential differing interests between them, in which case the Asserting Party shall have the right to defend the Third Party Claim and to employ counsel reasonably approved by the Defending Party, and to the extent the matter is determined to be subject to indemnification hereunder, the Defending Party shall reimburse the Asserting Party for the reasonable costs of its counsel. If the Defending Party assumes liability for the Third Party Claim as against the Asserting Party and assumes the defense and control of the Third Party Claim pursuant to this Section 9.2, the Defending Party shall not be liable for any fees and expenses of counsel fo r the Asserting Party incurred thereafter in connection with the Third Party Claim (except in the case of actual or potential differing interests, as provided in the preceding sentence), but shall not agree to any settlement of such Third Party Claim which does not include an unconditional release of the Asserting Party by the third party claimant on account thereof. If the Defending Party does not assume liability for and the defense of the Third Party Claim pursuant to this Section 9.2, the Asserting Party shall have the right to assume the defense of and, if such Asserting Party shall have notified the Defending Party of the Asserting Party's intention to negotiate a settlement of the Third Party Claim, which notice shall include the material terms of any proposed settlement in reasonable detail, to settle the Third Party Claim (at the Defending Party's expense to the extent the matter is determined to be subject to indemnification hereunder) on terms not materially inconsistent with those set forth in s uch notice, unless the Defending Party shall have notified the Asserting Party in writing of the Defending Party's election to assume liability for and the defense of the Third Party Claim pursuant to this Section 9.2 within ten (10) days after receipt of such notice of intention to settle, and the Defending Party promptly thereafter shall have taken appropriate action to implement such defense. The Asserting Party shall not be entitled to settle any such Third Party Claim pursuant to the preceding sentence unless such settlement includes an unconditional release by the third party claimant on account thereof. The Asserting Party and the Defending Party shall use all reasonable efforts to cooperate fully with respect to the defense of any Third Party Claim covered by this Article IX.             Section 9.3 Set-off. Buying Group shall have the right, notwithstanding any other rights it might have against any other Person, to set-off any unpaid indemnification obligation to which it is entitled under this Article IX against any amounts owed by it to a Selling Group Member, Parent or any Affiliate of Parent, pursuant to this Agreement or any of the Related Agreements to which such Persons are a party.              Section 9.4 Limitations. The obligations of each Selling Group Member and the Parent to indemnify the Indemnified Buyer Parties pursuant to this Article IX shall be subject to the following limitations:              (a)       No indemnification shall be required to be made by any Selling Group Member or the Parent until the aggregate amount of the Indemnified Buyer Parties' Losses exceeds $500,000 (the "Deductible"), whereupon indemnification shall be required to be made by the Selling Group and the Parent to the full extent of such Losses in excess of $250,000; provided, however, that the Deductible shall not be applicable to Indemnified Buying Parties' Losses arising from or relating to:                    (i)       the indemnification obligations under Sections 9.1(a), (b), (d), (e) and (f) hereof ("Excluded Claims");                    (ii)       breaches of the representations set forth in Sections 4.3 [Authorization; Enforceability], 4.4 [No Breach or Violation], 4.5 [Consents and Approvals], 4.14 [Tax Matters] and the second sentence of Section 4.16 [Title to Purchased Assets] or Section 4.25 [Brokers' Fees] ("Excluded Representations"); or                    (iii)      fraud ("Fraud Claims").              (b)       All representations and warranties contained in this Agreement shall survive the Closing until the second (2nd) anniversary thereof; provided, however, that the following claims shall survive for three months beyond the applicable statute of limitations period (the applicable period of survival being referred to herein as the "Survival Period"):                    (i)       Excluded Claims;                    (ii)       Excluded Representations; or                    (iii)      Fraud Claims. To the extent a claim is made in respect of a representation or warranty within the applicable Survival Period, such representation or warranty shall survive after such Survival Period for purposes of such claim until such claim is finally determined or settled.              (c)       The liability of each Selling Group Member and the Parent for their indemnification obligations under this Article IX shall be limited in the aggregate to an amount equal to fifty percent (50%) of the Base Purchase Price; provided, however, that there shall be no limit applicable to Losses arising from or relating to:                    (i)       Excluded Claims;                    (ii)       Excluded Representations; or                    (iii)      Fraud Claims.             Section 9.5 Buying Group. From and after the Closing Date, but subject to the limitations of this Article IX, each Buying Group Member, on a joint and several basis, agrees to reimburse, indemnify and hold harmless each Selling Group Member and their respective successors and assigns, and any director, shareholder, employee or officer thereof (an "Indemnified Seller Party" and collectively the " Indemnified Seller Parties") against and in respect of all Losses incurred or suffered by any Indemnified Seller Party arising from or relating to:              (a)       Any and all Assumed Liabilities;              (b)       Any misrepresentation, breach or inaccuracy in or omission from any representation or warranty made by a Buying Group Member under this Agreement or any certificate, schedule, statement, document or instrument furnished to a Selling Group Member pursuant hereto; or              (c)       Any breach or nonfulfillment of any agreement or covenant on the part of a Buying Group Member under this Agreement to be performed on or following the Closing Date.              Section 9.6 Limitations - Buying Group. The obligations of Buying Group to indemnify the Indemnified Seller Parties pursuant to this Article IX shall be subject to the following limitations:              (a)       No indemnification shall be required to be made by Buying Group until the aggregate amount of the Indemnified Seller Parties' Losses exceeds the Deductible and then indemnification shall be required to be made by Buying Group to the full extent of such Losses in excess of $250,000; provided, however, that the Deductible shall not be applicable to Losses arising from or relating to:                    (ii)       Indemnification obligations under 9.5(a) ("Assumed Liability Claims");                    (ii)       Fraud Claims.              (b)       All representations and warranties contained in this Agreement shall survive the Closing until the second (2nd) anniversary thereof; provided, however, that the following claim shall apply for three months beyond the applicable statute of limitations (the applicable period of survival being referred to herein as the "Survival Period"):                    (i)       Assumed Liability Claims;                    (ii)       Fraud Claims. To the extent a claim is made in respect of a representation or warranty within the applicable Survival Period, such representation or warranty shall survive after such Survival Period for purposes of such claim until such claim is finally determined or settled.              (c)       The liability of Buying Group and ProCare for its respective indemnification obligations under this Article IX shall be limited in the aggregate to an amount equal to fifty percent (50%) of the Base Purchase Price; provided, however, that there shall be no limit applicable to Losses arising from or relating to Assumed Liability Claims and Fraud Claims.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE X TERMINATION        Section 10.1. Termination. This Agreement may be terminated and the transactions contemplated herein may be abandoned, by written notice given to the other party hereto, at any time prior to the Closing:              (a)       by mutual written consent of Buying Group and Selling Group;              (b)       by either Buying Group or Selling Group, if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise permanently prohibiting the sale of the Purchased Assets to Buying Group (and in which case Buying Group and Selling Group shall have used all reasonable efforts to have such order, decree, ruling or other action lifted or reversed) and such order, decree, ruling or other action shall have become final and nonappealable;              (c)       by Buying Group, if any Selling Group Member shall have breached any of its representations herein and such breach or breaches, in the aggregate, would reasonably be expected to have a Material Adverse Effect or if any Selling Group Member shall have materially breached any of its covenants hereunder (and any such breach shall not have been cured to the reasonable satisfaction of Buying Group within 10 days after Buying Group's notice to Selling Group of such breach);              (d)      by Selling Group, if any Buying Group Member shall have materially breached any of its representations herein and such breach or breaches, in the aggregate, would reasonably be expected to have a Material Adverse Effect or if any Buying Group Member shall have materially breached any of its covenants hereunder (and any such breach shall not have been cured to the reasonable satisfaction of Selling Group within ten (10) days after Selling Group's notice to Buying Group of such breach); or              (e)      by either Buying Group or Selling Group if the Closing shall not have occurred on or before October 1, 2000 (the "Outside Date"), unless (i) the parties agree in writing to extend the Outside Date, or (ii) the failure to have the Closing shall be due to the failure of the party seeking to terminate this Agreement to perform in any material respect its obligations under this Agreement required to be performed by it at or prior to the Closing.              Section 10.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 10.1, written notice thereof shall be given by the terminating party to the other party specifying the provision hereof pursuant to which such termination is being made and the Agreement shall become null and void and of no further force or effect, and no party hereto (or any of its Affiliates, directors, officers, managers, agents or representatives) shall have any liability or obligation hereunder (except for any liability of any party then in breach); provided, however, that the provisions of all but the first and fourth sentences of Section 6.1 (Access) and all of Section 11.2 (Expenses) shall survive any such termination.   -------------------------------------------------------------------------------- [ COVER ] || [ TABLE OF CONTENTS ]   ARTICLE XI MISCELLANEOUS              Section 11.1 Assignment. Neither this Agreement, nor any right hereunder, may be assigned by any of the parties hereto except that at ProCare's option, a Buying Group Member shall have the right to designate one or more Affiliates as a Buying Group Member for all or any portion of the Purchased Assets, provided that ProCare remains liable hereunder and the CVS Guaranty remains in effect.              Section 11.2 Payment of Fees and Expenses. Each party to this Agreement agrees to pay its own costs, fees and expenses incurred (including legal, accounting, consulting, appraisal, investment banking and similar professional fees) in connection with the transactions contemplated hereunder (other than with respect to the HSR Act filing fee as provided in Section 6.5 hereto). No portion of any such costs, fees and expenses incurred by a Selling Group Member shall be accrued on the Closing Balance Sheet.              Section 11.3 Further Acts by Each Selling Group Member and the Parent. From and after the Closing Date, upon the reasonable request of any Buying Group Member, each Selling Group Member, and the Parent shall execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney, and assurances as may be required to convey and transfer to and vest in each Buying Group Member and protect their respective right, title and interest in the Purchased Assets to be acquired hereunder, and as may be appropriate otherwise to carry out the transactions contemplated by this Agreement.              Section 11.4 Entire Agreement, Construction, Counterparts, Effectiveness. This Agreement, including the Schedules and Exhibits delivered pursuant hereto, constitutes the entire agreement of the parties in respect of the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions of the parties, whether written or oral, and may not be changed, terminated or discharged orally. The Table of Contents and Headings appearing in this Agreement have been inserted solely for the convenience of the parties and shall be of no force and effect in the construction of the provisions of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. This Agreement may be executed in several counterparts, and each executed counterpart shall be considered an original of this Agreement. This Agreement shall not become effective until it has been executed by all of the parties hereto.              Section 11.5 Notices. Any notice or other communication in connection with this Agreement or any Related Agreement shall be deemed to be delivered if in writing (or in the form of telecopy) addressed as provided below (a) when actually delivered, (b) when telecopied to said address, or (c) in the case of a letter, one (1) business day after deposit with a nationally recognized overnight courier or five (5) business days after the same has been deposited in the United States mails, postage prepaid and certified:   (i) If to a Buying Group Member:           CVS Corporation One CVS Drive Woonsocket, Rhode Island 02895 Attention: Zenon P. Lankowsky, Esq. Telecopy No. (401) 770-2603           with a copy to:           Edwards & Angell, LLP 2800 Bank Boston Plaza Providence, Rhode Island 02903 Attention: Christopher D. Graham, Esq. Telecopy No. 401-276-6611         (ii) If to a Selling Group Member or Parent:           Bergen Brunswig Corporation 4000 Metropolitan Drive Orange, CA 92868 Attention: Milan A. Sawdei, Esq. Telecopy No. 714-385-4000           with a copy to:           Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Attention: Peter H. Ehrenberg, Esq. Telecopy No. 973-597-2351   Any party may change the address to which notices are to be addressed by giving the other parties hereto notice in the manner herein set forth.              Section 11.6 Changes in Writing. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.              Section 11.7 Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law, but only as long as the continued validity, legality and enforceability of such provision or application does not materially (a) alter the terms of this Agreement, (b) diminish the benefits of this Agreement or (c) increase the burdens of this Agreement, for any person.              Section 11.8 Governing Law.              This Agreement shall be governed by and construed in accordance with the laws of the State of Rhode Island, as applied to contracts made and performed within the State of Rhode Island, without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other state.              Section 11.9 Consent to Jurisdiction              THE PARTIES HERETO HEREBY AGREE TO SUBMIT TO THE JURISDICTION OF THE COURTS IN AND OF THE STATE OF RHODE ISLAND AND THE STATE OF CALIFORNIA, AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURTS FOR THE DISTRICT OF RHODE ISLAND AND THE SOUTHERN DISTRICT OF CALIFORNIA, AND TO THE STATE AND FEDERAL COURTS TO WHICH AN APPEAL OF THE DECISIONS OF SUCH COURTS MAY BE TAKEN, AND CONSENT THAT SERVICE OF PROCESS WITH RESPECT TO ALL COURTS IN AND OF THE STATE OF RHODE ISLAND AND THE STATE OF CALIFORNIA, AND THE UNITED STATES DISTRICT COURTS FOR THE DISTRICT OF RHODE ISLAND AND THE SOUTHERN DISTRICT OF CALIFORNIA, MAY BE MADE BY REGISTERED MAIL TO THEM AT THEIR RESPECTIVE ADDRESSES SET FORTH IN SECTION 11.5 HEREOF.             Section 11.10 Non-Competition by Selling Group/Parent.              (a)       For a period of four years following the Closing Date (the "Restrictive Period"), each Selling Group Member and Parent will not, and will cause the respective Affiliates controlled by any of them not to, directly or indirectly, anywhere in North America (the "Territory"), own, operate or engage in a Competing Business. For purposes of this Agreement, the Selling Group and Parent will not be deemed to have violated the preceding sentence in the event that (A) any Selling Group Member, Parent or any of the respective Affiliates controlled by any of them acquires the capital stock or a substantial portion of the assets of a Person whose revenues attributable to a Competing Business during its last fiscal year are less than $5 million and represent less than 25% of the aggregate revenues of such Person during such fiscal year; or (B) if any Selling Group Member, Parent or any of the respective Affiliates controlled by any of them acquires the capital s tock or a substantial portion of the assets of a Person whose revenues attributable to a Competing Business during its last fiscal year are equal to or greater than $5 million or represent at least 25% of the aggregate revenues of such Person during such fiscal year, such Selling Group Member, Parent or such Affiliate promptly offers to sell such Competing Business to the Buying Group on commercially reasonably terms at a price that is either agreed upon by the Selling Group and the Buying Group or is determined by a valuation firm mutually acceptable to the Selling Group and the Buying Group to represent the fair market value of such Competing Business; provided that if the Buying Group does not, or is not permitted by Law to, accept such offer, such Selling Group Member, Parent or such Affiliate shall use all reasonable commercial efforts to dispose of the Competing Business promptly on commercially reasonable terms.              (b)       For a period of twelve months following the Closing Date (the "First Twelve Month Period"), each Selling Group Member and Parent agrees that it will not, and will cause the respective Affiliates controlled by any of them not to, without the prior written consent of ProCare, hire, engage, employ or interfere with or attempt to hire, engage, employ or interfere with any Rehired Employee who was an exempt employee of Selling Group at the Closing Date, other than Andrew Wolpe and Bernie Heron.              (c)       For a period of twelve months following the First Twelve Month Period (the "Second Twelve Month Period"), each Selling Group Member and Parent agrees that it will not, and will cause the respective Affiliates controlled by any of them not to, without the prior written consent of ProCare, solicit or attempt to hire any Rehired Employee who was an exempt employee of Selling Group at the Closing Date, other than Andrew Wolpe and Bernie Heron.              (d)       If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 11.10 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to achieving the intention of the parties as set forth herein, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.              Section 11.11 Non-Competition - Buying Group.              (a)       During the Restrictive Period, each Buying Group Member agrees that it will not, and will cause each of the Affiliates controlled by it not to, directly or indirectly, anywhere in the Territory, own, operate or engage in a Competing Corrections Division Business. For purposes of this Agreement, the Buying Group will not be deemed to have violated the preceding sentence in the event that (A) any Buying Group Member or any of the Affiliates controlled by it acquires the capital stock or a substantial portion of the assets of a Person whose revenues attributable to a Competing Corrections Division Business during its last fiscal year are less than $2.5 million and represent less than 25% of the aggregate revenues of such Person during such fiscal year,; or (B) if any Buying Group Member or any of the Affiliates controlled by it acquires the capital stock or a substantial portion of the assets of a Person whose revenues attributable to a Competing Corrections Division Bus iness during its last fiscal year are equal to or greater than $2.5 million or represent at least 25% of the aggregate revenues of such Person during such fiscal year, such Buying Group Member or such Affiliate promptly offers to sell such Competing Corrections Division Business to the Selling Group on commercially reasonably terms at a price that is either agreed upon by the Selling Group and the Buying Group or is determined by a valuation firm mutually acceptable to the Selling Group and the Buying Group to represent the fair market value of such Competing Corrections Division Business; provided that if the Selling Group does not, or is not permitted by Law to, accept such offer, such Buying Group Member or such Affiliate shall use all reasonable commercial efforts to dispose of the Competing Corrections Division Business promptly on commercially reasonable terms.              (b)       For the First Twelve Month Period, each Buying Group Member agrees that it will not, and will cause each of the Affiliates controlled by it not to, without the prior written consent of Parent, hire, engage, employ or interfere with or attempt to hire, engage, employ or interfere with, any exempt employee of the Corrections Division Business at the Closing Date.              (c)       For the Second Twelve Month Period, each Buying Group Member agrees that it will not, and will cause each of the Affiliates controlled by it not to, without the prior written consent of Parent, solicit or attempt to hire any exempt employee of the Corrections Division Business at the Closing Date.              (d)       If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 11.11 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to achieving the intention of the parties as set forth herein, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.              Section 11.12 Waiver of Jury Trial.              THE PARTIES HERETO HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS.              Section 11.13 Publicity. No party will issue any press release or make any other public statement relating to the transactions contemplated hereby unless (i) mutually agreed to by the parties hereto, or (ii) required by law, regulation, court order or the rules of any applicable stock exchange or the New York Stock Exchange or of any applicable Governmental Authority and any such release or statement shall be subject to prior review by the parties hereto.   [Signatures Appear on Following Page]               --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.     PROCARE PHARMACY, INC.           By: /s/ Dennis C. Burton --------------------------------------------------------------------------------     Name: Dennis C. Burton     Title: President, CVS ProCare                   STADTLANDER OPERATING COMPANY, L.L.C.           By: /s/ Milan A. Sawdei --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary                   STADTLANDER LICENSING COMPANY, LLC           By: /s/ Milan A. Sawdei --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary                   STADTLANDER DRUG OF CALIFORNIA, LP           By: /s/ Milan A. Sawdei --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary                   STADTLANDER DRUG OF HAWAII, LP           By: /s/ Milan A. Sawdei --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary                   BERGEN BRUNSWIG CORPORATION           By: /s/ Robert E. Martini --------------------------------------------------------------------------------     Name: Robert E. Martini     Title: Chairman and Chief Executive       Officer

EX-10.63 5 ebay1063.htm 10.63 TECHNOLOGY LICENSE AGREEMENT CO-BRANDED WEB SERVICES REFERRAL AGREEMENT This Co-Branded Web Services Referral Agreement ("Agreement") is made and entered into as of the 21st day of April, 2000 (the "Effective Date"), by and between E-LOAN, Inc., a corporation organized and existing pursuant to the laws of the state of Delaware, with principal offices at 5875 Arnold Drive, Suite 100, Dublin, California 94568 ("E-LOAN"); and eBay Inc., a corporation organized and existing pursuant to the laws of the state of Delaware, with principal offices at 2145 Hamilton Avenue, San Jose, California, 95125 ("eBay"); with respect to the following facts and circumstances: WHEREAS, E-LOAN is the provider of a web-based consumer and small business loan service currently available over the world wide web at URL: www.eloan.com; and WHEREAS, eBay is in the business of providing on-line trading and auction services and related services currently available over the world wide web at URL: www.ebay.com; and WHEREAS, the parties desire to create a co-branded, specialized version of the service of E-LOAN described above, branded with the E-LOAN and the eBay trademarks. NOW, THEREFORE, the parties hereby agree as follows: Definitions "eBay Service" means eBay's internet-based global on-line trading community that allows users to list and bid on items, and other related on-line services, which may be modified by eBay from time to time. "E-LOAN Service" means E-LOAN's web based equity loan service including private party financing and auto and home equity financing, currently available at URLs www.E-LOAN.com and www.CarFinance.com, as modified by E-LOAN from time to time. "Closed Loan" means the acquisition by a Consumer of automobile financing based through the Co-Branded Service by means of a completed Financing Submission. "Co-Branded Service" means a version of the E-LOAN Service that bears E-LOAN's and eBay's trademarks and logos, as developed under Section 2. "Consumer" means a user of the Co-Branded Service. "Financing Submission" means, for a specified Consumer, (i) the submission by such Consumer through the Co-Branded Service of a request for credit approval for the acquisition of a vehicle, which consists of such Consumer completing to the reasonable satisfaction of E-LOAN (i.e., sufficiently to permit E-LOAN to identify such Consumer by name and social security number and make its credit evaluation of the Consumer consistent with its normal business practices) one or more forms displayed in the Co-Branded Service for such purpose and then transmitting such information electronically to E-LOAN by clicking on a "submit" or similar button; (ii) the submission by a Consumer to E-LOAN, by telecopier, mail or other physical delivery, of one or more comparable forms similarly completed; or (iii) the oral submission by such Consumer of the information required by such form(s) to a representative of E-LOAN in a manner that permits E-LOAN to process such submission. "Financing Submission" does not include a submission (x) made by a Consumer anonymously; (y) that is identified by E-LOAN as either made with fraudulent intent or is not bona fide (e.g., does not include truthful responses to the material items of information that E-LOAN needs in order to process a submission); or (z) that is a duplicate of a prior Financing Submission. "Financing Yield" means, for a specified month, a fraction, the denominator of which is the number of Financing Submissions made during such month and the numerator of which is the number of such Financing Submissions that resulted in a Closed Loan during such month. Development Of The Co-Branded Service Specifications. The functional and technical specifications that will be required for the Co-Branded Service are set forth in Exhibit A attached hereto. Development Obligations . Exhibit B lists the responsibilities of each party with respect to the development of the Co-Branded Service and the schedule for its development and deployment. E-LOAN and eBay shall each perform their respective obligations described in Exhibit B , and shall use commercially reasonable efforts to complete such obligations by the dates set forth in Exhibit B . The parties acknowledge that the obligations and deliverables described in Exhibit B may be changed by prior written mutual agreement. Delay in Implementation of Service . The parties acknowledge that the development and launch of the Co-Branded Service is a cooperative effort requiring the diligent efforts of both parties. Therefore, in the event that the activities designated in Exhibit B for "Stage 1" of the development of the Co-Branded Service are not complete 120 days after the Launch Date, either party may, at any time thereafter, terminate this Agreement immediately upon written notice. Such termination will be each party's sole remedy and sole liability with respect to the failure of the development activities in Exhibit B to be completed. Operation Of The Service Operation of Service . As between the parties, E-LOAN will be responsible for the operation of the Co-Branded Service. E-LOAN shall operate the Co-Branded Service on E-LOAN's computer servers in a fashion substantially similar to the fashion in which it operates the E-LOAN Service. However, notwithstanding the foregoing, the parties acknowledge that the Co-Branded Service may not operate continuously or in an error-free fashion, but shall operate in accordance within the parameters of Exhibit A and the warranties of Section 7. Most Favored Customer . E-LOAN shall operate the Co-Branded Service in such a fashion that the prices for auto financing offered to Consumers will be, taken as a whole, as good or better than that of the E-LOAN Service or any of its partner's services. Customer Support. E-LOAN shall provide all technical and customer support to Consumers for all financing specific and financing transaction specific questions and issues related to the Co-Branded Service in at least the same manner it provides such support to users of the E-LOAN Service and in no event less than a reasonable level of support commensurate with or superior to similar support offered in E-LOAN's market. To the extent that any technical issues arise regarding the integration of the Co-Branded Service with the eBay Service, then eBay agrees to provide reasonable third-line technical support to E-LOAN's second-line technical support staff during eBay's normal business hours. If E-LOAN receives customer support or technical support inquiries that relate only to the eBay Service, E-LOAN will promptly refer all such matters to eBay. eBay and E-LOAN shall each provide the other party with customer support training for a small team of employees that may be cross-trained, free of charge. Each party shall pay for their employees' cost of travel and expenses related to such training. Performance Reporting. E-LOAN shall provide eBay with monthly written performance reports showing the number of Financing Submissions, and the number of approvals, declines, and Closed Loans relating thereto, the number of unique identified visitors to the Co-Branded Service, the average selling price of Closed Loans, the cumulative loan amounts sold, and the number of transactions requested. E-LOAN will use reasonable efforts to provide to eBay other information from time to time. eBay and E-LOAN will meet monthly to discuss in good faith the performance and adoption rate of the Co-Branded Service by users of the automobile listing elements of the eBay Service and ways to improve the performance and the adoption rate of the Co-Branded Service. As part of such meetings, eBay will use good faith, commercially reasonable efforts to provide E-LOAN with information regarding the number of page views on the eBay Service containing links to the Co-Branded Service (if technically feasible) and other relevant information to assist the parties' analysis of the performance and adoption rate of the Co-Branded Service. Any such information provided by eBay shall be treated as eBay's Confidential Information pursuant to Section 12. Marketing And Rights To Consumer Information Promotion of the Co-Branded Service . eBay shall use reasonable efforts to promote the Co-Branded Service; for example, by placing links or other promotions on its autos web page and other pages in eBay's sole discretion. In addition, E-LOAN shall promote the Co-Branded Service with eBay as set forth in Exhibit D. Rights to Consumer Information . The parties acknowledge that in connection with the operation of the Co-Branded Service, E-LOAN will collect certain information about Consumers and visitors to the Co-Branded Service, including without limitation personally identifiable information such as, but not limited to, email addresses, other contact information and traffic data, both on an individual basis and on an aggregate basis (collectively, "Consumer Information"), as well as social security numbers and other personally-identifiable or aggregated financial information (collectively, "Customer Financial Information"). Neither party shall sell Consumer Information to any third party for the purpose of providing unsolicited advertisements; and neither party shall target such users, either individually or as a group because of such user's use of the other party's services, for the purposes of sending unsolicited email advertisements. The above obligations will not be limited by Section 12.4. All Consumer Information shall be jointly owned by eBay and E-LOAN. Notwithstanding any other provision of this Agreement to the contrary, this right will immediately terminate upon any termination or expiration of this Agreement. As between E-LOAN and eBay, E-LOAN shall own the Customer Financial Information, and shall provide eBay written reports of aggregated Customer Financial Information as set forth in Section 3.4. In addition, E-LOAN agrees to use Customer Financial Information solely for purposes of providing the Co-Branded Service. E-LOAN shall not compile a list of personally identifiable eBay users. E-LOAN may keep aggregate data that does not contain personally identifiable information. In no event shall E-LOAN create a list of eBay users, including without limitation a list of all visitors to the Co-Branded Service, nor shall E-LOAN share, rent, sell, pass, or transfer such list to any third party. Publicity. No press release shall be announced without the prior written consent of both parties. eBay and E-LOAN shall cooperate to develop mutually acceptable press releases announcing the Co-Branded Service. Costs, Fees, And Payments Fees . As between the parties, E-LOAN will bear all costs associated with hosting and operating the Co-Branded Service. Payments . No later than 30 days after the end of each calendar quarter, E-LOAN shall pay to eBay the referral fees specified in Exhibit C accrued during such quarter, along with a report showing, in reasonable detail, the basis for calculation of such amounts. Pricing Reviews . The parties will conduct an initial pricing review no later than September 1, 2000, during which the parties will re-examine in good faith the revenue sharing arrangements set forth in Exhibit C. If no agreement is reached at such initial pricing review, by default, the payment amounts set forth in Exhibit C shall automatically increase by ten percent (10%). Thereafter, no later than 45 days before each anniversary of the Effective Date during the term of this Agreement, the parties will negotiate in good faith the economic terms for the upcoming year. If the parties cannot decide upon such terms by such anniversary, either party may terminate this Agreement for convenience pursuant to Section 8 below. Audits . E-LOAN shall maintain records of the transactions underlying the reports to be furnished under Section 6.2, and shall allow eBay, an auditor appointed by eBay reasonably acceptable to E-LOAN, during E-LOAN's office hours and at reasonable intervals, no more than once every twelve months, to inspect and make extracts or copies of such records solely for the purpose of ascertaining the correctness of such statements. All books of account and records will be kept available for at least two years after end of the term of this Agreement. E-LOAN shall immediately make any overdue payments disclosed by the audit plus applicable interest. Such inspection shall be at eBay's expense; however, if the audit reveals overdue payments in excess of 5% of the payments owed to date, E-LOAN shall immediately pay the cost of such audit, and eBay may conduct another audit during the same 12 month period. Warranties Warranties. E-LOAN represents and warrants to eBay that, during the term of this Agreement: and following the Launch Date, the Co-Branded Service will be available on a 24-hour, seven days per week basis, excluding routine, scheduled maintenance, in accordance with the specifications set forth in Exhibit A. E-LOAN owns all of the right, title and interest in and to the content provided by E-LOAN hereunder, and has the right to display such content on the Co-Branded Service. E-LOAN shall comply at all times with all government rules, regulations and laws applicable to provision of the E-LOAN Service and the Co-Branded Service, including without limitation all rules, regulations and laws relating to consumer privacy and data privacy of any kind. Disclaimer. EXCEPT AS SET FORTH IN SECTION 7.1, E-LOAN MAKES NO OTHER WARRANTIES REGARDING THE CO-BRANDED SERVICE, EXPRESS, IMPLIED OR STATUTORY, AND HEREBY EXPRESSLY DISCLAIMS ANY AND ALL OTHER SUCH WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Term And Termination Term and Termination. This Agreement will become effective on the Effective Date and shall remain force for an initial term of one year after the Launch Date. Thereafter, the term of this Agreement will continue until terminated as described in Section 8.2, unless earlier terminated pursuant to Section 8.3. Renewal . After the initial one-year term, this Agreement will automatically renew each year for an additional one-year period, unless either party terminates this Agreement by giving written notice of its intention to terminate no later than 30 days prior to the end of the then-current term. Events of Default. A party may terminate this Agreement and its further obligations hereunder upon the occurrence of any of the following events of default (subject to Sections 8.4 and 8.5): The other party ceases business in the ordinary course, or makes an assignment for the benefit of its creditors; or The other party is in material default of any provision of this Agreement. Cure Period for Event of Default. Upon the occurrence of any event of default that is amenable to cure, and that entitles a party to terminate this Agreement, the non-defaulting party may send notice of termination, specifying the nature of the default, to the other party. If the defaulting party has not cured the default to the non-defaulting party's satisfaction within 30 days after the date of such notice, this Agreement will terminate without further notice by the non-defaulting party. Upon the occurrence of any event of default that is not amenable to cure, and that entitles a party to terminate this Agreement, the non-defaulting party may send notice of termination, specifying the nature of the default, to the other party, which notice will be effective upon receipt. Effect of Termination . Upon expiration or termination of this Agreement, each party shall return or destroy the Confidential Information (as defined herein) of the other party. The rights and obligations of the parties under Sections 1, 4.2, 6, 7, 8.5, 9.4, 10, 11, 12, 13 and 14 will survive termination or expiration of this Agreement for any reason. Licenses And Ownership Trademark License. Each party ("Licensor") grants to the other party ("Licensee") a non-exclusive, non-transferable, royalty-free right to display the trademarks and logos adopted by Licensor ("Marks") solely to perform Licensee's obligations under this Agreement. In addition, Licensee may display the Marks on an appropriate area of its Web site indicating its business associates and strategic alliances and in such other promotions as the parties may agree upon pursuant to Exhibit D. Review . Licensee shall submit to Licensor all representations of the Marks that Licensee intends to use in connection with the license granted in Section 9.1, for Licensor's approval of design, color, presentation, quality, and conformance with the Licensor's trademark and branding policies. Licensee shall not publish, disseminate, exhibit, or otherwise distribute any such representation without the Licensor's prior written permission. Once Licensor grants its approval, Licensor shall not unreasonably withdraw its approval, and Licensee will not be obligated to seek further approval for substantially similar uses of the Mark. Assignment of Goodwill . If Licensee, in the course of performing its services hereunder, acquires any goodwill or reputation in any of the Marks, all such goodwill or reputation will automatically vest in Licensor when and as, on an on-going basis, such acquisition of goodwill or reputation occurs, as well as at the expiration or termination of this Agreement, without any separate payment or other consideration of any kind to Licensee, and Licensee agrees to take all such actions necessary to effect such vesting. Licensee shall not contest the validity of any of the Marks or Licensor's exclusive ownership of them. During the term of this Agreement, Licensee shall not adopt, use, or register, whether as a corporate name, trademark, service mark or other indication of origin, any of the Marks, or any word or mark confusingly similar to them in any jurisdiction. Retained Rights . Each party hereby reserves all intellectual property rights not explicitly granted in this Agreement. Limitation Of Liability EXCEPT FOR ANY LIABILITY ARISING OUT OF A BREACH OF SECTION 12 ("CONFIDENTIALITY"), NEITHER PARTY WILL BE LIABLE TO THE OTHER, NOR WILL E-LOAN BE LIABLE TO AUTOTRADER.COM, LLC, FOR ANY LOST PROFITS, LOSS OF MARKET OR OPPORTUNITY, OR FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY KIND HOWSOEVER ARISING (WHETHER OR NOT ARISING OUT OF THE NEGLIGENCE OF E-LOAN OR EBAY, OR THEIR RESPECTIVE EMPLOYEES OR AGENTS) IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT, PURSUANT TO ANY CLAIM IN CONTRACT, NEGLIGENCE, TORT, STRICT LIABILITY, OR OTHER THEORY. EXCEPT FOR LIABILITY ARISING OUT OF SECTION 11, EACH PARTY'S LIABILITY HEREUNDER WILL BE LIMITED TO AMOUNTS PAID BY E-LOAN UNDER SECTION 6. Indemnity. By E-LOAN. E-LOAN hereby indemnifies eBay and AutoTrader.com, LLC and holds each harmless from and against any and all liabilities, damages, costs and expenses (including without limitation reasonable attorneys' fees) arising out of or related to any third party claim, suit, action or proceeding arising from E-LOAN's provision of the Co-Branded Service or a breach by E-LOAN of any of the warranties under Section 7.1(b) or (c). eBay agrees to provide E-LOAN prompt written notice of any such claim, give E-LOAN sole control of the defense of such claim, provided that E-LOAN may not settle or compromise any such claim in a manner that does not unconditionally release eBay or AutoTrader.com, LLC unless eBay consents to such in writing, and provide E-LOAN reasonable assistance in the defense of such claim upon E-LOAN's request and at E-LOAN's reasonable expense. By eBay. eBay hereby indemnifies E-LOAN and holds it harmless from and against any and all liabilities, damages, costs and expenses (including without limitation reasonable attorneys' fees) arising out of or related to any third party claim, suit, action or proceeding alleging that the trademarks licensed by eBay to E-LOAN hereunder infringe such third party's trademark rights in the applicable classes. E-LOAN agrees to provide eBay prompt written notice of any such claim, give eBay sole control of the defense of such claim, provided that eBay may not settle or compromise any such claim in a manner that does not unconditionally release E-LOAN unless E-LOAN consents to such in writing, and provide eBay reasonable assistance in the defense of such claim reasonable assistance upon eBay's request and at eBay's reasonable expense. Confidentiality "Confidential Information" is any information disclosed by one party to the other in connection with this Agreement and which the receiving party knows or has reason to know is regarded as confidential information by the disclosing party. The Confidential Information will include, but will not be limited to, trade secrets, the structure, sequence and organization of the source code of computer software, marketing plans, techniques, processes, procedures and formulae. For each item of Confidential Information, the party disclosing the item will be called the "Disclosing Party," and the party receiving the item will be called the "Receiving Party." Non-Use and Non-Disclosure . The Receiving Party shall hold all Confidential Information of the Disclosing Party in trust and confidence, and protect it as the Receiving Party would protect its own confidential information (which, in any event, will not be less than reasonable protection) and shall not use such Confidential Information for any purpose other than that contemplated by this Agreement. Unless agreed by the Disclosing Party in writing, the Receiving Party shall not disclose any Confidential Information of the Disclosing Party, by publication or otherwise, to any person other than employees and contractors (such as contract manufacturers or software developers) who (i) are bound to written confidentiality obligations consistent with and at least as restrictive as those set forth herein and (ii) have a need to know such Confidential Information for purposes of enabling a party to exercise its rights and perform its obligations pursuant to this Agreement. The foregoing confidentiality obligation will be effective for a period of three years after first disclosure of the Confidential Information pursuant to the terms of this Agreement, provided however, that each party will comply with any obligations of confidentiality as may be imposed pursuant to agreements with third parties for longer periods if the Disclosing Party discloses to the other in writing such obligations of confidentiality that may be imposed pursuant to such agreements with third parties at the time of disclosure. Confidential Treatment. Without limiting the foregoing, and subject to compliance with applicable law, each party agrees to notify the other party in the event any element of this Agreement may need to be disclosed to the federal or state government pursuant to any regulatory or other disclosure requirement, and to further seek confidential treatment requested by the other with respect to certain confidential elements of the Agreement and any documents related thereto (including information relating to fees, payments and integration) in any governmental or public filings. Exceptions . The obligations specified in Section 12.2 will not apply to any Confidential Information to the extent that: it is already known to the Receiving Party without restriction prior to the time of disclosure by the Disclosing Party; it is acquired by the Receiving Party from a third party without confidentiality restriction; it is independently developed or acquired by the Receiving Party by employees or contractors without access to such Confidential Information; it is approved for release by written authorization of the Disclosing Party; it is in the public domain at the time it is disclosed or subsequently falls within the public domain through no wrongful action of the Receiving Party; it is furnished to a third party by the Disclosing Party without a similar restriction on that third party's right of disclosure; it is disclosed pursuant to the requirement of a governmental agency or disclosure is permitted or required by operation of law, provided that the Receiving Party use its best efforts to notify the Disclosing Party in advance of such disclosure and seeks confidential treatment for such Confidential Information. Confidentiality of Agreement . Subject to Section 5, each party agrees that the terms and conditions of this Agreement will be treated as Confidential Information; provided that each party may disclose the terms and conditions of this Agreement: (a) to legal counsel; (b) in confidence, to accountants, banks, and financing sources and their advisors; (c) in connection with promotional and marketing activities permitted by this Agreement; and (d) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement. Jurisdiction And Applicable Law Choice of Forum. The parties hereby submit to the jurisdiction of, and waive any venue objections against, the United States District Court for the Northern District of California, San Jose Branch and the Superior and Municipal Courts of the State of California, Santa Clara County, in any litigation arising out of the Agreement. Governing Law . This Agreement will be governed by and construed under the laws of the United States and the State of California, as those laws are applied to contracts entered into and to be performed entirely in California by California residents. Miscellaneous Event of Force Majeure. If the performance of this Agreement or any obligations hereunder is prevented, restricted, or interfered with by reason of acts of God, acts of an governmental authority, riot, revolution, fires, or war, or other cause beyond the reasonable control of the parties hereto ("Force Majeure"), the party so effected will be excused from such performance until such Force Majeure is removed, provided that the party so affected will use its best efforts to avoid or remove such causes of non-performance and shall continue performance hereunder with the utmost dispatch whenever such causes are removed. Waiver . Any waiver of breach or default pursuant to this Agreement will not be a waiver of any other subsequent default. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. Customer Privacy and Non-Solicitation. Each party expressly acknowledges and agrees not to disclose, share, rent, sell or transfer to any third party any personal or financial information relating to the other party's customers (including without limitation a consumer's first and last name, physical address, zip code, email address, phone number, social security number, birth date, and any other information that itself identifies or, when tied to the above information, may identify a consumer), except as specifically required to satisfy the disclosing party's contractual obligations to the other party, provided that such disclosure would not violate existing law or the privacy policy of either party. Each party also agrees not to contact, solicit, or advertise, telemarket or e-mail to any of the other party's customers as a group or otherwise on the basis of their status as users of that party's service. Severability . To the extent that any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, that provision notwithstanding, the remaining provisions of this Agreement will remain in full force and effect and such invalid or unenforceable provision will be deleted. Assignment . Neither party may assign, voluntarily, by operation of law, or otherwise, any rights or delegate any duties under this Agreement (other than third-party technical infrastructure and the right to receive payments) without the other party's prior written consent, and any attempt to do so without that consent will be void; provided, however, that either party may assign all of its rights or obligations under this Agreement to a successor in interest in connection with a change of control, a sale of substantially all of its assets, or a merger, acquisition, public offering or other reorganization transaction. This Agreement will bind and inure to the benefit of the parties and their respective successors and permitted assigns. Notices . Any notice required or permitted pursuant to this Agreement must be in writing delivered by hand, overnight courier, telecopy, facsimile, or certified or registered mail to the address first listed above. Each party may change such address upon written notice to the other. Amendment . No alteration, waiver, cancellation, or any other change or modification in any term or condition of this Agreement will be valid or binding on either party unless made in writing and signed by duly authorized representatives of both parties. Counterparts . This Agreement may be executed in one or more counterparts, including facsimiles, each of which will be deemed to be a duplicate original, but all of which, taken together, will be deemed to constitute a single instrument. Entire Agreement . The terms and conditions herein contained, including all Exhibits hereto, constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede any previous and contemporaneous agreements and understandings, whether oral or written, between the parties hereto with respect to the subject matter hereof. There are no other agreements, understandings, representations, or promises between the parties with respect to the subject matter of this Agreement. Construction . This Agreement is the product of negotiation between the parties and their respective counsel. This Agreement will be interpreted fairly in accordance with its terms and conditions and without any strict construction in favor of either party. Any ambiguity will not be interpreted against the drafting party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized representatives as of the Effective Date. E-LOAN, Inc. eBay Inc . By: By: Name: Name: Title: Title: Exhibit A Co-Branded Service Specifications Co-Branded Service Functionality The Co-Branded Service will offer the following services to Customers: 1) A "Loan Center" to be linked to from the "eBay Motor" site and such other sites of the eBay Service as eBay may choose. The Loan Center will include a loan quotation engine, loan processing services for secured and unsecured loan offerings and prime and subprime loan offerings, private party financing services, loan tracking functionality to enable a Customer to follow the process of his or her loan application, and information pages that explain the loan process and such other information as eBay may direct E-LOAN to provide Customers from time to time. 2) A loan rate calculator, which calculates general monthly payment or customer-specific rates. 3) An "eBay Wallet," which will offer an unsecured line of credit on terms and conditions to be agreed upon by the parties. Other details will be decided during the implementation process. 1. A loan rate translator, which allows individual customers to see and bid for cars based on comparisons of different loan payment schedules. The Loan Center will be implemented prior to the Launch Date as set forth in Exhibit B. Whether an "eBay Wallet" or loan rate translator gets included in the Co-Branded Service will be determined later by mutual agreement of the parties. Traffic Flow and Navigation. The Co-Branded Service will incorporate an eBay-designated header and eBay-branded graphics and text links above the fold that navigate back to the eBay Service. Unless mutually agreed upon, there will not be any links on the Co-Branded Service to third party sites. No Advertising. There will be no advertising on the Co-Branded Service unless mutually agreed by the parties. Brand Placement. The parties will mutually agree upon the appropriate placement of their respective Marks on the Co-Branded Service. Without limiting the foregoing, the eBay brand shall be displayed prominently on the top of the initial page and all subsequent pages of the Co-Branded Service. Security. E-LOAN shall take best efforts to ensure the security (through SSL, firewall, and other technology) of the Co-branded web site and the Consumer data it contains from physical theft as well as, but not limited to, electronic theft, hacks, robots, spiders, and other automatic devices. Privacy Policy. E-LOAN shall create, post, and abide by a privacy policy no less protective of Consumer information than that of the eBay Privacy Policy, and that shall conform at a minimum to the TRUSTe privacy principles. Feedback Rating. The Co-Branded Service must maintain a positive eBay Feedback Rating in accordance with eBay's standard policies regarding Feedback. In no circumstances will E-LOAN own any feedback rating analysis or information. Site Performance Specifications. Availability of Web Site . The Co-Branded Service shall be publicly available to users a minimum of 99.5% of the time during any 24-hour period, 99.5% of the time during any 7-day period, and 99.5% of the time during any 30-day period. Response Time. The mean response time for server response to all accesses to the Co-Branded Service shall not exceed more than three seconds during any 1 hour period. Bandwidth. The bandwidth representing the Co-Branded Service connection to the Internet shall be operating at capacity no more than five minutes in any 24 hour period. Exhibit B Development Schedule Launch Date : April 24, 2000 Car loans secured through home equity and collateralized automotive loans, for prime and subprime customers, based on the existing E-LOAN engine. National coverage will be achieved for prime loans by the Launch Date, and for subprime loans within a year following the Launch Date. E-LOAN's personal pages integrated with eBay. eBay-approved information pages. The loan rate calculator. The eBay wallet and the loan rate translator will be implemented upon mutual agreement on a schedule to be mutually determined if the parties decide to implement either functionality.   Exhibit C E-LOAN will pay eBay the following amounts per month, beginning the month following the Launch Date:   Financing Yield during the month Payment Per Financing Submission Payment Per Closed Loan [*] $[*] $[*] [*] $[*] $[*] [*] $[*] $[*] [*] $[*] $[*]   Exhibit D Marketing and Promotion of the Co-Branded Service TBD

EXHIBIT 10.1 HARCOURT GENERAL, INC. (Formerly GENERAL CINEMA CORPORATION) 1988 STOCK INCENTIVE PLAN 1.     Purposes of the Plan .        The purposes of the 1988 Stock Incentive Plan are to provide a means to attract and retain competent personnel and to provide to participating officers and other key employees long-term incentive for high levels of performance and for unusual efforts to improve the financial performance of the Company. These purposes may be achieved through the grant of options to purchase Common Stock of General Cinema Corporation, the grant of Stock Appreciation Rights, and the grant of other Stock-Based Awards, as described below. 2.     Definitions .        (a)     "Affiliate" means any corporation or other entity which is not a parent or subsidiary corporation (as defined in Section 425 of the Code) and (i) with respect to which the Company possesses a direct or indirect ownership interest in, and has the power to exercise management control over, such corporation or entity, or (ii) which possesses a direct or indirect ownership interest in, and has the power to exercise management control over, the Company.        (b)     "Board" means the Board of Directors of General Cinema Corporation or the Executive Committee thereof.        (c)     "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time.        (d)     "Committee" means the Compensation Committee of the Board, or any other committee the Board may subsequently appoint to administer the Plan, as herein defined. The Committee shall be composed entirely of members of the Board who meet the requirements of Section 4(a) hereof.        (e)     "Common Stock" means the common stock of the Company having a par value of $1.00 per share.        (f)     "Company" means General Cinema Corporation, and any present or future parent or subsidiary corporations (as defined in Section 425 of the Code) or any successor to such corporations.        (g)     "Employee" means any employee of the Company or its Affiliates.        (h)     "Fair Market Value" means the closing price of Common Stock as quoted on the Composite Tape as published in The Wall Street Journal on the date as of which the fair market value is to be determined, or if there is no trading of Common Stock on such date, the closing price of Common Stock as quoted on such Composite Tape on the next preceding date on which there was trading in such shares.        (i)     "Incentive Award" means a Stock Option, Stock Appreciation Right or Stock-Based Award granted under the Plan, as herein defined.        (j)     "Incentive Stock Option" means a Stock Option that is intended to meet the requirements of Section 422A of the Code and regulations thereunder.        (k)    "Non-Qualified Stock Option" means a Stock Option other than an Incentive Stock Option.        (l)     "Participant" means any key Employee selected to receive an Incentive Award under the Plan.        (m)     "Plan" means The General Cinema Corporation 1988 Stock Incentive Plan as set forth herein, as it may be amended from time to time.        (n)     "Stock Appreciation Right" means the right to receive an amount up to the excess of the Fair Market Value of a share of Common Stock (as determined on the date of exercise), over (i) if the Stock Appreciation Right is granted without relationship to a Stock Option, the Fair Market Value of a share of Common Stock on the date the Stock Appreciation Right was granted, or (ii) if the Stock Appreciation Right is related to a Stock Option, the purchase price of a share of Common Stock specified in the related Stock Option.        (o)     "Stock-Based Award" means any award granted under Section 8.        (p)     "Stock Option" means a right to purchase Common Stock. 3.     Shares of Common Stock Subject to the Plan.        (a)     Subject to the provisions of Section 3(c) and Section 9 of the Plan, the aggregate number of shares of Common Stock that may be issued or transferred pursuant to Incentive Awards under the Plan will not exceed 2,500,000 shares.        (b)     The Common Stock to be delivered under the Plan will be made available, at the discretion of the Board or the Committee, either from authorized but unissued shares of Common Stock or from previously issued shares of Common Stock reacquired by the Company, including shares purchased on the open market.        (c)     If any Incentive Award shall expire or terminate for any reason, without being exercised or paid, shares of Common Stock subject to such Incentive Award shall again be available for grant under subsequent Incentive Awards. Shares of Common Stock reserved for issuance upon payment of a Stock-Based Award when payment of the Stock-Based Award is made in cash shall be available for grant under subsequent Incentive Awards. Shares as to which a Stock Option has been surrendered in connection with the exercise of a related Stock Appreciation Right will not be available for grant under subsequent Incentive Awards.       (d)     Subject to the general limitations contained in Sections 6, 7, 9 and 11, the Committee may make any adjustment in the exercise price, the number of shares subject to, or the terms of, a Non-Qualified Stock Option or Stock Appreciation Right by cancellation of an outstanding Non-Qualified Stock Option or Stock Appreciation Right and a subsequent regranting of a Non-Qualified Stock Option or Stock Appreciation Right, by amendment or by substitution of an outstanding Non-Qualified Stock Option or Stock Appreciation Right. Such amendment, substitution, or regrant may result in an exercise price that is higher or lower than the exercise price of the Non-Qualified Stock Option or Stock Appreciation Right, provide for a greater or lesser number of shares subject to the Non-Qualified Stock Option or Stock Appreciation Right, or provide for a longer or shorter term than the prior Non-Qualified Stock Option or Stock Appreciation Right; provided, however, that the Committee may not adversely affect the rights of any Participant to previously granted Incentive Awards without the consent of such Participant. If such action is effected by amendment, the effective date of such amendment may be the date of the original grant. 4.     Administration of the Plan.        (a)     The Plan will be administered by the Committee, which will consist of three or more persons (i) who are not eligible to receive Incentive Awards under the Plan, and (ii) who have not been eligible within one year before appointment to the Committee, for selection as persons to whom Incentive Awards may be granted pursuant to the Plan, or to whom shares may be allocated or stock options, stock appreciation rights or other stock-based awards may be granted pursuant to any other plan of the Company entitling the participants to acquire stock, stock appreciation rights, stock options or stock-based rights in the Company.        (b)     The Committee has and may exercise such powers and authority of the Board as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. The Committee has authority in its discretion to determine the key Employees to whom and the time or times at which Incentive Awards may be granted or sold, to determine the number of shares of Common Stock, Stock Appreciation Rights or the number and type of Stock-Based Awards that make up each Incentive Award and to grant Incentive Awards. Each Incentive Award will be evidenced by a written instrument and may include any other terms and conditions consistent with the Plan, as the Committee may determine. The Committee also has authority to interpret the Plan, to determine the terms and provisions of the respective Incentive Award agreements and to make all other determinations necessary or advisable for Plan administration. The Committee has authority to prescribe, amend, and rescind rules and regulations relating to the Plan. All interpretations, determinations and actions by the Committee will be final, conclusive and binding upon all parties. Any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members.        (c)     No member of the Board or the Committee and no Employee will be liable for any action taken, or determination or omission made, in good faith by the Board, the Committee or any Employee with respect to the Plan or any Incentive Award granted under it. 5.     Participation .        (a)     The Committee shall from time to time designate those key Employees, if any, to be granted Incentive Awards under the Plan, the type of awards granted, the number of shares, options, rights or units, as the case may be, which shall be granted to each such Employee, and any other terms or conditions relating to the awards as it may deem appropriate, consistent with the provisions of the Plan. Participants may be designated at any time, and it shall not be necessary that all Participants be designated at the same meeting of the Committee. An individual who has been granted an Incentive Award may, if otherwise eligible, be granted additional Incentive Awards if the Committee so determines.        (b)     No person will be eligible for the grant of any Incentive Stock Option who owns or would own immediately before the grant of such Stock Option, directly or indirectly, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company. This restriction does not apply if, at the time such Incentive Stock Option is granted, the Incentive Stock Option exercise price is at least 110% of the Fair Market Value on the date of grant and the Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date of grant.        (c)     In no event may any member of the Board who is not an officer or other Employee be granted an Incentive Award under the Plan. 6.     Terms and Conditions of Stock Options .        (a)     Non-Qualified Stock Options may be granted to any key Employee selected by the Committee. Incentive Stock Options may be granted only to key Employees of the Company as selected by the Committee.        (b)     The purchase price of Common Stock under each Stock Option will be determined by the Committee, but may not be less than the Fair Market Value on the date of grant .        (c)     Stock Options may be exercised as determined by the Committee but in no event after ten years from the date of grant in the case of Incentive Stock Options, or after ten years and one day from the date of grant in the case of Non-Qualified Stock Options.        (d)     Upon the exercise of a Stock Option, the purchase price will be payable in full in cash or its equivalent acceptable to the Company. To the extent provided by the Stock Option, the purchase price may be paid by the assignment and delivery to the Company of shares of Common Stock or Series A Stock or a combination of cash and such shares equal in value to the exercise price. Any shares so assigned and delivered to the Company in payment or partial payment of the purchase price will be valued at their Fair Market Value on the exercise date.        (e)     Notwithstanding any other provision of the Plan, any Participant who disposes of shares of Common Stock acquired on the exercise of an Incentive Stock Option by sale or exchange either (i) within two years after the date of the grant of the Stock Option under which the stock was acquired or (ii) within one year after the transfer of such shares to him pursuant to exercise shall notify the Company of such disposition and of the amount realized and of his adjusted basis in such shares.        (f)     The Fair Market Value (determined at the time the Incentive Stock Option is granted) of the shares of Common Stock with respect to which an Incentive Stock Option is exercisable for the first time by an Employee during any calendar year under this Plan or any other stock option plan of the Company will not exceed $100,000.        (g)     No fractional shares will be issued pursuant to the exercise of a Stock Option; payment for the fractional shares will be made in cash.        (h)     A Stock Option granted under this Plan shall, by its terms, be non-transferable by a Participant other than by will or the laws of descent and distribution, and shall be exercisable during the Participant's lifetime solely by the Participant or the Participant's duly appointed guardian or personal representative. 7.     Terms and Conditions of Stock Appreciation Rights .        (a)     A Stock Appreciation Right may be granted in connection with a Stock Option, either at the time of grant or at any time thereafter during the term of the Stock Option, or may be granted unrelated to a Stock Option.        (b)     A Stock Appreciation Right related to a Stock Option shall require the holder, upon exercise, to surrender such Stock Option with respect to the number of shares as to which such Stock Appreciation Right is exercised, in order to receive payment of an amount computed pursuant to Section 7(e). Such Stock Option will, to the extent surrendered, then cease to be exercisable.        (c)     In the case of Stock Appreciation Rights granted in relation to Stock Options, if the Stock Appreciation Right covers as many shares as the related Stock Option, the exercise of a related Stock Option shall cause the number of shares covered by the Stock Appreciation Right to be reduced by the number of shares with respect to which the related Stock Option is exercised. If the Stock Appreciation Right covers fewer shares than the related Stock Option, when a portion of the related Stock Option is exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be reduced only to the extent necessary so that the number of remaining shares subject to the Stock Appreciation Right is not more than the remaining shares subject to the Stock Option.        (d)     Subject to Section 7(k) and to such rules and restrictions as the Committee may, in its discretion and for any reason whatsoever, impose, a Stock Appreciation Right granted in connection with a Stock Option will be exercisable at such time or times, and only to the extent that a related Stock Option is exercisable, and will not be transferable except to the extent that such related Stock Option may be transferable.        (e)     Upon the exercise of a Stock Appreciation Right related to a Stock Option, the holder will be entitled to receive payment of an amount determined by multiplying:                (i)     The difference obtained by subtracting the purchase price of a share of Common Stock specified in                       the related Stock Option from the Fair Market Value of a share of Common Stock on the date of                       exerciseof such Stock Appreciation Right, by                (ii)    The number of shares as to which such Stock Appreciation Right will have been exercised.        (f)     A Stock Appreciation Right granted without relationship to a Stock Option will be exercisable as determined by the Committee but in no event after ten years from the date of grant.        (g)     A Stock Appreciation Right granted without relationship to a Stock Option will entitle the holder, upon exercise of the Stock Appreciation Right, to receive payment of an amount determined by multiplying:               (i)     The difference obtained by subtracting the Fair Market Value of a share of Common Stock on the date                      the Stock Appreciation Right is granted from the Fair Market Value of a share of Common Stock on                      the date of exercise of such Stock Appreciation Right, by               (ii)    The number of shares as to which such Stock Appreciation Right will have been exercised.        (h)     Notwithstanding subsections (e) and (g) above, the Committee may place a limitation on the amount payable upon exercise of a Stock Appreciation Right. Any such limitation must be determined as of the date of grant and noted on the instrument evidencing the Participant's Stock Appreciation Right granted hereunder.        (i)     Payment of the amount determined under subsections (e) and (g) above may be made solely in whole shares of Common Stock valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right or alternatively, in the sole discretion of the Committee, solely in cash or a combination of cash and shares as the Committee deems advisable. If the Committee decides to make full payment in shares of Common Stock, and the amount payable results in a fractional share, payment for the fractional share will be made in cash.        (j)     A Stock Appreciation Right granted under this Plan shall, by its terms, be non-transferable by a Participant other than by will or the laws of descent and distribution and shall be exercisable during the Participant's lifetime solely by the Participant or the Participant's duly appointed guardian or personal representative.        (k)     So long as required by the federal securities laws, no Stock Appreciation Right granted to an Employee subject to Section 16 of the Securities Exchange Act of 1934, as amended, may be exercised before six months after the date of grant except in the event death or disability of such employee occurs before the expiration of the six-month period; any exercise of a Stock Appreciation Right for cash will be made only during the period beginning on the third business day following the date of release for publication of the Company's regular quarterly or annual summary statement of revenues and income (assuming such financial data appears on a wire service, in a financial news service, or in a newspaper of general circulation, or is otherwise made publicly available) and ending on the twelfth business day following such date.        (l)     The Committee may impose such additional conditions or limitations on the exercise of a Stock Appreciation Right as it may deem necessary or desirable to secure for holders of Stock Appreciation Rights the benefits of Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any successor provision in effect at the time of grant or exercise of a Stock Appreciation Right or as it may otherwise deem advisable.        (m)     The Committee may, in its discretion, defer payment with respect to an exercise of a Stock Appreciation Right to some later time, but in no event later than 12 months after the exercise of the Stock Appreciation Right; provided, however, the Committee may not defer payment with respect to a Stock Appreciation Right which is related to an Incentive Stock Option. 8.     Stock-Based Awards        The Committee may grant awards of shares, share units, or cash payments valued with reference to the Fair Market Value of Common Stock, including (without limitation) restricted shares, restricted share units, performance shares, performance share units, and tax-offset payments. Subject to the provisions of the Plan, the Committee shall have complete discretion to determine the terms and conditions applicable to such awards. Such terms and conditions may require, among other things, continued employment and/or attainment of specified performance objectives. The Committee shall determine whether awards granted under this Section 8 shall be settled in cash, Common Stock or a combination of cash and Common Stock. 9.     Adjustment Provisions .        (a)     If the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock, or other securities, an appropriate and proportionate adjustment may be made in (i) the maximum number and kind of shares provided in Section 3, (ii) the number and kind of shares or other securities subject to the then-outstanding Incentive Awards, and (iii) the price for each share or other unit of any other securities subject to then-outstanding Incentive Awards without change in the aggregate purchase price or value as to which such Incentive Awards remain exercisable or subject to restrictions.        (b)     Adjustments under paragraph (a) will be made by the Committee, whose determination as to what adjustments will be made and the extent thereof will be made and the extent thereof will be final, binding, and conclusive. No fractional interest will be issued under the Plan on account of any such adjustments.        (c)     Notwithstanding anything to the contrary in this Plan, upon any Change of Control, any time periods, conditions or contingencies relating to the exercise or realization of, or lapse of restrictions under, any Incentive Award shall be automatically accelerated or waived so that the Incentive Award may be immediately exercised or realized in full.        A Change of Control means the occurrence of any of the following:               (i)  any "person" or "group" (as described in the Securities Exchange Act of 1934, as amended) becomes or               is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting               securities with respect to the election of the Board (counting each share of Class B Stock, par value $1.00               per share, of the Company (the "Class B Stock") as having ten votes per share), and also holds more of               such combined voting power than any group or person who is the beneficial owner, on June 16, 2000, of               over 20% of the combined voting power of the then outstanding voting securities with respect to the               election of the Board. "Person" does not include any Company employee benefit plan, any company the               shares of which are held by the Company shareholders in substantially the same proportion as such               shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or               any testamentary trust or estate;               (ii)  any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction                involving the Company, other than, in the case of any of the foregoing, a transaction in which the                Company shareholders immediately prior to the transaction hold immediately thereafter, in the same                proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of                the then outstanding voting securities with respect to the election of the board of directors of the resulting                entity (it being understood that if the Class B Stock shall remain outstanding following such transaction,                each share of Class B Stock shall be counted as having ten votes per share for purposes of such                calculation);               (iii)  any change in a majority of the Board within a 24-month period unless the change was approved by a                majority of the Incumbent Directors. "Incumbent Director" means a member of the Board at the beginning               of the period in question, including any director who was not a member of the Board at the beginning of               such period but was elected or nominated to the Board by, or on the recommendation of or with the               approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such               director was not nominated by a person who has expressed an intent to effect a Change of Control or               engage in a proxy or other control contest);               (iv)  any liquidation or sale of all or substantially all of the assets of the Company; or               (v)  any other transaction so denominated by the Board. 10.    General Provisions.        (a)     Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon any Participant any right to continue in the employ of the Company or its Affiliates or affect the right of the Company or its Affiliates to terminate the employment of any Participant at any time for any reason.        (b)     No shares of Common Stock will be issued or transferred pursuant to an Incentive Award unless and until all then-applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction and by any stock exchanges upon which the Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Incentive Award, the Company may require the Participant to take any reasonable action to meet such requirements.        (c)     No Participant and no beneficiary or other person claiming under or through such Participant will have any right, title or interest in or to any shares of Common Stock allocated or reserved under the Plan or subject to any Incentive Award except as to such shares of Common Stock, if any, that have been issued or transferred to such Participant, beneficiary or other person.        (d)     The Company may make such provisions as it deems appropriate to withhold any taxes the Company determines it is required to withhold in connection with any Incentive Award. The Company may require the Participants to satisfy any relevant tax requirements before authorizing any issuance of Common Stock to the Participant.        The Committee may provide that, if and to the extent withholding of any federal, state or local tax is required in connection with the exercise of an option, the optionee may elect, at such time and in such manner as the Committee shall prescribe, to have the Company hold back from the shares to be delivered stock having a value calculated to satisfy such withholding obligation. Notwithstanding the foregoing, in the case of an optionee subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, no such election shall be effective unless made in compliance with any applicable requirements of Rule 16b-3(e) or any successor Rule under such Act.        (e)     No Incentive Award and no right under the Plan, contingent or otherwise, will be assignable or subject to any encumbrance, pledge or charge of any nature except that, under such rules and regulations as the Company may establish pursuant to the terms of the Plan, a beneficiary may be designated with respect to an Incentive Award in the event of death of a Participant. If such beneficiary is the executor or administrator of the estate of the Participant, any rights with respect to such incentive Award may be transferred to the person or persons or entity (including a trust) entitled thereto under the will of the holder of such Incentive Award.        (f)     The Committee shall have sole discretion to determine the time or times and conditions under which Stock Options or Stock Appreciation Rights may be exercised and, as provided in Section 8, the terms and conditions of Stock-Based Awards and the extent to which Participants or their beneficiaries may exercise Stock Appreciation Rights and receive payment with respect to, or otherwise obtain the benefits of Stock-Based Awards upon any particular Participant's retirement, death or other termination of the Participant's employment with the Company or its Affiliates. The provisions applicable to the Stock Options, Stock Appreciation Rights and/or Stock-Based Awards of a particular Participant upon the Participant's termination of employment with the Company or its Affiliates will be set forth in each agreement under which an Incentive Award is made.        (g)     (i)  If the Committee in its sole discretion determines that as a matter of law such procedure is or may be                desirable, it may require the Participant, on any exercise or payment of an Incentive Award, or any portion                thereof, and as a condition to the Company's obligation to deliver to the Participant certificates                representing shares of Common Stock, to execute and deliver to the Company a written statement, in form                satisfactory to the Company, representing and warranting that his purchase or receipt of shares of Common                Stock, is for his own account for investment and not with a view to resale or distribution thereof and that                any subsequent sale or offer for sale of any of such shares shall be made pursuant to either (A) a                Registration Statement on an appropriate form under the Securities Act of 1933, as amended, which has                become effective and is current with respect to the shares being offered and sold or (B) a specific                exemption from the registration requirements of the Securities Act, but in claiming such exemption the                Participant shall, before any sale or offer for sale of such shares, obtain a favorable written opinion from                counsel for or approved by the Company as to the availability of such exemption.                (ii) The Company may endorse an appropriate legend referring to the foregoing restrictions or other                 restrictions which may be applied under the Plan on the certificate or certificates representing any shares                 of Common Stock issued or transferred to a Participant under any Incentive Award granted under the Plan.        (h)     If at any time the Board shall determine in its discretion that the listing, registration or qualification of the shares of Common Stock covered by the Plan on any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the sale or transfer of shares of Common Stock under the Plan, no shares will be delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained or otherwise provided for, free of any conditions not acceptable to the Board. 11.    Amendment and Termination of Plan; Amendment of Incentive Awards.        (a)     The Board will have the power, in its discretion, to amend, suspend or terminate the Plan at any time. No such amendment will, without approval of the shareholders of the Company:               (i)   Change the class of person eligible to receive Incentive Awards under the Plan;               (ii)  Materially increase the benefits accruing to Participants under the Plan;               (iii) Increase the number of shares of Common Stock subject to the Plan; or               (iv)  Transfer the administration of the Plan to any person who is not a "disinterested administrator" under Rule 16b.        (b)     Except as otherwise provided by Section 3(d) and Section 9, the Committee may not, without the consent of a Participant, make modifications in the terms and conditions of an Incentive Award which may adversely affect the Participant's Incentive Award.        (c)     No amendment, suspension or termination of the Plan will, without the consent of the Participant, alter, terminate, impair or adversely affect any right or obligation under any Incentive Award previously granted under the Plan.        (d)     The Committee may refrain from designating any Participants or may refrain from making any Incentive Awards, but such action shall not be deemed a termination of the Plan. No employee shall have any claim or right to be granted Incentive Awards under the Plan. 12.    Effective Date of Plan Duration of Plan. The Plan will become effective upon adoption by the Board, subject to approval by the shareholders of General Cinema Corporation. The Plan will terminate, unless sooner terminated under Section 11, on December 17, 1997, being the day before the tenth anniversary of the day on which the Plan was adopted by the Board.

EXHIBIT 10.0 EMPLOYMENT AGREEMENT           This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among Washington Gas Light Company (the "Company") and Elizabeth M. Arnold (the "Executive"), as of the 19th day of July, 1999. RECITALS           The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. AGREEMENT NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:           1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section l(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated within twelve months prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment.           (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the second anniversary of the Effective Date.           2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:           (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or           (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or           (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then- outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or           (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.           3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period").           4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location; and           (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of the activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.           (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. As used herein, "Annual Base Salary" will include all wages or salary paid to the Executive and will be calculated before any salary reduction or deferrals, including but not limited to reductions made pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.           (ii) Annual Incentive. In addition to Annual Base Salary, the Executive shall earn annual incentive compensation (the "Annual Incentive") for each fiscal year ending during the Employment Period, at least equal to that available to other peer executives of the Company and its affiliated companies. Each such Annual Incentive shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Incentive is awarded, unless the Executive shall elect to defer the receipt of such Annual Incentive. In the event the Executive is terminated during the Employment Period, the Executive's Annual Incentive for the most recent year shall be prorated for the portion of that year that the Executive worked in the manner set forth in Section 6(a)(i)(A)(2).           (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.           (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's beneficiaries, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.           (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.           (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.           (vii) Office. During the Employment Period, the Executive shall be entitled to an office at least equal to that of other peer executives of the Company and its affiliated companies.           (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.           5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative.           (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:    (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically indentifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or    (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.           (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:    (i) the assignment to the Executive of any duties inconsistent in any material respect with the Executive's position as contemplated by Section 4(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the Executive;    (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice thereof given by the Executive;    (iii) failure by the Company to reimburse the Executive for expenses related to a required relocation;(iv) any required relocation of the Executive more than thirty five miles from Washington, D.C., other than on a temporary basis (less than two months);    (v) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or    (vi) any failure by the Company to comply with and satisfy Section 11 (c) of this Agreement.           (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.           (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.           6. Obligations of the Company upon Termination During Employment Period. (a) Good Reason, Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:   (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:       A. the sum of (1) the Executive's Annual Base Salary through the date of Termination to the extent not theretofore paid, (2) the product of (x) the Target Annual Incentive (as defined in in the Executive Compensation Plan of the Company) in the fiscal year of the Executive's Termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not therefore pa id (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and     B. Subject to the provisions of Section 9, the amount equal to three times the Executive's Highest Pay. For purposes of this Agreement, Highest Pay shall mean the sum of (1) the Executive's Annual Base Salary, plus (2) the highest of the Executive's Annual Incentive actually earned for the last three full fiscal ears.     (ii) for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's beneficiaries at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. After this three-year term, the Executive shall immediately be eligible for COBRA benefits. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period;   (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits");   (iv) the Company shall credit the Executive with up to an additional three years of benefit service under the Company's Supplemental Executive Retirement Plan (the "SERP"), but in no event shall such additional years of benefit service result in total years of benefit service exceeding the maximum under the SERP;   (v) the Company shall, at its sole expense as incurred, provide the Executive with reasonable outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and   (vi) immediately prior to termination of the Executive's employment, all restricted stock grants made to the Executive which are outstanding at the time of such event shall be accelerated and vest.                   (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peers and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.                   (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's beneficiaries, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.                   (d) Cause: Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Executive's Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.                   7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.                   8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.                   9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.                   (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.                   (c) In the event the Internal Revenue Service ("IRS") subsequently challenges the Excise Tax computation herein described, then the Executive shall notify the Company in writing of any claim by the IRS that, if successful, would require the payment by the Executive of additional Excise Taxes. Such notification shall be given no later than ten days after the Executive receives written notice of such claim. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall cooperate with the Company in good faith in order effectively to contest such claim and permit the Company to participate in any proceedings relating to such claim. In the event a final determination is made with respect to the IRS claim, or in the event the Company chooses not to further challenge such claim, then the Company shall reimburse the Executive for the additional Excise Tax owed to the IRS in excess of the Excise Tax calculated by the Accounting Firm. The Company shall also reimburse the Executive for all interest and penalties related to the underpayment of such Excise Tax. The Company will also reimburse the Executive for all federal and state income tax and employment taxes thereon.                   10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.                   11. Successors & Assigns. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.                   (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.                   (c) The Company will require any successor or any party that acquires control of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any party that acquires control of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.                   12. Miscellaneous. (a) Governing Law; Headings; Amendment. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.                   (b) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:                   If to the Executive:                   at the address for Executive that is on file with the Company                   If to the Company:                   Washington Gas Light Company                   1100 H Street, N.W.                   Washington, D.C. 20080                   ATTN: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.                   (c) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.                   (d) Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.                   (e) Waiver. The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right under this Agreement.                   (f) At Will Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section l(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.                   (g) Arbitration. In the event of any dispute between the parties regarding this Agreement, the parties shall submit to binding arbitration, conducted in Washington, DC or in Virginia within 25 miles of Washington, DC. The arbitration shall be conducted pursuant to the rules of the American Arbitration Association. Each of the parties shall select one arbitrator, who shall not be related to, affiliated with or employed by that party. The two arbitrators shall, in turn, select a third arbitrator. The decision of any two of the arbitrators shall be binding upon the parties, and may, if necessary, be reduced to judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties expressly agree that nothing herein in any way precludes Company from seeking injunctive relief or declaratory judgment through a court of competent jurisdiction with respect to a breach (or an alleged breach) of any covenant not to compete or of any confidentiality covenant contained in this Agreement. In the event the Executive pursues arbitration pursuant to this Section herein, the Executive shall be compensated up to $150,000 in legal costs.                   (h) Pooling of Interests Accounting. In the event any provision of this Agreement would prevent the use of pooling of interests accounting in a corporate transaction involving the Company and such transaction is contingent upon pooling of interests accounting, then that provision shall be deemed amended or revoked to the extent required to preserve such pooling of interests. The Executive will, upon advice from the Company, take (or refrain from taking, as appropriate) all actions necessary or desirable to ensure that pooling of interests accounting is available.                   (i) Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes the Employment Agreement dated May 19, 1997 between the Company and the Executive.                   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                                                                                                                                                                           .                                                                                                Name: Elizabeth M. Arnold                                                                                                WASHINGTON GAS LIGHT COMPANY                                                                                                                                                                               .                                                                                                 By: James H. DeGraffenreidt, Jr.                                                                                                 Title: Chairman and Chief Executive Officer

EXHIBIT 10.1 SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT         THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into as of June 1, 2000, by and between Darrell Chambliss (the “Employee”) and Waste Connections, Inc., a Delaware corporation (the “Company”), and amends and restates the First Amended and Restated Employment Agreement entered into by the parties as of October 1, 1997, with reference to the following facts.         The Company desires to engage the services and employment of the Employee for the period provided in this Agreement, and the Employee is willing to accept employment by the Company for such period, on the terms and conditions set forth below.         NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions herein, the Company and the Employee agree as follows:         1.  Employment. The Company agrees to employ the Employee, and the Employee agrees to accept employment with the Company, for the Term stated in Section 3 hereof and on the other terms and conditions herein.         2.  Position and Responsibilities. During the Term, the Employee shall serve as Executive Vice President—Operations and Secretary of the Company, reporting directly to the Company’s President, and shall perform such other duties and responsibilities as the President or the Board of Directors (the “Board”) of the Company may reasonably assign to the Employee from time to time. The Employee shall be based at the Company’s corporate headquarters in Folsom, California. The Employee shall devote such time and attention to his duties as are necessary to the proper discharge of his responsibilities hereunder. The Employee agrees to perform all duties consistent with (a) policies established from time to time by the Company and (b) all applicable legal requirements.         3.  Term. The period of the Employee’s employment under this Agreement (the “Term”) commenced on October 1, 1997, and shall continue through May 31, 2003, unless terminated earlier as provided herein or extended by the Board. On each anniversary of the date of this Agreement, commencing June 1, 2001, this Agreement shall be extended automatically for an additional year, thus extending the Term to three years from such date, unless either party shall have given the other notice of termination hereof as provided herein.         4.  Compensation, Benefits and Reimbursement of Expenses.               (a)  Compensation. The Company shall compensate the Employee during the Term of this Agreement as follows:                      (1)  Base Salary. The Employee shall be paid a base salary (“Base Salary”) of not less than One Hundred Twenty-Seven Thousand Five Hundred Dollars ($127,500) per year in installments consistent with the Company’s usual practices. The Board shall review the Employee’s Base Salary on October 1 of each year or more frequently, at the times prescribed in salary administration practices applied generally to management employees of the Company.                      (2)  Performance Bonus. The Employee shall be entitled to an annual cash bonus (the “Bonus”) based on the Company’s attainment of reasonable financial objectives to be determined annually by the Board. The maximum annual Bonus will equal fifty percent (50%) of the applicable year’s ending Base Salary and will be payable if the Board determines, in its sole and exclusive discretion, that that year’s financial objectives have been fully met. The Bonus shall be paid in accordance with the Company’s bonus plan, as approved by the Board; provided that in no case shall any portion of the Bonus with respect to any such fiscal year be paid more than seventy-five (75) days after the end of such fiscal year.                      (3)  Grant of Options. The Employee shall be eligible for annual grants of management stock options (“Options”) commensurate with his position and with option grants to other management employees of the Company, based on the recommendation of the Company’s President and as approved by the Board. The terms of the Options shall be described in more detail in Stock Option Agreements to be entered into between the Employee and the Company. 1 --------------------------------------------------------------------------------                      (4)  Grant of Restricted Stock. On October 1, 1997, the Company sold to the Employee, for $0.01 per share in cash, 20,000 shares of the Company’s Common Stock (the “Restricted Stock”). Such Restricted Stock was not transferable initially by the Employee, but 6,667 shares of Restricted Stock became unrestricted and freely transferable (subject to compliance with all applicable Federal and state securities laws) on each of October 1, 1998, and October 1, 1999, and the remaining 6,666 shares of Restricted Stock shall become unrestricted and freely transferable (subject to compliance with all applicable Federal and state securities laws) on October 1, 2000. If a Change in Control of the Company (as defined in Section 10(b)) occurs before all of the Employee’s Restricted Stock has become unrestricted and freely transferab le under this Section 4(a)(4), all of the Employee’s shares of Restricted Stock shall immediately become unrestricted and freely transferable on such Change of Control, and all shares of Restricted Stock granted to the Employee hereunder shall be treated as owned by the Employee without restriction for the purpose of determining the Employee’s percentage ownership of the Company on such Change of Control. If before all of the Employee’s Restricted Stock has become unrestricted and freely transferable under this Section 4(a)(4), the Employee’s employment is terminated by the Company without Cause (as defined in Section 7(a)) or by the Employee for Good Reason (as defined in Section 8(a)), all of the Employee’s shares of Restricted Stock shall immediately become unrestricted and freely transferable on such termination. If the Employee’s employment is terminated by the Company for Cause or by the Employee without Good Reason before all of the Restricted Stock has become unrestricte d and freely transferable, the Company may, within 90 days after such termination of employment, repurchase from the Employee for $0.01 per share in cash any shares of Restricted Stock that are subject to restrictions on transfer under this Section 4(a)(4) as of the termination date. The Employee may in his sole discretion file an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to the Restricted Stock.               (b)  Other Benefits. During the Term, the Company shall provide the Employee with a cellular telephone and will pay or reimburse the Employee’s monthly service fee and costs of calls attributable to Company business. During the Term, the Employee shall be entitled to receive all other benefits of employment generally available to other management employees of the Company and those benefits for which management employees are or shall become eligible, including, without limitation and to the extent made available by the Company, medical, dental, disability and prescription coverage, life insurance and tax-qualified retirement benefits. The Employee shall be entitled to three (3) weeks of paid vacation each year of his employment.               (c)  Reimbursement of Other Expenses. The Company agrees to pay or reimburse the Employee for all reasonable travel and other expenses (including mileage for business use of employee’s personal automobile at the maximum rate permitted under Internal Revenue Service regulations) incurred by the Employee in connection with the performance of his duties under this Agreement on presentation of proper expense statements or vouchers. All such supporting information shall comply with all applicable Company policies relating to reimbursement for travel and other expenses.               (d)  Withholding. All compensation payable to the Employee hereunder is subject to all withholding requirements under applicable law.         5.  Confidentiality. During the Term of his employment, and at all times thereafter, the Employee shall not, without the prior written consent of the Company, divulge to any third party or use for his own benefit or the benefit of any third party or for any purpose other than the exclusive benefit of the Company, any confidential or proprietary business or technical information revealed, obtained or developed in the course of his employment with the Company and which is otherwise the property of the Company or any of its affiliated corporations, including, but not limited to, trade secrets, customer lists, formulae and processes of manufacture; provided, however, that nothing herein contained shall restrict the Employee’s ability to make such disclosures during the course of his employment as may be necessary or appropriate to the effective and efficient discharge of his duties to the Company.         6.  Property. Both during the Term of his employment and thereafter, the Employee shall not remove from the Company’s offices or premises any Company documents, records, notebooks, files, correspondence, reports, memoranda and similar materials or property of any kind unless necessary in accordance with the duties and responsibilities of his employment. In the event that any such material or property is removed, it shall be returned to its proper file or place of safekeeping as promptly as possible. The Employee shall not make, retain, remove or distribute any copies, or divulge to any third person the nature or contents of any of the foregoing or of any other oral or written information to which he may have access, except as disclosure shall be necessary in the performance of his assigned duties. On the termination of his employment with the Company, the Employee shall leave with or 2 -------------------------------------------------------------------------------- return to the Company all originals and copies of the foregoing then in his possession or subject to his control, whether prepared by the Employee or by others.         7.  Termination By Company.               (a)  Termination for Cause. The employment of the Employee may be terminated for Cause at any time by the Board; provided, however, that before the Company may terminate the Employee’s employment for Cause for any reason that is susceptible to cure, the Company shall first send the Employee written notice of its intention to terminate this Agreement for Cause, specifying in such notice the reasons for such Cause and those conditions that, if satisfied by the Employee, would cure the reasons for such Cause, and the Employee shall have 60 days from receipt of such written notice to satisfy such conditions. If such conditions are satisfied within such 60-day period, the Company shall so advise the Employee in writing. If such conditions are not satisfied within such 60-day period, the Company may thereafter terminate this Agreement for Cause on written Notice of Termination (as de fined in Section 9(a)) delivered to the Employee describing with specificity the grounds for termination. Immediately on termination pursuant to this Section 7(a), the Company shall pay to the Employee in a lump sum his then current Base Salary under Section 4(a)(1) on a prorated basis to the Date of Termination (as defined in Section 9(b)). On termination pursuant to this Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such termination occurs, and (ii) all outstanding but unvested Options and other options and rights relating to capital stock of the Company, and all shares of Restricted Stock that as of the termination date are still subject to the restrictions on transfer imposed by Section 4(a)(4) shall be subject to repurchase by the Company as provided in Section 4(a)(4). For purposes of this Agreement, Cause shall mean:                      (1)  a material breach of any of the terms of this Agreement that is not immediately corrected following written notice of default specifying such breach;                      (2)  a breach of any of the provisions of Section 12;                      (3)  repeated intoxication with alcohol or drugs while on Company premises during its regular business hours to such a degree that, in the reasonable judgment of the other managers of the Company, the Employee is abusive or incapable of performing his duties and responsibilities under this Agreement;                      (4)  conviction of a felony; or                      (5)  misappropriation of property belonging to the Company and/or any of its affiliates.               (b)  Termination Without Cause. The employment of the Employee may be terminated without Cause at any time by the Board on delivery to the Employee of a written Notice of Termination (as defined in Section 9(a)). On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the Company shall, in lieu of any payments under Section 4(a)(1) and 4(a)(2) for the remainder of the Term, pay to the Employee an amount equal to the sum of (i) all Base Salary payable under Section 4(a)(1) through the termination date, (ii) the full (not pro-rated) maximum Bonus available to the Employee under Section 4(a)(2) for the year in which the termination occurs, and (iii) an amount equal to three times the Employee’s current annual Base Salary under Section 4(a)(1) plus three times his maximum bonus under Section 4(a)(2) (whether or not the entire amount was actually earne d or paid) for the year in which the termination occurs. Such amount shall be paid as follows: one third on the Date of Termination and, provided that Employee has complied with the provisions of Section 12 hereof, one third on each of the first and second anniversaries of the Date of Termination of the Employee’s employment. In addition, on termination of the Employee under this Section 7(b), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination. The Employee acknowledges that extending the term of any incentive stock options pursuant to this Section 7(b), or Section 7(c), 7(d) or 8(a), could cause such option to lose its tax-qualified status if it is an incentive stock option under the Code and agrees that the Company shall have no obligation to compensate the Employee for any additional taxes he incurs as a result.               (c)  Termination on Disability. If during the Term the Employee should fail to perform his duties hereunder on account of physical or mental illness or other incapacity which the Board shall in good faith determine renders the Employee incapable of performing his duties hereunder, and such illness or other incapacity 3 -------------------------------------------------------------------------------- shall continue for a period of more than six (6) consecutive months (“Disability”), the Company shall have the right, on written Notice of Termination (as defined in Section 9(a)) delivered to the Employee to terminate the Employee’s employment under this Agreement. During the period that the Employee shall have been incapacitated due to physical or mental illness, the Employee shall continue to receive the full Base Salary provided for in Section 4(a)(1) hereof at the rate then in effect until the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of Termination pursuant to this Section 7(c), the Company shall pay to the Employee in a lump sum an amount equal to (i) the Base Salary remaining payable to the Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a pro-rated portion of the maximum Bonus available to the Employee under Section 4(a)(2) for the year in which the termination occurs. In addition, on su ch termination, all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination.               (d)  Termination on Death. If the Employee shall die during the Term, the employment of the Employee shall thereupon terminate. On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the Company shall pay to the Employee’s estate the payments and other benefits applicable to termination without Cause set forth in Section 7(b) hereof. In addition, on termination of the Employee under this Section 7(d), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination. The provisions of this Section 7(d) sha ll not affect the entitlements of the Employee’s heirs, executors, administrators, legatees, beneficiaries or assigns under any employee benefit plan, fund or program of the Company.         8.  Termination By Employee.               (a)  Termination for Good Reason. The Employee may terminate his employment hereunder for Good Reason (as defined below). On the Date of Termination pursuant to this Section 8(a), the Employee shall be entitled to receive, and the Company agrees to pay and deliver, the payments and other benefits applicable to termination without Cause set forth in Section 7(b) hereof at the times and subject to the conditions set forth therein. In addition, on termination of the Employee under this Section 8(a), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee ’s termination.         For purposes of this Agreement, “Good Reason” shall mean:                      (1)  assignment to the Employee of duties inconsistent with his responsibilities as they existed on the date of this Agreement; a substantial alteration in the title(s) of the Employee (so long as the existing corporate structure of the Company is maintained); or a substantial alteration in the status of the Employee in the Company organization as it existed on the date of this Agreement;                      (2)  the relocation of the Company’s principal executive office to a location more than fifty (50) miles from its present location;                      (3)  a reduction by the Company in the Employee’s Base Salary without the Employee’s prior approval;                      (4)  a failure by the Company to continue in effect, without substantial change, any benefit plan or arrangement in which the Employee was participating or the taking of any action by the Company which would adversely affect the Employee’s participation in or materially reduce his benefits under any benefit plan (unless such changes apply equally to all other management employees of Company);                      (5)  any material breach by the Company of any provision of this Agreement without the Employee having committed any material breach of his obligations hereunder, which breach is not cured within twenty (20) days following written notice thereof to the Company of such breach; or 4 --------------------------------------------------------------------------------                      (6)  the failure of the Company to obtain the assumption of this Agreement by any successor entity.               (b)  Termination Without Good Reason. The Employee may terminate his employment hereunder without Good Reason on written Notice of Termination delivered to the Company setting forth the effective date of termination. If the Employee terminates his employment hereunder without Good Reason, he shall be entitled to receive, and the Company agrees to pay on the effective date of termination specified in the Notice of Termination, his current Base Salary under Section 4(a)(1) hereof on a prorated basis to such date of termination. On termination pursuant to this Section 8(b), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such termination occurs and (ii) all outstanding but unvested Options and other options and rights relating to capital stock of the Company, and all shares of Restricted Stock that as of the termination date are still subject to the restrictions on transfer imposed by Section 4(a)(4) shall be subject to repurchase by the Company as provided in Section 4(a)(4).         9.  Provisions Applicable to Termination of Employment.               (a)  Notice of Termination. Any purported termination of Employee’s employment by the Company pursuant to Section 7 shall be communicated by Notice of Termination to the Employee as provided herein, and shall state the specific termination provisions in this Agreement relied on and set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment (“Notice of Termination”). If the Employee terminates under Section 8, he shall give the Company a Notice of Termination.               (b)  Date of Termination. For all purposes, “Date of Termination” shall mean, for Disability, thirty (30) days after Notice of Termination is given to the Employee (provided the Employee has not returned to duty on a full-time basis during such 30-day period), or, if the Employee’s employment is terminated by the Company for any other reason or by the Employee, the date on which a Notice of Termination is given.               (c)  Benefits on Termination. On termination of this Agreement by the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all profit-sharing, deferred compensation and other retirement benefits payable to the Employee under benefit plans in which the Employee then participated shall be paid to the Employee in accordance with the provisions of the respective plans.         10.  Change In Control.               (a)  Payments on Change in Control. Notwithstanding any provision in this Agreement to the contrary, unless the Employee elects in writing to waive this provision, a Change in Control (as defined below) of the Company shall be deemed a termination of the Employee without Cause, and the Employee shall be entitled to receive and the Company agrees to pay to the Employee the same amount determined under Section 7(b) that is payable to the Employee on termination without Cause provided, however, that such amount shall be payable in a lump sum on the Date of Termination and not in installments as provided in Section 7(b). In addition, on a Change of Control, all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, the term of any such options and rights shall be extende d to the third anniversary of the Employee’s termination, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable.         After a Change in Control, if any previously outstanding Option or other option or right (the “Terminated Option”) relating to the Company’s capital stock does not remain outstanding, the successor to the Company or its then Parent (as defined below) shall either:                      (1)  Issue an option, warrant or right, as appropriate (the “Successor Option”), to purchase common stock of such successor or Parent in an amount such that on exercise of the Successor Option the Employee would receive the same number of shares of the successor’s/Parent’s common stock as the Employee would have received had the Employee exercised the Terminated Option immediately prior to the transaction resulting in the Change in Control and received shares of such successor/Parent in such transaction. The aggregate exercise price for all of the shares covered by such Successor Option shall equal the aggregate exercise price of the Terminated Option; or                      (2)  Pay the Employee a bonus within ten (10) days after the consummation of the Change in Control in an amount agreed to by the Employee and the Company. Such amount shall be at least 5 -------------------------------------------------------------------------------- equivalent on an after-tax basis to the net after-tax gain that the Employee would have realized if he had been issued a Successor Option under clause (i) above and had immediately exercised such Successor Option and sold the underlying stock, taking into account the different tax rates that apply to such bonus and to such gain, and such amount shall also reflect other differences to the Employee between receiving a bonus under this clause (ii) and receiving a Successor Option under clause (i) above.               (b)  Definitions. For the purposes of this Agreement, a Change in Control shall be deemed to have occurred if (i) there shall be consummated (aa) any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction, (bb) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the ass ets of the Company, or if (ii) any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company’s outstanding voting securities (except that for purposes of this Section 10(b), “person” shall not include any person (or any person that controls, is controlled by or is under common control with such person) who as of the date of this Agreement owns ten percent (10%) or more of the total voting power represented by the outstanding voting securities of the Company, or a trustee or other fiduciary holding securities under any employee benefit plan of the Company, or a corporation that is owned directly or indirectly by the stockholders of the Company in substantially the same percentage as their ownership of the Company) or if (iii) during any period of t wo consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least one-half of the membership thereof unless the election, or the nomination for election by the Company’s shareholders, of each new director was approved by a vote of at least one-half of the directors then still in office who were directors at the beginning of the period.         The term “Parent” means a corporation, partnership, trust, limited liability company or other entity that is the ultimate “beneficial owner” (as defined above) of fifty percent (50%) or more of the Company’s outstanding voting securities.         11.  Gross Up Payments. If all or any portion of any payment or benefit that the Employee is entitled to receive from the Company pursuant to this Agreement (a “Payment”) constitutes an “excess parachute payment” within the meaning of Section 280G of the Code, and as such is subject to the excise tax imposed by Section 4999 of the Code or to any similar Federal, state or local tax or assessment (the “Excise Tax”), the Company or its successors or assigns shall pay to the Employee an additional amount (the “Gross-Up Payment”) with respect to such Payment. The amount of the Gross-Up Payment shall be sufficient that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c) any interest and penalties imposed in respect of the Excise Tax, the Employee shall retain an amoun t equal to the full amount of the Payment. For the purpose of determining the amount of any Gross-Up Payment, the Employee shall be deemed to pay Federal income taxes at the highest marginal rate applicable in the calendar year in which the Gross-Up Payment is made, and state and local income taxes at the highest marginal rate applicable in the state and locality where the Employee resides on the date the Gross-Up Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from deducting such state and local taxes.         The Gross-Up Payment with respect to any Payment shall be paid to the Employee within ten (10) days after the Internal Revenue Service or any other taxing authority issues a notice stating that an Excise Tax is due with respect to the Payment, unless the Company undertakes to challenge the taxing authority on the applicability of such Excise Tax and indemnifies the Employee for (a) any amounts ultimately determined to be payable, including the Excise Tax and any related interest and penalties, (b) all expenses (including attorneys’ and experts’ fees) reasonably incurred by the Employee in connection with such challenge, as such expenses are incurred, and (c) all amounts that the Employee is required to pay to the taxing authorities during the pendency of such challenge (such amounts to be repaid by the Employee to the Company if they are ultimately refunded to the Employee by the taxing authority). 6 --------------------------------------------------------------------------------         12.  Non-Competition and Non-Solicitation.               (a)  In consideration of the provisions hereof, for the Restricted Period (as defined below), the Employee will not, except as specifically provided below, anywhere in any county in the State of California or anywhere in any other state in which the Company is engaged in business as of such termination date (the “Restricted Territory”), directly or indirectly, acting individually or as the owner, shareholder, partner or management employee of any entity, (i) engage in the operation of a solid waste collection, transporting or disposal business, transfer facility, recycling facility, materials recovery facility or solid waste landfill; (ii) enter the employ as a manager of, or render any personal services to or for the benefit of, or assist in or facilitate the solicitation of customers for, or receive remuneration in the form of management salary, commissions or otherwise from, a ny business engaged in such activities in such counties; or (iii) receive or purchase a financial interest in, make a loan to, or make a gift in support of, any such business in any capacity, including without limitation, as a sole proprietor, partner, shareholder, officer, director, principal agent or trustee; provided, however, that the Employee may own, directly or indirectly, solely as an investment, securities of any business traded on any national securities exchange or quoted on any NASDAQ market, provided the Employee is not a controlling person of, or a member of a group which controls, such business and further provided that the Employee does not, in the aggregate, directly or indirectly, own two percent (2%) or more of any class of securities of such business. The term “Restricted Period” shall mean the earlier of (i) the maximum period allowed under applicable law and (ii)(x) in the case of a Change of Control, until the third anniversary of the effective date of the Change of Control, (y) in the case of a termination by the Company without Cause pursuant to Section 7(b) or by the Employee for Good Reason pursuant to Section 8(a) and provided the Company has made the payments required under Section 7(b) or 8(a), as the case may be, until the third anniversary of the Date of Termination, or (z) in the case of Termination for Cause by the Company pursuant to Section 7(a) or by the Employee without Good Reason pursuant to Section 8(b), until the first anniversary of the Date of Termination.               (b)  After termination of this Agreement by the Company or the Employee pursuant to Section 7 or 8 or termination of this Agreement upon a Change in Control pursuant to Section 10, the Employee shall not (i) solicit any residential or commercial customer of the Company to whom the Company provides service pursuant to a franchise agreement with a public entity in the Restricted Territory (ii) solicit any residential or commercial customer of the Company to enter into a solid waste collection account relationship with a competitor of the Company in the Restricted Territory, (iii) solicit any such public entity to enter into a franchise agreement with any such competitor, (iv) solicit any officer, employee or contractor of the Company to enter into an employment or contractor agreement with a competitor of the Company or otherwise interfere in any such relationship, or (v) solicit o n behalf of a competitor of the Company any prospective customer of the Company in the Restricted Territory that the Employee called on or was involved in soliciting on behalf of the Company during the Term, in each case until the third anniversary of the date of such termination or the effective date of such change of control (whichever is later), unless otherwise permitted to do so by Section 12(a).               (c)  If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 12 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specified words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.         13.  Indemnification. As an employee and agent of the Company, the Employee shall be fully indemnified by the Company to the fullest extent permitted by applicable law in connection with his employment hereunder.         14.  Survival of Provisions. The obligations of the Company under Section 13 of this Agreement, and of the Employee under Section 12 of this Agreement, shall survive both the termination of the Employee’s employment and this Agreement.         15.  No Duty to Mitigate; No Offset. The Employee shall not be required to mitigate damages or the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other sources or offset against any other payments made to him or required to be made to him pursuant to this Agreement. 7 --------------------------------------------------------------------------------         16.  Assignment; Binding Agreement. The Company may assign this Agreement to any parent, subsidiary, affiliate or successor of the Company. This Agreement is not assignable by the Employee and is binding on him and his executors and other legal representatives. This Agreement shall bind the Company and its successors and assigns and inure to the benefit of the Employee and his heirs, executors, administrators, personal representatives, legatees or devisees. The Company shall assign this Agreement to any entity that acquires its assets or business.         17.  Notice. Any written notice under this Agreement shall be personally delivered to the other party or sent by certified or registered mail, return receipt requested and postage prepaid, to such party at the address set forth in the records of the Company or to such other address as either party may from time to time specify by written notice.         18.  Entire Agreement; Amendments. This Agreement contains the entire agreement of the parties relating to the Employee’s employment and supersedes all oral or written prior discussions, agreements and understandings of every nature between them. This Agreement may not be changed except by an agreement in writing signed by the Company and the Employee.         19.  Waiver. The waiver of a breach of any provision of this Agreement shall not operate or as be construed to be a waiver of any other provision or subsequent breach of this Agreement.         20.  Governing Law and Jurisdictional Agreement. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California. The parties irrevocably and unconditionally submit to the jurisdiction and venue of any court, federal or state, situated within Sacramento County, California, for the purpose of any suit, action or other proceeding arising out of, or relating to or in connection with, this Agreement.         21.  Severability. In case any one or more of the provisions contained in this Agreement is, for any reason, held invalid in any respect, such invalidity shall not affect the validity of any other provision of this Agreement, and such provision shall be deemed modified to the extent necessary to make it enforceable.         22.  Enforcement. It is agreed that it is impossible to measure fully, in money, the damage which will accrue to the Company in the event of a breach or threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the Employee waives the claim or defense that the Company has an adequate remedy at law and will not assert the claim or defense that such a remedy at law exists. The Company is entitled to injunctive relief to enforce the provisions of such sections as well as any and all other remedies available to it at law or in equity without the posting of any bond. The Employee agrees that if the Employee breaches any provision of Section 12, the Company may recover as partial damages all profits realized by the Employee at any time prior to such recovery on the exercise of any warrant, option or right to purchase the Company ’s Common Stock and the subsequent sale of such stock, and may also cancel all outstanding such warrants, options and rights.         23.  Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute one and the same instrument.         24.  Due Authorization. The execution of this Agreement has been duly authorized by the Company by all necessary corporate action. 8 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties have executed and delivered this Second Amended Employment Agreement as of the day and year set forth above.      WASTE CONNECTIONS, INC., a Delaware corporation   By:        --------------------------------------------------------------------------------      Roland J. Mittelstaedt President and Chief Executive Officer      EMPLOYEE:           --------------------------------------------------------------------------------      Darrell Chambliss   9

OCCUPANCY AGREEMENT THIS OCCUPANCY AGREEMENT (this "Agreement") is made as of the 1st day of May 2000, between INTERSTATE GENERAL COMPANY, L.P., a Delaware limited partnership ("IGC"), and PACE CARBON FUELS, L.L.C., a Delaware limited liability company ("Pace"), with reference to the following background: BACKGROUND A. IGC, as tenant, and Coors Brewing Company, as landlord ("Coors"), are parties to that certain Sublease, dated April 5, 2000 (the "Lease"), pursuant to which IGC leases certain space ("Master Premises") on the second floor of the office building located at 5160 Parkstone Drive, Chantilly, Virginia 20151 ("Building").     B. Pace desires to occupy a portion of the Master Premises, and IGC has agreed to allow Pace to occupy such portion of the Master Premises, upon the terms and conditions set forth below, and such occupancy by Pace is contemplated by the Lease. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants, conditions and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, IGC and Pace, intending to be legally bound, hereby agree as follows: 1. Premises.   (a) IGC hereby grants to Pace (i) the exclusive right to use, occupy and enjoy the portion of the Master Premises that is shown on Exhibit "A" attached hereto (the "Premises") containing approximately 2,493 usable square feet of space and (ii) the non-exclusive right to use and enjoy all common areas of the Building, including, without limitation, such areas as are reasonably necessary to provide Pace with satisfactory and legally adequate ingress and egress to and from the Premises.         (b) Notwithstanding the foregoing, IGC and Pace agree that they shall share equally in the use of the large conference room (shown as Room 206 on Exhibit "A") that is located within the Premises. IGC and Pace agree to implement a mutually satisfactory scheduling/reservation procedure to insure that their respective use of the conference rooms is equitable. 2. Term . The term of this Agreement shall commence on the date hereof ("Commencement Date") and shall be co-terminus with the term of the Lease, unless sooner terminated as provided in this Agreement.     3. Occupancy Fee; Security Deposit.   (a) During the term of this Agreement, Pace shall pay to IGC a monthly occupancy fee equal to fifty-seven percent (57%) of the monthly base rent payable by IGC to Coors under Section 3 of the Lease as currently in effect. The occupancy fee shall be payable, in advance, on the first day of each month during the term. In addition, Pace shall reimburse IGC for fifty-seven percent (57%) of all Additional Rent (as defined in the Lease) payable by IGC to Coors under Section 3 of the Lease. Such reimbursement shall be made within fifteen (15) days after Pace's receipt of an invoice therefore, accompanied by the invoice for the Additional Rent received by IGC under the Lease.         (b) IGC acknowledges that Pace has paid to IGC the amount of Nineteen Thousand Six Hundred Sixteen and 41/100 Dollars ($19,616.41) as Pace's share of the security deposit due under the Lease. If the security deposit is used and applied by Coors as a result of a default under the Lease, the party responsible for such default (i.e., IGC or Pace) shall be solely liable for restoring the security deposit to its original amount. Upon the expiration or earlier termination of this Agreement, IGC shall reimburse Pace for its share of the security deposit.       4. Use; Electricity . Pace shall use and occupy the Premises for general office purposes. The parties shall equitably allocate between them the cost of electricity serving their respective spaces and Pace shall reimburse IGC for Pace's share of such costs.     5. Surrender . Upon the expiration or earlier termination of the term of this Agreement, Pace shall quit, surrender and deliver to IGC the Premises in good order and repair, reasonable wear and tear and damage by fire or other casualty excepted, and Pace shall remove all of its property and trade fixtures from the Premises.     6. Condition and Maintenance of the Premises . Pace acknowledges that it has accepted the Premises in its current "as-is" condition. In the event any portion of the Construction Allowance (as defined in the Lease) remains undisbursed, Pace shall be entitled to utilize fifty-seven percent (57%) of such balance. Pace shall, during the term of this Agreement, keep the Premises in good order and repair and shall engage, at its own cost, janitorial and trash removal services. Pace shall not make or permit to be made any alterations to the Premises in violation of the Lease. IGC agrees to use reasonable efforts to cause Coors and its landlord to supply to the Premises the services required to be provided under the Lease and the prime lease. Pace shall bear the cost of installing any signage desired by Pace.     7. Compliance with Laws, Ordinances, Etc. Pace shall comply with the requirements of all public authorities and with the terms of any state or federal statute or local ordinance or regulation applicable to Pace or its use of the Premises.     8. Compliance with Rules and Regulations . Pace and Pace's employees, agents, visitors and licensees shall observe and comply with all rules and regulations that may be promulgated from time to time with respect to the Building.     9. Insurance . Each party shall, at all times during the term hereof, carry and maintain, at its sole cost and expense, usual and customary commercial general liability insurance, naming the other party and Coors as additional insureds, and casualty insurance on account of loss or damage from any cause to the property of such party on the Premises. Each policy of insurance shall otherwise comply with the requirements of the Lease.     10. Assignment . Pace shall not have the right to assign this Agreement. Notwithstanding the foregoing, IGC agrees that the rights and benefits arising under this Agreement may be transferred to, used and enjoyed by Pace's parent company, Magellan Carbon Fuels, L.L.C. ("Magellan").     11. Default and Remedies . If (i) Pace shall fail to remedy any default in the payment of any sums due under this Agreement within fifteen (15) days after written notice of such failure has been received by Pace or (ii) Pace shall fail to remedy any default with respect to any of the other provisions, covenants, or conditions of this Agreement to be kept or performed by Pace within thirty (30) days after written notice of such failure, unless such cure cannot be reasonably effected within such thirty (30)-day period, in which event Pace will have such additional time as is reasonably necessary to cure such default, then in any such event, IGC shall be entitled to exercise all rights and remedies provided by law.     12. Quiet Enjoyment . IGC covenants with Pace that upon Pace paying the monthly occupancy fee and observing and performing all the terms, covenants and conditions on Pace's part to be observed and performed, Pace and Magellan may peaceably and quietly occupy, use and enjoy the Premises.     13. Relationship of Lease . This Agreement is an occupancy agreement and Pace agrees to take this Agreement subject and subordinate to the Lease. Pace shall have no right to (i) amend or modify the Lease in any manner or for any purpose, (ii) exercise any rights of IGC under the Lease to renew or extend the term of the Lease, (iii) exercise any rights of IGC to terminate the Lease, (iv) exercise any purchase options, expansion rights, rights of first refusal or similar rights granted to IGC under the Lease or (v) waive any agreement or obligation of or right or remedy against Coors, all of which rights are expressly and exclusively reserved by IGC.     14. Termination . Pace shall have the right at any time during the term hereof to terminate this Agreement effective as of the end of any calendar month by giving not less than thirty (30) days prior written notice to IGC. 15. Destruction; Condemnation . If the Premises or the Building are totally or partially destroyed or damaged by fire or other casualty, this Agreement shall, at the option of Pace, terminate as of the date of such casualty. If all of any portion of the Building is taken by exercise of the power of eminent domain, this Agreement shall, at the option of Pace, terminate as of the date title vests in the condemner.     16. Force Majeure . In the event IGC or Pace shall be delayed, hindered or prevented from the performance of any act required hereunder, by reason of act of God, fire, casualty, action of the elements, strikes, lockouts, other labor troubles, inability to procure, or general shortage of labor, equipment, facilities, materials or supplies, failure of transportation or of power, restrictive governmental laws or regulations, changes to laws or regulations, riots, insurrection, war or any other cause similar or dissimilar to the foregoing beyond the reasonable control of IGC or Pace, as the case may be, the performance of such act shall be excused for the period of delay, and the period for the performance of any such act shall be extended for the period necessary to complete performance after the end of the period of such delay.     17. Miscellaneous .   (a) Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Agreement shall be binding upon either party unless reduced to writing and signed by the party or parties to be bound thereby.         (b) Any provision or provisions of this Agreement which shall be invalid, void or illegal, shall in no way affect, impair or invalidate any other provision hereof, and the remaining provisions hereof shall nevertheless remain in full force and effect.         (c) This Agreement shall be interpreted under the laws of the State of Virginia.         (d) This Agreement may be executed in multiple counterparts.       (signature page follows) IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     INTERSTATE GENERAL COMPANY, L.P.   By: Interstate General Management Corporation its General Partner     By: __________________________________ Name: Mark Augenblick Title: President       PACE CARBON FUELS, L.L.C.         By: __________________________________ Name: James R. Treptow Title: President                 EXHIBIT "A" PLAN SHOWING PREMISES

QuickLinks -- Click here to rapidly navigate through this document INTERACTIVE INTELLIGENCE, INC. 1999 STOCK OPTION AND INCENTIVE PLAN (Restated to reflect all amendments adopted through February 22, 2000)      1.  Plan Purpose.  The purpose of the Plan is to promote the long-term interests of the Company and its shareholders by providing a means for attracting and retaining officers and key employees of the Company and its Affiliates.      2.  Definitions.  The following definitions are applicable to the Plan:     "Affiliate"—means any "parent corporation" or "subsidiary corporation" of the Company as such terms are defined in Section 424(e) and (f), respectively, of the Code and any other corporation or other entity (including partnerships, limited liability companies, and joint ventures) controlled by or under common control with the Company.     "Award"—means, individually or collectively, the grant by the Committee of an Incentive Stock Option, a Non-Qualified Stock Option, or Restricted Stock, or any combination thereof, as provided in the Plan.     "Board or Board of Directors"—means the Board of Directors of the Company.     "Cashless Exercise"—means, if there is a public market for the Shares, the payment of the Exercise Price (a) through a "same day sale" commitment from the Participant and an NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased in order to pay the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such stock to forward the Exercise Price directly to the Company, or (b) through a "margin" commitment from the Participant and an NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company.     "Cause"—means, for purposes of determining whether and when a Participant has incurred a Termination of Continuous Service for Cause, any act or failure to act which permits the Company to terminate the written agreement or arrangement between the Participant and the Company or an Affiliate for "cause" as defined in such agreement or arrangement or, in the event there is no such agreement or arrangement or the agreement or arrangement does not define the term "cause," then "Cause" for purposes of the Plan shall mean any act or failure to act deemed to constitute "cause" under the Company's established and applied practices, policies or guidelines applicable to the Participant.     "Change in Control"—means each of the events specified in the following clauses (i) through (iii): (i) any third person, including a "group" as defined in Section 13(d)(3) of the Exchange Act shall, after the date of the adoption of the Plan by the Board, first become the beneficial owner of Shares of the Company with respect to which 25% or more of the total number of votes for the election of the Board of Directors of the Company may be cast, (ii) as a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company shall cease to constitute a majority of the Board of Directors of the Company or (iii) the stockholders of the Company shall approve an agreement providing either for a transaction in which the Company will cease to be an independent publicly owned entity or for a sale or other disposition of all or substantially all the assets of the Company.     "Code"—means the Internal Revenue Code of 1986, as amended.     "Committee"—means the Committee referred to in Section 3 hereof.     "Company"—means Interactive Intelligence, Inc., an Indiana corporation. --------------------------------------------------------------------------------     "Continuous Service"—means the absence of any interruption or termination of service as an employee of the Company or an Affiliate. Service shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Company or in the case of any transfer between the Company and an Affiliate or any successor to the Company.     "Disability"—means a mental or physical illness that entitles the Participant to receive benefits under the long-term disability plan of the Company or an Affiliate. Notwithstanding the foregoing, a Disability shall not qualify under the Plan if it is the result, as determined by the Committee, of (a) an intentionally self-inflicted injury or an intentionally self-induced sickness, or (b) an injury or disease contracted, suffered or incurred while participating in a criminal offense. The determination of a Disability for purposes of the Plan shall not be construed to be an admission of a disability for any other purpose.     "Employee"—means any person, including an officer or director, who is employed by the Company or any Affiliate.     "Exchange Act"—means the Securities Exchange Act of 1934, as amended.     "Exercise Price"—means the price per Share at which the Shares subject to an Option may be purchased upon exercise of such Option.     "Incentive Stock Option"—means an option to purchase Shares granted by the Committee pursuant to the terms of the Plan which is intended to qualify under Section 422 of the Code.     "Market Value"—means the last reported sale price on the date in question (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) of one Share on the principal exchange on which the Shares are listed for trading, or if the Shares are not listed for trading on any exchange, on the NASDAQ National Market System or any similar system then in use, or, if the Shares are not listed on the NASDAQ National Market System, the mean between the closing high bid and low asked quotations of one Share on the date in question as reported by NASDAQ or any similar system then in use, or, if no such quotations are available, the fair market value on such date of one Share as the Committee shall determine.     "NASD Dealer"—means a broker-dealer who is a member of the National Association of Securities Dealers, Inc.     "Non-Qualified Stock Option"—means an option to purchase Shares granted by the Committee pursuant to the terms of the Plan, which option is not intended to qualify under Section 422 of the Code.     "Option"—means an Incentive Stock Option or a Non-Qualified Stock Option.     "Participant"—means any officer, key employee, or consultant of the Company or any Affiliate or any other individual who is selected by the Committee to receive an Award.     "Plan"—means the Interactive Intelligence, Inc. 1999 Stock Option and Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.     "Reorganization"—means the liquidation or dissolution of the Company or any merger, consolidation or combination of the Company (other than a merger, consolidation or combination in which the Company is the continuing entity and which does not result in the outstanding Shares being converted into or exchanged for different securities, cash or other property or any combination thereof).     "Restricted Period"—means the period of time selected by the Committee for the purpose of determining when restrictions are in effect under Section 10 hereof with respect to Restricted Stock awarded under the Plan. 2 --------------------------------------------------------------------------------     "Restricted Stock"—means Shares which have been contingently awarded to a Participant by the Committee subject to the restrictions referred to in Section 10 hereof, so long as such restrictions are in effect.     "Retirement"—means the date on which a Participant attains age sixty-five (65) or such other "normal retirement age" as the Company shall specify in its written policies.     "Securities Act"—means the Securities Act of 1933, as amended.     "Shares"—means the common stock, $.01 par value, of the Company and shall include common stock as it may be changed from time to time as described in Section 11 hereof.     "Termination of Continuous Service"—means the occurrence of any act or event or any failure to act whether pursuant to an employment agreement or otherwise that actually or effectively causes or results in a Participant ceasing, for whatever reason, to be an Employee of the Company or an Affiliate, including, but not limited to, death, Disability, Retirement, termination by the Company or an Affiliate of the Participant's employment with the Company or an Affiliate (whether with or without Cause), and voluntary resignation or termination by the Participant of his or her employment with the Company or an Affiliate. A Termination of Continuous Service also shall occur with respect to an Employee who is employed by an Affiliate if the Affiliate shall cease to be an Affiliate of the Company and the Participant shall not immediately thereafter become an Employee of the Company or another Affiliate. For purposes of the Plan, transfers or changes of employment of a Participant between the Company and an Affiliate (or between Affiliates) shall not be deemed a Termination of Continuous Service.      3.  Administration.  The Plan shall be administered by the Committee, which shall consist of two or more members of the Board, each of whom shall be a "non-employee director" as provided under Rule 16b-3 of the Exchange Act, and an "outside director" as provided under Section 162(m) of the Code. Failure by the Committee to be so comprised shall not result in the cancellation, termination, expiration, or lapse of any Award. The members of the Committee shall be appointed by the Board. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. Except as limited by the express provisions of the Plan, the Committee shall have sole and complete authority and discretion to (a) select Participants and grant Awards; (b) determine the number of Shares to be subject to and the types of Awards generally, as well as to individual Awards granted under the Plan; (c) determine the terms and conditions upon which Awards shall be granted under the Plan; (d) prescribe the form and terms of instruments evidencing such grants; (e) establish procedures and regulations for the administration of the Plan; (f) construe and interpret the Plan, any Award agreement executed in connection therewith, and any other agreements or instruments entered into under the Plan; (g) make all determinations deemed necessary or advisable for the administration of the Plan; and (h) establish, amend, or waive rules and regulations for the administration of the Plan.     A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all members of the Committee without a meeting, shall be acts of the Committee. All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law. Each Award shall be evidenced by a written agreement between the Company and the Participant and shall contain such terms and conditions established by the Committee consistent with the provisions of the Plan. Any notice or document required to be given to or filed with the Committee will be properly given or filed if hand delivered (and a delivery receipt is received) or mailed by certified mail, return receipt requested, postage paid, to the Committee at 8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268. 3 --------------------------------------------------------------------------------      4.  Participants.  The Committee may select from time to time Participants from those officers, key employees and consultants of the Company or its Affiliates and such other individuals who, in the opinion of the Committee, have the capacity for contributing in a substantial measure to the successful performance of the Company or its Affiliates. Neither the Plan nor any Award agreement executed under the Plan shall constitute a contract of employment between a Participant and the Company or an Affiliate, and participation in the Plan shall not give a Participant the right to be rehired by or retained in the employment of the Company or an Affiliate.      5.  Shares Subject to Plan.  Subject to adjustment by the operation of Sections 11 and 12 hereof, the maximum number of Shares with respect to which Awards may be granted under the Plan is Three Million Seven Hundred Fifty Thousand (3,750,000) Shares. The number of Shares which may be granted under the Plan to any Participant during any calendar year of the Plan, under all forms of Awards, shall not exceed Two Hundred Fifty Thousand (250,000) Shares. The Shares with respect to which Awards may be made under the Plan may either be authorized and unissued Shares or unissued Shares heretofore or hereafter reacquired and held as treasury Shares. With respect to any Option which terminates or is surrendered for cancellation or with respect to Restricted Stock which is forfeited, new Awards may be granted under the Plan with respect to the number of Shares as to which such termination or forfeiture has occurred.     Subject to the limitations set forth in the Plan, the Committee shall have full authority to determine the number of Shares available for Awards, and in its discretion may include (without limitation) as available for distribution any Shares that have ceased to be subject to an Award, any Shares subject to an Award that have been previously forfeited, and any Shares under an Award that otherwise terminates without the issuance of Shares being made to a Participant.     Shares issued upon exercise of an Award shall be subject to the terms and conditions specified herein and to such other terms, conditions and restrictions as the Committee in its discretion may determine or provide in the Award agreement. The Company shall not be required to issue or deliver any certificates for Shares or other property prior to (a) the listing of such Shares on any stock exchange (or other public market) on which the Shares may then be listed (or regularly traded); and (b) the completion of any registration or qualification of such Shares under federal, state, local or other law, or any ruling or regulation of any government body which the Committee determines to be necessary or advisable. The Company may cause any certificate for any Shares to be delivered hereunder to be properly marked with a legend or other notation reflecting the limitations on transfer of such Shares as provided in the Plan or as the Committee may otherwise require. Participants, or any other persons entitled to benefits under the Plan, must furnish to the Committee such documents, evidence, data, or other information as the Committee considers necessary or desirable for the purpose of administering the Plan. The benefits under the Plan for each Participant, and each other person who is entitled to benefits hereunder, are to be provided on the condition that he furnish full, true, and complete data, evidence, or other information, and that he will promptly sign any document reasonably related to the administration of the Plan requested by the Committee. No fractional Shares shall be issued under the Plan; rather, fractional Shares shall be aggregated and then rounded to the next lower whole Share.      6.  General Terms and Conditions of Options.  The Committee shall have full and complete authority and discretion, except as expressly limited by the Plan, to grant Options and to provide the terms and conditions (which need not be identical among Participants) thereof. In particular, the Committee shall prescribe the following terms and conditions: (a) the type of Option; (b) the Exercise Price; (c) the number of Shares subject to, and the expiration date of, any Option; (d) the manner, time and rate (cumulative or otherwise) of exercise of such Option; (e) the restrictions, if any, to be placed upon such Option or upon Shares which may be issued upon exercise of such Option; and (f) such other terms and conditions consistent with the Plan as the Committee determines in its 4 -------------------------------------------------------------------------------- discretion. The Committee may, as a condition of granting any Option, require that a Participant agree to surrender for cancellation one or more Options previously granted to such Participant.      7.  Exercise of Options.       (a)  Restriction on Exercise.  Except as provided in Section 14, all Options granted under the Plan shall be exercisable during the lifetime of the Participant to whom such Option was granted only by such Participant, and except as provided in Section 8, no Option may be exercised unless, at the time the Participant exercises the Option, the Participant has maintained Continuous Service since the date of the grant of the Option. Except as provided in Section 13, or as otherwise determined by the Committee, all Options granted under the Plan shall vest and become exercisable in accordance with the following schedule:     Percentage of Option Shares Vested and Exercisable --------------------------------------------------------------------------------   Date of Vesting --------------------------------------------------------------------------------   Percent Vested --------------------------------------------------------------------------------   Cumulative --------------------------------------------------------------------------------   First anniversary of date of Option grant   25 % 25 % Second anniversary of date of Option grant   25 % 50 % Third anniversary of date of Option grant   25 % 75 % Fourth anniversary of date of Option grant   25 % 100 %     (b)  Method of Exercise.  To exercise an Option under the Plan, the Participant must give written notice to the Company specifying the number of Shares with respect to which the Participant elects to exercise the Option together with full payment of the Exercise Price. The date of exercise shall be the date on which the notice is received by the Company. Payment may be made either (i) in cash (including check, bank draft, or money order), (ii) by tendering Shares already owned by the Participant for more than six months and having a Market Value on the date of exercise equal to the Exercise Price, (iii) the delivery of cash by a broker-dealer as a Cashless Exercise, or (iv) by any other means determined by the Committee in its sole discretion.     (c)  Reload Provision.  In the event a Participant exercises an Option and pays all or a portion of the Exercise Price in Shares, in the manner permitted by Section 7(b), such Participant may (either pursuant to terms of the Award agreement or pursuant to the sole discretion of the Committee at the time the Option is exercised) be issued a new Option to purchase additional Shares equal to the number of Shares surrendered to the Company in such payment. Such new Option shall (a) have an Exercise Price equal to the Market Value per Share on the grant date of the new Option, (b) first be exercisable six (6) months from such grant date, and (c) expire on the same date as the original Option so exercised by payment of the Exercise Price in Shares.      8.  Termination of Options.  Unless otherwise specifically provided by the Committee in the Award agreement between the Participant and the Company, each Option granted under the Plan shall terminate as provided in this Section 8.     (a)  Maximum Term.  Unless sooner terminated under the provisions of this Section 8, Options shall expire on the earlier of the date specified by the Committee or the expiration of ten (10) years from the date of grant.     (b)  Termination for Cause.  If the Participant incurs a Termination of Continuous Service for Cause, all rights under any Options granted to the Participant shall terminate immediately upon the Participant's Termination of Continuous Service, and the Participant shall (if the Committee in its sole discretion exercises its rights under this Section 8(b) within ten (10) days of such Termination of Continuous Service) repay to the Company within ten (10) days of the Committee's demand therefor 5 -------------------------------------------------------------------------------- the amount of any gain realized by the Participant upon any exercise within the 90-day period prior to the Termination of Continuous Service of any Options granted to such Participant under the Plan.     (c)  Termination Due to Retirement or Without Cause or Voluntary Termination.  If the Continuous Service of a Participant is terminated by reason of Retirement, terminated by the Company without Cause, or by Voluntary Termination, the Participant may exercise outstanding Options to the extent that the Participant was entitled to exercise the Options at the date of Termination of Continuous Service, but only within the period of one (1) month immediately succeeding the Participant's Termination of Continuous Service, and in no event after the applicable expiration dates of the Options. Any Option that is not exercisable on the date of Termination of Continuous Service shall terminate and be forfeited effective on such date.     (d)  Termination Due to Death or Disability.  In the event of the Participant's death or Disability, the Participant or the Participant's beneficiary, as the case may be, may exercise outstanding Options to the extent that the Participant was entitled to exercise the Options at the date of Termination of Continuous Service, but only within the one (1)-year period immediately succeeding the Participant's Termination of Continuous Service in the case of Disability, and in no event after the applicable expiration date of the Options. Any Option that is not exercisable on the date of Termination of Continuous Service shall terminate and be forfeited effective on such date.     (e)  Committee Discretion.  Notwithstanding the provisions of the foregoing paragraphs of this Section 8, the Committee may, in its sole discretion, establish different terms and conditions pertaining to the effect of the Termination of Continuous Service, to the extent permitted by applicable federal and state law.      9.  Incentive Stock Options.  Incentive Stock Options may be granted only to Participants who are Employees. Any provisions of the Plan to the contrary notwithstanding, (i) no Incentive Stock Option shall be granted more than ten (10) years from the date the Plan is adopted by the Board of Directors of the Company and no Incentive Stock Option shall be exercisable more than ten (10) years from the date such Incentive Stock Option is granted, (ii) the Exercise Price of any Incentive Stock Option shall not be less than the Market Value per Share on the date such Incentive Stock Option is granted, (iii) any Incentive Stock Option shall not be transferable by the Participant to whom such Incentive Stock Option is granted other than by will or the laws of descent and distribution and shall be exercisable during such Participant's lifetime only by such Participant, and (iv) no Incentive Stock Option shall be granted which would permit a Participant to acquire, through the exercise of Incentive Stock Options in any calendar year, Shares or Shares of any capital stock of the Company or any Affiliate thereof having an aggregate Market Value (determined as of the time any Incentive Stock Option is granted) in excess of One Hundred Thousand Dollars ($100,000). The foregoing limitation shall be determined by assuming that the Participant will exercise each Incentive Stock Option on the date that such Option first becomes exercisable. Notwithstanding the foregoing, in the case of any Participant who, at the date of grant, owns stock possessing more than Ten Percent (10%) of the total combined voting power of all classes of capital stock of the Company or any Affiliate, the Exercise Price of any Incentive Stock Option shall not be less than One Hundred Ten Percent (110%) of the Market Value per Share on the date such Incentive Stock Option is granted and such Incentive Stock Option shall not be exercisable more than five (5) years from the date such Incentive Stock Option is granted.     10.  Terms and Conditions of Restricted Stock.  The Committee shall have full and complete authority, subject to the limitations of the Plan, to grant awards of Restricted Stock and, in addition to the terms and conditions contained in paragraphs (a) through (g) of this Section 10, to provide such other terms and conditions (which need not be identical among Participants) in respect of such Awards 6 -------------------------------------------------------------------------------- as the Committee shall determine and provide in the agreement referred to in paragraph (d) of this Section 10.     (a)  Restricted Period.  At the time of an Award of Restricted Stock, the Committee shall establish for each Participant a Restricted Period during which, or at the expiration of which, the Shares of Restricted Stock shall vest. The Committee may also restrict or prohibit the sale, assignment, transfer, pledge, or other encumbrance of the Shares of Restricted Stock by the Participant during the Restricted Period. Except for such restrictions, and subject to paragraphs (c), (d) and (e) of this Section 10 and Section 11 hereof, the Participant as owner of such Shares shall have all the rights of a stockholder, including but not limited to the right to receive all dividends paid on such Shares and the right to vote such Shares. Except in the case of grants of Restricted Stock which are intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Committee shall have the authority, in its discretion, to accelerate the time at which any or all of the restrictions shall lapse with respect to any Shares of Restricted Stock prior to the expiration of the Restricted Period with respect thereto, or to remove any or all of such restrictions, whenever it may determine that such action is appropriate by reason of changes in applicable tax or other laws or other changes in circumstances occurring after the commencement of such Restricted Period.     (b)  Lapse and Forfeiture.  Except as provided in Section 13 hereof, if a Participant incurs a Termination of Continuous Service for any reason (other than death, Disability or Retirement), unless the Committee shall otherwise determine, all Shares of Restricted Stock theretofore awarded to such Participant and which at the time of such Termination of Continuous Service are subject to the restrictions imposed by paragraph (a) of this Section 10 shall upon such Termination of Continuous Service be forfeited and returned to the Company. If a Participant incurs a Termination of Continuous Service by reason of death or Disability, then the restrictions with respect to the Ratable Portion of the Shares of Restricted Stock shall lapse and such Shares shall be free of restrictions and shall not be forfeited. The Ratable Portion shall be determined with respect to each separate Award of Restricted Stock issued and shall be equal to (i) the number of Shares of Restricted Stock awarded to the Participant multiplied by the portion of the Restricted Period that expired at the date of the Participant's death or Disability reduced by (ii) the number of Shares of Restricted Stock awarded with respect to which the restrictions had lapsed as of the date of the death or Disability of the Participant. Likewise, on the date set forth in the applicable Award agreement, the Restricted Stock for which restrictions have not lapsed by the last day of the Restricted Period shall be forfeited and returned to the Company and thereafter shall be available for the grant of new Awards under the Plan.     (c)  Legend on Certificates.  Each certificate issued in respect of Shares of Restricted Stock awarded under the Plan shall be registered in the name of the Participant and deposited by the Participant, together with a stock power endorsed in blank, with the Company and shall bear the following (or a similar) legend: "The sale, pledge or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law is subject to the terms and conditions (including forfeiture) contained in the Interactive Intelligence, Inc. 1999 Stock Option and Incentive Plan and an Award agreement entered into between the registered owner and Interactive Intelligence, Inc. Copies of such Plan and Award agreement are on file in the office of the Secretary of Interactive Intelligence, Inc."     (d)  Award Agreement.  At the time of an Award of Shares of Restricted Stock, the Participant shall enter into an Agreement with the Company in a form specified by the Committee, agreeing to the terms and conditions of the Award, and to such other matters as the Committee shall in its sole discretion determine.     (e)  Dividend Rights.  At the time of an Award of Shares of Restricted Stock, the Committee may, in its discretion, determine that the payment to the Participant of dividends declared or paid on 7 -------------------------------------------------------------------------------- such Shares by the Company or a specified portion thereof, shall be deferred until the earlier to occur of (i) the lapsing of the restrictions imposed under paragraph (a) of this Section 10, or (ii) the forfeiture of such Shares under paragraph (b) of this Section 10, and shall be held by the Company for the account of the Participant until such time. In the event of such deferral, there shall be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends, together with interest accrued thereon as aforesaid, shall be made upon the earlier to occur of the events specified in (i) and (ii) of the immediately preceding sentence.     (f)  Lapse of Restrictions.  At the expiration of the restrictions imposed by paragraph (a) of this Section 10, the Company shall redeliver to the Participant (or where the relevant provision of paragraph (b) of this Section 10 applies in the case of a deceased Participant, to his legal representative, beneficiary or heir) the certificate(s) and stock power deposited with it pursuant to paragraph (c) of this Section 10 and the Shares represented by such certificate(s) shall be free of the restrictions referred to in paragraph (a) of this Section 10. Notwithstanding any other provision of this Section 10 and Section 12 to the contrary, in the case of grants of Restricted Stock that are intended to qualify as "performance-based compensation" under Section 162(m) of the Code, no Shares of Restricted Stock shall become vested unless the performance goals with respect to such Restricted Stock shall have been satisfied. If the vesting of Shares of Restricted Stock is accelerated after the applicable performance goals have been met, the amount of Restricted Stock distributed shall be discounted by the Committee to reasonably reflect the time value of money in connection with such early vesting.     (g)  Section 162(m) Performance Restrictions.  Notwithstanding any other provision of this Section 10 to the contrary, for purposes of qualifying grants of Restricted Stock as "performance-based compensation" under Section 162(m) of the Code, the Committee shall establish restrictions based upon the achievement of performance goals. The specific targets under the performance goals that must be satisfied for the Restricted Period to lapse or terminate shall be set by the Committee on or before the latest date permissible to enable the Restricted Stock to qualify as "performance-based compensation" under Section 162(m) of the Code. The business criteria for performance goals under this Section 10 shall be one or more of the return on equity, total revenues, net earnings, or earnings per share of the Company as selected by the Committee on, where applicable, a consolidated basis, for a calendar year calculated in accordance with generally accepted accounting principles consistently applied. In granting Restricted Stock that is intended to qualify under Section 162(m), the Committee shall follow any procedures determined by it in its sole discretion from time to time to be necessary, advisable or appropriate to ensure qualification of the Restricted Stock under Section 162(m) of the Code.     11.  Adjustments Upon Changes in Capitalization.  In the event of any change in the Shares by virtue of any stock dividends, stock splits, recapitalizations, or reclassifications or any acquisition, merger, consolidation, share exchange, tender offer, or other combination involving the Company that does not constitute a Change in Control but that results in the acquisition of a subsidiary by the Company, or in the event that other stock shall be substituted for the Shares as the result of any merger, consolidation, share exchange, or reorganization or any similar transaction which constitutes a Change in Control of the Company, the Committee shall correspondingly adjust (a) the number, kind, and class of Shares which may be delivered under the Plan; (b) the number, kind, class, and price of Shares subject to outstanding Awards (except for mergers or other combinations in which the Company is the surviving entity); and (c) the numerical limits of Section 5, all in such manner as the Committee in its sole discretion shall determine to be advisable or appropriate to prevent the dilution or diminution of such Awards; provided, however, in no event shall the One Hundred Thousand Dollar ($100,000) limit on Incentive Stock Options contained in Section 9 be affected by an adjustment under this Section 11. The Committee's determination in this respect shall be final and conclusive. 8 --------------------------------------------------------------------------------     12.  Effect of Reorganization.  Awards will be affected by a Reorganization as follows:     (a) If the Reorganization is a dissolution or liquidation of the Company then (i) the restrictions of Section 10(a) on Shares of Restricted Stock shall lapse, and (ii) each outstanding Option shall terminate, but each Participant to whom the Option was granted shall have the right, immediately prior to such dissolution or liquidation to exercise his Option in full, notwithstanding the provisions of Section 9, and the Company shall notify each Participant of such right within a reasonable period of time prior to any such dissolution or liquidation.     (b) If the Reorganization is a merger or consolidation, upon the effective date of such Reorganization (i) each Optionee shall be entitled, upon exercise of his Option in accordance with all of the terms and conditions of the Plan, to receive in lieu of Shares, Shares of such stock or other securities or consideration as the holders of Shares shall be entitled to receive pursuant to the terms of the Reorganization; and (ii) each holder of Restricted Stock shall receive Shares of such stock or other securities as the holders of Shares received which shall be subject to the restrictions set forth in Section 10(a) unless the Committee accelerates the lapse of such restrictions and the certificate(s) or other instruments representing or evidencing such Shares or securities shall be legended and deposited with the Company in the manner provided in Section 10 hereof.     The adjustments contained in this Section 12 and the manner of application of such provisions shall be determined solely by the Committee.     13.  Effect of Change in Control.  Unless the Committee shall have otherwise provided in the Award agreement reflecting the applicable Award, upon the occurrence of a Change in Control (a) any Restricted Period with respect to Restricted Stock theretofore awarded to a Participant shall lapse and all Shares awarded as Restricted Stock shall become fully vested in the Participant to whom such Shares were awarded and (b) all Options theretofore granted and not fully exercisable shall become exercisable in full and shall remain so exercisable in accordance with their terms; provided, however, that no Option which has previously been exercised or otherwise terminated shall become exercisable.     14.  Assignments and Transfers.  Except as otherwise determined by the Committee, no Award nor any right or interest of a Participant under the Plan in any instrument evidencing any Award under the Plan may be assigned, encumbered, or transferred except, in the event of the death of a Participant, by will or the laws of descent and distribution.     15.  Employee Rights Under Plan.  No officer, Employee or other person shall have a right to be selected as a Participant nor, having been so selected, to be selected again as a Participant and no officer, Employee or other person shall have any claim or right to be granted an Award under the Plan or under any other incentive or similar plan of the Company or any Affiliate. Neither the Plan nor any action taken thereunder shall be construed as giving any Employee any right to be retained in the employ of the Company or any Affiliate.     16.  Delivery and Registration of Stock.  Except with respect to Restricted Stock as provided in Section 10, no person shall have any rights of a shareholder (including, but not limited to, voting and dividend rights) as to Shares subject to an Option until, after proper exercise of the Option or other action as may be required by the Committee in its discretion, such Shares shall have been recorded on the Company's official shareholder records (or the records of its transfer agents or registrars) as having been issued and transferred to the Participant. Upon exercise of the Option or any portion thereof, the Company will have a reasonable period in which to issue and transfer the Shares to the Participant, and the Participant will not be treated as a shareholder for any purpose whatsoever prior to such issuance and transfer. No payment or adjustment shall be made for cash dividends or other rights for which the record date is prior to the date such Shares are recorded as issued and transferred in the Company's official shareholder records (or the records of its transfer agents or registrars), except as provided 9 -------------------------------------------------------------------------------- herein or in an Award agreement. The Company's obligation to deliver Shares with respect to an Award shall, if the Committee so determines, be conditioned upon the receipt of a representation as to the investment intention of the Participant to whom such Shares are to be delivered, in such form as the Company shall determine to be necessary or advisable to comply with the provisions of the Securities Act or any other applicable federal or state securities legislation. It may be provided that any representation requirement shall become inoperative upon a registration of the Shares or other action eliminating the necessity of such representation under the Securities Act or other securities legislation. The Company shall not be required to deliver any Shares under the Plan prior to (i) the admission of such Shares to listing on any stock exchange or system on which Shares may then be listed, and (ii) the completion of such registration or other qualification of such Shares under any state or federal law, rule, or regulation, as the Company shall determine to be necessary or advisable.     17.  Withholding Tax.  Upon the termination of the Restricted Period with respect to any Shares of Restricted Stock or the issuance of Shares pursuant to the exercise of any Option (or at any such earlier time, if any, that an election is made by the Participant under Section 83(b) of the Code, or any successor provision thereto, to include the value of such Shares in income), the Company may, in lieu of requiring the Participant or other person receiving such Shares, to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Shares, retain a sufficient number of Shares held by it to cover the amount required to be withheld. The Company shall have the right to deduct from all dividends paid with respect to Shares of Restricted Stock the amount of any taxes which the Company is required to withhold with respect to such dividend payments.     Where a Participant or other person is entitled to receive Shares pursuant to the exercise of an Option pursuant to the Plan, the Company may, in lieu of requiring the Participant or such other person to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Shares, retain a number of such Shares sufficient to cover the amount required to be withheld.     18.  Loans.       (a)  Loans Authorized.  The Company may make loans to a Participant in connection with Restricted Stock or the exercise of Options subject to the following terms and conditions and such other terms and conditions not inconsistent with the Plan, including the rate of interest, if any, as the Company shall impose from time to time.     (b)  Limitations on Loans.  No loan made under the Plan shall exceed (i) with respect to Options, the sum of (A) the aggregate option price payable upon exercise of the Option in relation to which the loan is made, plus (B) the amount of the reasonably estimated income taxes payable by the Participant, and (ii) with respect to Restricted Stock, the amount of reasonably estimated income taxes payable by the Participant. In no event may any such loan exceed the Market Value of the related Shares at the time of the loan.     (c)  Minimum Terms.  No loan shall have an initial term exceeding three (3) years; provided, that loans under the Plan shall be renewable at the discretion of the Committee; and, provided, further, that the indebtedness under each loan shall become due and payable on a date no later than (i) one year after Termination of Continuous Service by the Participant due to death, Disability or Retirement, or (ii) the day of Termination of Continuous Service by the Participant for any reason other than death, Disability or Retirement.     (d)  Payment of Loans.  Loans under the Plan may be satisfied by the Participant, as determined by the Committee, in cash or, with the consent of the Committee, in whole or in part in Shares at Market Value on the date of such payment.     (e)  Collateral.  When a loan shall have been made, Shares having an aggregate Market Value equal to the amount of the loan may, in the discretion of the Committee, be required to be pledged by 10 -------------------------------------------------------------------------------- the Participant to the Company as security for payment of the unpaid balance of the loan. Portions of such Shares may, in the discretion of the Committee, be released from time to time as it deems not to be needed as security.     (f)  Legal Requirements.  Every loan shall meet all applicable laws, regulations, and rules of the Federal Reserve Board and any other governmental agency having jurisdiction.     19.  Amendment, Suspension or Termination.  The Board may supplement, amend, alter, or discontinue the Plan in its sole discretion at any time and from time to time, but no supplement, amendment, alteration, or discontinuation shall be made which would impair the rights of a Participant under an Award theretofore granted without the Participant's consent, except that any supplement, amendment, alteration, or discontinuation may be made to (a) avoid a material charge or expense to the Company or an Affiliate; (b) cause the Plan to comply with applicable law; or (c) permit the Company or an Affiliate to claim a tax deduction under applicable law. In addition, subject to the provisions of this Section 19, the Board, in its sole discretion at any time and from time to time, may supplement, amend, alter, or discontinue the Plan without the approval of the Company's shareholders (a) to the extent such approval is not required by applicable law or the terms of a written agreement; and (b) so long as any such amendment or alteration does not increase the number of Shares subject to the Plan (other than pursuant to Section 11) or increase the maximum number of Options or Shares of Restricted Stock that the Committee may award to an individual Participant under the Plan. The Committee may supplement, amend, alter, or discontinue the terms of any Award theretofore granted, prospectively or retroactively, on the same conditions and limitations (and exceptions to limitations) as apply to the Board under the foregoing provisions of this Section 19, and further subject to any approval or limitations the Board may impose. Notwithstanding any provision of the Plan to the contrary, if any right, Award or Award agreement under the Plan would cause a transaction of or acquisition by the Company to be ineligible for "pooling of interest" accounting treatment that would, but for such right hereunder, otherwise be eligible for such accounting treatment, the Committee may amend, modify, or adjust the right, the Award or the Award agreement of a Participant (without the prior consent, approval, or authorization of the Participant) so that pooling of interest accounting treatment shall be available with respect to such transaction or acquisition even if any such amendment, modification, or adjustment would be detrimental to or impair the rights of a Participant under the Plan.     20.  Effective Date and Term of Plan.  The Plan shall become effective upon its approval by the holders of at least a majority of the outstanding Shares at a meeting at which approval of the Plan is considered and shall continue in effect for a term of ten (10) years from the date of adoption unless sooner terminated under Section 19 hereof.     21.  Legal Construction.       (a)  Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.     (b)  Severability.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein.     (c)  Requirements of Law.  The grant of Awards and the issuance of Shares under the Plan shall be subject to all applicable statutes, laws, rules, and regulations and to such approvals and requirements as may be required from time to time by any governmental authorities or any securities exchange or market on which the Shares are then listed or traded.     (d)  Governing Law.  Except to the extent preempted by the Federal laws of the United States of America, the Plan and all Award agreements shall be construed in accordance with and governed by 11 -------------------------------------------------------------------------------- the laws of the State of Indiana without giving effect to any choice or conflict of law provisions, principles or rules (whether of the State of Indiana or any other jurisdiction) that would cause the application of any laws of any jurisdiction other than the State of Indiana.     (e)  Headings.  The descriptive headings, sections, and paragraphs of the Plan are provided herein for convenience of reference only and shall not serve as a basis for interpretation or construction of the Plan.     (f)  Mistake of Fact.  Any mistake of fact or misstatement of facts shall be corrected when it becomes known by a proper adjustment to an Award or Award agreement.     (g)  Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document, or other information which the person relying thereon considers pertinent and reliable, and signed, made, or presented by the proper party or parties.     22.  No Effect on Employment or Service.  Neither the Plan nor the grant of any Awards or the execution of any Award agreement shall confer upon any Participant any right to continued employment by the Company or shall interfere with or limit in any way the right of the Company to terminate any Participant's employment or service at any time, with or without Cause. Employment with the Company and its Affiliates is on an at-will basis only, unless otherwise provided by a written employment or severance agreement, if any, between the Participant and the Company or an Affiliate, as the case may be. If there is any conflict between the provisions of the Plan and an employment or severance agreement between a Participant and the Company, the provisions of such employment or severance agreement shall control, including, but not limited to, the vesting and nonforfeiture of any Awards.     23.  No Company Obligation.  Unless required by applicable law, the Company, an Affiliate, the Board of Directors, and the Committee shall not have any duty or obligation to affirmatively disclose material information to a record or beneficial holder of Shares or an Award, and such holder shall have no right to be advised of any material information regarding the Company or any Affiliate at any time prior to, upon, or in connection with the receipt, exercise, or distribution of an Award. In addition, the Company, an Affiliate, the Board of Directors, the Committee, and any attorneys, accountants, advisors, or agents for any of the foregoing shall not provide any advice, counsel, or recommendation to any Participant with respect to, without limitation, any Award, any exercise of an Option, or any tax consequences relating to an Award.     24.  Participation.  No Employee or consultant shall have the right to be selected to receive an Award under the Plan or, having been selected, to be selected to receive a future Award. Participation in the Plan will not give any Participant any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.     25.  Liability and Indemnification.  No member of the Board, the Committee, or any officer or Employee of the Company or any Affiliate shall be personally liable for any action, failure to act, decision, or determination made in good faith in connection with the Plan. By participating in the Plan, each Participant agrees to release and hold harmless the Company and its Affiliates (and their respective directors, officers, and employees) and the Committee from and against any tax liability, including, but not limited to, interest and penalties, incurred by the Participant in connection with his receipt of Awards under the Plan and the payment and exercise thereof. Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from (a) any loss, cost, liability, or expense (including, but not limited to, attorneys' fees) that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan or any Award agreement; and (b) any and all amounts paid by him in settlement thereof, with the Company's prior written approval, 12 -------------------------------------------------------------------------------- or paid by him in satisfaction of any judgment in any such claim, action, suit, or proceeding against him; provided, however, that he shall give the Company an opportunity, at the Company's expense, to handle and defend such claim, action, suit, or proceeding before he undertakes to handle and defend the same on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.     26.  Successors.  All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether or not the existence of such successor is the result of a Change in Control. The Company shall not, and shall not permit its Affiliates to, recommend, facilitate, agree, or consent to a transaction or series of transactions which would result in a Change in Control of the Company unless and until the person or persons or entity or entities acquiring control of the Company as a result of such Change in Control agree(s) to be bound by the terms of the Plan insofar as it pertains to Awards theretofore granted and agrees to assume and perform the obligations of the Company and its successor.     27.  Beneficiary Designations.  Any Participant may designate, on such forms as may be provided by the Committee for such purpose, a beneficiary to whom any vested but unpaid Award shall be paid in the event of the Participant's death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate and, subject to the terms of the Plan and of the applicable Award agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participant's estate.     28.  Funding.  Benefits payable under the Plan to any person will be paid by the Company from its general assets. Shares to be distributed hereunder shall be issued directly by the Company from its authorized but unissued Shares or acquired by the Company on the open market, or a combination thereof. Neither the Company nor any of its Affiliates shall be required to segregate on their books or otherwise establish any funding procedure for any amount to be used for the payment of benefits under the Plan. The Company or any of its Affiliates may, however, in their sole discretion, set funds aside in investments to meet any anticipated obligations under the Plan. Any such action or set-aside shall not be deemed to create a trust of any kind between the Company or any of its Affiliates and any Participant or other person entitled to benefits under the Plan or to constitute the funding of any Plan benefits. Consequently, any person entitled to a payment under the Plan will have no rights greater than the rights of any other unsecured general creditor of the Company or its Affiliates. 13 -------------------------------------------------------------------------------- QUICKLINKS INTERACTIVE INTELLIGENCE, INC. 1999 STOCK OPTION AND INCENTIVE PLAN (Restated to reflect all amendments adopted through February 22, 2000)

REVOLVING CREDIT NOTE Boston, Massachusetts June 26, 2000       FOR VALUE RECEIVED, the undersigned, Westerbeke Corporation., a Delaware corporation with its principal executive offices at Avon Industrial Park, Avon, Massachusetts (the " Borrower") promises to pay to the order of Brown Brothers Harriman & Co. , with offices at 40 Water Street, Boston, Massachusetts (with any subsequent holder, the "Lender") the aggregate principal sum of Five Million and 00/100 Dollars ($5,000,000.00) or the aggregate unpaid principal balance of loans and advances made by the Lender to the Borrower pursuant to the Revolving Credit established in favor of the Borrower pursuant to the Loan and Security Agreement of even date (as such may be amended hereafter, the "Loan Agreement") with the Lender, with interest at the rate and payable in the manner stated therein. Terms used herein which are defined in the Loan Agreement are used as so defined.       This is the "Revolving Credit Note" to which reference is made in the Loan Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Note shall be payable ON DEMAND as provided in the Loan Agreement and shall be subject to acceleration as provided therein.       The Lender's books and records concerning loans and advances pursuant to the Revolving Credit, the accrual of interest thereon, and the repayment of such loans and advances, shall be prima facie evidence of the indebtedness of the Borrower to the Lender hereunder.       No delay or omission by the Lender in exercising or enforcing any of the Lender's powers, rights, privileges, remedies, or discretions hereunder or under the Loan Agreement shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver of any other default hereunder, nor as a continuing waiver.       The Borrower, and any endorser and guarantor of this Note, respectively waive presentment, demand, notice, and protest, and also waive any delay on the part of the holder hereof. Each assents to any extension or other indulgence (including, without limitation, the release or substitution of collateral) permitted by the Lender with respect to this Note and/or any Collateral given to secure this Note or any extension or other indulgence with respect to any other liability or any Collateral given to secure any other liability of the Borrower or any other person obligated on account of this Note.       This Note shall be binding upon the Borrower, and any endorser and guarantor hereof, and upon their respective heirs, successors, assigns, and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.       The liabilities of the Borrower, and of any endorser or guarantor of this Note, are joint and several; provided, however, the release by the Lender of any one or more such person, endorser or guarantor shall not release any other person obligated on account of this Note. Each reference in this Note to the Borrower, any endorser and any guarantor, is to such person individually and also to all such persons jointly. No person obligated on account of this Note may seek contribution from any other person also obligated unless and until all liabilities, obligations, and indebtedness to the Lender of the person from whom contribution is sought have been satisfied in full.       This Note is delivered at the offices of the Lender in Boston, Massachusetts, shall be governed by the laws of The Commonwealth of Massachusetts, and shall take effect as a sealed instrument.       The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Lender in the establishment and maintenance of its relationships with the Borrower contemplated by this Note, is relying thereon. THE BORROWER, TO THE EXTENT ENTITLED THERETO, WAIVES ANY PRESENT OR FUTURE RIGHT OF THE BORROWER, OR OF ANY GUARANTOR OR ENDORSER OR OF ANY OTHER PERSON LIABLE TO THE LENDER ON ACCOUNT OF OR IN RESPECT TO ITS LIABILITIES UNDER THE LOAN AGREEMENT, TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER, OR IN WHICH THE LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, THE LOAN AGREEMENT BETWEEN THE BORROWER AND THE LENDER. (The " Borrower") WESTERBEKE CORPORATION /s/ Carleton F. Bryant III Carleton F. Bryant, III Executive Vice President, Treasurer and Secretary

QuickLinks -- Click here to rapidly navigate through this document -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG WESTERN POWER & EQUIPMENT CORP., E-MOBILE, INC., AND E-MOBILE HOLDINGS, INC. -------------------------------------------------------------------------------- DATED AS OF NOVEMBER 1, 2000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS     Page -------------------------------------------------------------------------------- ARTICLE I. THE MERGERS         SECTION 1.1. Certificate of Incorporation and Bylaws of Parent       1   SECTION 1.2. The Western Power Merger   1   SECTION 1.3. The E-Mobile Merger   2   SECTION 1.4. Effective Time of the Mergers   2   SECTION 1.5. Closing   2   SECTION 1.6. Effect of the Mergers   2   SECTION 1.7. Articles or Certificate of Incorporation and Bylaws of the Surviving Corporations   3   SECTION 1.8. Directors and Officers of the Surviving Corporations   3   ARTICLE II. CONVERSION OF SECURITIES             SECTION 2.1. Conversion of Western Power Capital Stock       3   SECTION 2.2. Conversion of E-Mobile Capital Stock   4   SECTION 2.3. Cancellation of Parent Common Stock   4   SECTION 2.4. Exchange of Certificates   5   SECTION 2.5. Dissenting Shares   7   ARTICLE III. REPRESENTATIONS AND WARRANTIES OF WESTERN POWER             SECTION 3.1. Organization of Western Power       8   SECTION 3.2. Western Power Capital Structure   8   SECTION 3.3. Authority; No Conflict; Required Filings and Consents   9   SECTION 3.4. SEC Filings   10   SECTION 3.5. No Liabilities   10   SECTION 3.6. Taxes   10   SECTION 3.7. Litigation   11   SECTION 3.8. Employment and Consulting Relationships   11   SECTION 3.9. Accounting and Tax Matters   11   SECTION 3.10. Registration Statement; Joint Proxy Statement/Prospectus   11   SECTION 3.11. No Existing Discussions   12   SECTION 3.12. Section 203 of the DGCL Not Applicable   12   SECTION 3.13. Complete Disclosure   12   SECTION 3.14. No Defense   12   ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF E-MOBILE             SECTION 4.1. Organization of E-Mobile       13   SECTION 4.2. E-Mobile Capital Structure   13   SECTION 4.3. Authority; No Conflict; Required Filings and Consents   14   SECTION 4.4. Business Plan   14   SECTION 4.5. Financial Statements   15   SECTION 4.6. Licenses and Permits   15   SECTION 4.7. Leases   15   SECTION 4.8. Property   15   SECTION 4.9. Contracts   15   SECTION 4.10. No Undisclosed Liabilities   15   SECTION 4.11. Guarantor of Payment   16   SECTION 4.12. Absence of Certain Changes or Events   16 i --------------------------------------------------------------------------------   SECTION 4.13. Taxes   16   SECTION 4.14. Intellectual Property   16   SECTION 4.15. Agreements, Contracts and Commitments   16   SECTION 4.16. Litigation   17   SECTION 4.17. Environmental Matters   17   SECTION 4.18. Employment and Consulting Relationships   17   SECTION 4.19. Compliance With Laws   17   SECTION 4.20. Accounting and Tax Matters   18   SECTION 4.21. Registration Statement; Joint Proxy Statement/Prospectus   18   SECTION 4.22. Labor Matters   18   SECTION 4.23. Insurance   18   SECTION 4.24. No Existing Discussions   18   SECTION 4.25. Section 203 of the DGCL Not Applicable   19   SECTION 4.26. Complete Disclosure   19   SECTION 4.27. No Defense   19   ARTICLE V. COVENANTS             SECTION 5.1. Conduct of Business       19   SECTION 5.2. Cooperation; Notice; Cure   21   SECTION 5.3. No Solicitation   21   SECTION 5.4. Joint Proxy Statement/Prospectus; Registration Statement   21   SECTION 5.5. Nasdaq Quotation   22   SECTION 5.6. Access to Information   22   SECTION 5.7. Stockholders Meetings   22   SECTION 5.8. Legal Conditions to Merger   22   SECTION 5.9. Public Disclosure   23   SECTION 5.10. Tax-Free Transfer   23   SECTION 5.11. Affiliate Agreements   23   SECTION 5.12. Nasdaq Quotation   23   SECTION 5.13. Stock Plans   24   SECTION 5.14. Brokers or Finders   24   SECTION 5.15. Private Placements   25   SECTION 5.16. Sale of Western Power Assets   25   SECTION 5.17. Post-Merger Parent Corporate Governance   25   SECTION 5.18. Confidentiality Agreements and Restrictive Covenants   25   SECTION 5.19. Lock-Up   26   ARTICLE VI. CONDITIONS TO MERGER             SECTION 6.1. Conditions to Each Party's Obligation to Effect the Mergers       26   SECTION 6.2. Additional Conditions to Obligations of Western Power   27   SECTION 6.3. Additional Conditions to Obligations of E-Mobile   28   ARTICLE VII. TERMINATION AND AMENDMENT             SECTION 7.1. Termination       29   SECTION 7.2. Effect of Termination   29   SECTION 7.3. Fees and Expenses   30   SECTION 7.4. Amendment   30   SECTION 7.5. Extension; Waiver   30 ii --------------------------------------------------------------------------------               ARTICLE VIII. MISCELLANEOUS             SECTION 8.1. Survival of Representations, Warranties and Agreements.       30   SECTION 8.2. Notices   30   SECTION 8.3. Indemnification   31   SECTION 8.4. Interpretation   34   SECTION 8.5. Counterparts   34   SECTION 8.6. Entire Agreement; No Third Party Beneficiaries   34   SECTION 8.7. Governing Law   34   SECTION 8.8. Assignment   34 EXHIBITS Exhibit A   —   Certificate of Incorporation of Parent Exhibit B   —   Bylaws of Parent Exhibit C   —   Form of Affiliate Agreement Exhibit D   —   Form of Parent Stock Plan Exhibit E   —   List of Management Purchasers Exhibit F   —   Form of Asset Purchase and Sale Agreement Exhibit G   —   Western Power Disclosure Schedule Exhibit H   —   E-Mobile Disclosure Schedule Exhibit I   —   E-Mobile Business Plan Exhibit J   —   Indemnification Letter Exhibit K   —   Lock-Up Agreement iii -------------------------------------------------------------------------------- TABLE OF DEFINED TERMS Terms --------------------------------------------------------------------------------   Cross Reference in Agreement -------------------------------------------------------------------------------- Acquisition Proposal   Section 5.3(a) Additional Placement   Section 5.15(b) Affiliate   Section 5.11 Affiliate Agreement   Section 5.11 Aggregate Western Power Share Number   Section 2.4(k)(ii) Aggregate Western Power Shares   Section 2.4(k)(i) Agreement   Preamble Asset Purchase and Sale Agreement   Section 5.16(a) Bank   Section 3.3(a) Bank Consent Agreement   Section 3.3(a) Bankruptcy and Equity Exception   Section 3.3(a) Business Plan   Section 4.4 Case Consent Agreement   Section 3.3(a) Certificates   Section 2.4(b) Claim Notice   Section 8.3(c) Closing   Section 1.5 Closing Date   Section 1.5 Code   Preamble DGCL   Section 1.2 Dissenting Shares   Section 2.5 E-Mobile   Preamble E-Mobile Certificate of Merger   Section 1.4(b) E-Mobile Common Stock   Section 1.3 E-Mobile Director   Section 5.17(a) E-Mobile Disclosure Schedule   ARTICLE IV E-Mobile Exchange Ratio   Section 2.2(c) E-Mobile Lock-Up Obligation   Section 5.19(b) E-Mobile Lock-Up Period   Section 5.19(b) E-Mobile Material Contracts   Section 4.15 E-Mobile Merger   Section 1.3 E-Mobile Stock Option   Section 2.2(d) E-Mobile Stock Plans   Section 4.2(a) E-Mobile Stockholders' Meeting   Section 3.10 E-Mobile Surviving Corporation   Section 1.6 Effective Time   Section 1.4(c) Employee Benefit Plan   Section 3.8(a) Environmental Liabilities   Section 8.3 ERISA   Section 3.8(a) Exchange Act   Section 3.3(c) Exchange Agent   Section 2.4(a) Exchange Fund   Section 2.4(a) Extension Date   Section 7.1(b) GAAP   Section 4.5 Governmental Entity   Section 3.3(c) Hazardous Materials Release   Section 8.3 Indemnified Parties   Section 8.3(a) Indemnifying Party   Section 8.3(c) iv -------------------------------------------------------------------------------- IRS   Section 3.7(b) Joint Proxy Statement/Prospectus   Section 3.10 Lock-Up Obligation   Section 5.19(c) Management Purchasers   Section 5.16(a) Material Adverse Effect   Section 4.1 Mergers   Section 1.3 Merger Sub 1   Section 1.2 Merger Sub 2   Section 1.3 Order   Section 5.8(b) Outside Date   Section 7.1(b) Parent   Preamble Parent Common Stock   Section 1.2 Parent Material Adverse Effect   Section 6.1(e) Parent Stock Plan   Section 5.13(e) Private Placement   Section 5.15(a) Registration Statement   Section 3.10 Rule 145   Section 5.11 SEC   Section 3.3(c) Securities Act   Section 3.3(c) Subsidiary   Section 3.1 Surviving Corporations   Section 1.6 Tax   Section 3.6(a) Taxes   Section 3.6(a) Transaction Documents   Section 3.3(a) Western Power   Preamble Western Power Asset Sale   Section 5.16(a) Western Power Certificate of Merger   Section 1.4(a) Western Power Common Stock   Section 1.2 Western Power Director   Section 5.17(a) Western Power Disclosure Schedule   ARTICLE III Western Power Exchange Ratio   Section 2.4(k)(iii) Western Power Lock-Up Obligation   Section 5.19(a) Western Power Lock-Up Period   Section 5.19(a) Western Power Merger   Section 1.2 Western Power SEC Reports   Section 3.4 Western Power Stock Option   Section 2.1(d) Western Power Stock Plans   Section 3.2(a) Western Power Stockholders' Meeting   Section 3.10 Western Power Surviving Corporation   Section 1.6 v -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF REORGANIZATION AND MERGER     AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement"), dated as of November 1, 2000, by and among WESTERN POWER & EQUIPMENT CORP., a Delaware corporation ("Western Power"), E-MOBILE, INC., a Delaware corporation ("E-Mobile"), and E-MOBILE HOLDINGS, INC., a newly-formed Delaware corporation, one-half of the issued and outstanding capital stock of which is owned by each of Western Power and E-Mobile ("Parent").     WHEREAS, the Boards of Directors of Western Power and E-Mobile deem it advisable and in the best interests of each corporation and its respective stockholders that Western Power and E-Mobile combine in order to advance the long-term business interests of Western Power and E-Mobile;     WHEREAS, the combination of Western Power and E-Mobile shall be effected by the terms of this Agreement through (i) a merger of a wholly-owned subsidiary of Parent with and into Western Power and (ii) a merger of another wholly-owned subsidiary of Parent with and into E-Mobile such that Western Power and E-Mobile become wholly-owned subsidiaries of Parent and the stockholders of Western Power and E-Mobile become stockholders of Parent;     WHEREAS, for Federal income tax purposes, it is intended that (i) the Western Power Merger (as defined in Section 1.2) shall, taken together with the E-Mobile Merger (as defined in Section 1.3), qualify as a transfer of property to Parent by holders of Western Power Common Stock (as defined in Section 1.2) described in Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the E-Mobile Merger shall, taken together with the Western Power Merger, qualify as a transfer of property to Parent by holders of E-Mobile Common Stock (as defined in Section 1.3) described in Section 351 of the Code; and     WHEREAS, the Boards of Directors of Western Power and E-Mobile have approved this Agreement and each of the Transaction Documents to which its company is a party (as defined in Section 3.3).     NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: ARTICLE I. THE MERGERS     SECTION 1.1.  Certificate of Incorporation and Bylaws of Parent.  The Certificate of Incorporation and Bylaws of Parent shall, at the Effective Time (as defined in Section 1.4), be in the form of Exhibit A and Exhibit B attached hereto, respectively. From the date hereof until the Effective Time, the Parent will not take any action inconsistent with the provisions of this Agreement without the written consent of both Western Power and E-Mobile.     SECTION 1.2.  The Western Power Merger.  Western Power and E-Mobile shall cause Parent to form a wholly-owned subsidiary named Western Power Acquisition Corp. ("Merger Sub 1") under the laws of the State of Delaware. Western Power and E-Mobile shall cause Parent to cause Merger Sub 1 to execute and deliver a written document agreeing to be bound by the terms and conditions of this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub 1 will merge with and into Western Power (the "Western Power Merger") at the Effective Time, and each outstanding share of Common Stock, par value $.001 per share, of Western Power ("Western Power Common Stock") shall be converted into that number of shares of common stock, par value $.000001 per share, of Parent (the "Parent Common Stock") (as described in Section 2.1(c)) equal to the Exchange Ratio (as defined in Section 2.4(k)(iii) below). Merger Sub 1 will be formed solely to facilitate the Western Power Merger and will conduct no business or activity other than in connection with the Western Power Merger. 1 --------------------------------------------------------------------------------     SECTION 1.3.  The E-Mobile Merger.  Western Power and E-Mobile shall cause Parent to form a wholly-owned subsidiary named E-Mobile Acquisition Corp. ("Merger Sub 2") under the laws of the State of Delaware. Western Power and E-Mobile shall cause Parent to cause Merger Sub 2 to execute and deliver a written document agreeing to be bound by the terms and conditions of this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the DGCL, Merger Sub 2 shall merge with and into E-Mobile (the "E-Mobile Merger" and together with the Western Power Merger, the "Mergers") at the Effective Time, and each outstanding share of Common Stock, par value $.000001 per share, of E-Mobile ("E-Mobile Common Stock") shall be converted into one share of Parent Common Stock (as described in Section 2.2(c)). Merger Sub 2 will be formed solely to facilitate the E-Mobile Merger and will conduct no business or activity other than in connection with the E-Mobile Merger.     SECTION 1.4.  Effective Time of the Mergers.       (a) The Western Power Merger.  Subject to, and consistent with, the provisions of this Agreement, articles of merger with respect to the Western Power Merger in such form as is required by the relevant provisions of the DGCL (the "Western Power Certificate of Merger") shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL as early as practicable on the Closing Date (as defined in Section 1.5). The Western Power Merger shall become effective upon the filing of the Western Power Certificate of Merger with the Secretary of State of the State of Delaware.     (b) The E-Mobile Merger.  Subject to, and consistent with, the provisions of this Agreement, a certificate of merger (the "E-Mobile Certificate of Merger") with respect to the E-Mobile Merger in such form as is required by the relevant provisions of the DGCL shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL as early as practicable on the Closing Date. The E-Mobile Merger shall become effective upon the filing of the E-Mobile Certificate of Merger with the Secretary of State of the State of Delaware.     (c) The Effective Time.  The time at which both Mergers have become fully effective is hereinafter referred to as the "Effective Time."     SECTION 1.5.  Closing.  The closing of the Mergers (the "Closing") will take place at 11:00 a.m., Eastern Standard Time, on a date to be specified by E-Mobile and Western Power, which shall be no later than the third business day after satisfaction or, if permissible, waiver of the conditions set forth in Article VI (the "Closing Date"), at the offices of Mintz & Fraade, P.C., 488 Madison Avenue, New York, New York 10022, unless another date, place or time is agreed to in writing by E-Mobile and Western Power.     SECTION 1.6.  Effect of the Mergers.  As a result of the Western Power Merger, the separate corporate existence of Merger Sub 1 shall cease and Western Power shall continue as the surviving corporation (the "Western Power Surviving Corporation"). As a result of the E-Mobile Merger, the separate corporate existence of Merger Sub 2 shall cease and E-Mobile shall continue as the surviving corporation (the "E-Mobile Surviving Corporation" and together with Western Power Surviving Corporation, the "Surviving Corporations"). Upon becoming effective, the Mergers shall have the effects set forth in the DGCL, as the case may be. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all properties, rights, privileges, powers and franchises of Western Power and Merger Sub 1 shall vest in Western Power Surviving Corporation, and all debts, liabilities and duties of Western Power and Merger Sub 1 shall become the debts, liabilities and duties of the Western Power Surviving Corporation and (ii) all properties, rights, privileges, powers and franchises of E-Mobile and Merger Sub 2 shall vest in E-Mobile Surviving Corporation, and all debts, 2 -------------------------------------------------------------------------------- liabilities and duties of E-Mobile and Merger Sub 2 shall become the debts, liabilities and duties of E-Mobile Surviving Corporation.     SECTION 1.7.  Articles or Certificate of Incorporation and Bylaws of the Surviving Corporations.  At the Effective Time, (i) the Articles of Incorporation and Bylaws of Western Power Surviving Corporation shall be the Articles of Incorporation and Bylaws, respectively, of Western Power, as in effect immediately prior to the Effective Time, in each case until duly amended in accordance with applicable law, and (ii) the Certificate of Incorporation and Bylaws of E-Mobile Surviving Corporation shall be the Certificate of Incorporation and Bylaws, respectively, of E-Mobile, as in effect immediately prior to the Effective Time, in each case until duly amended in accordance with applicable law.     SECTION 1.8.  Directors and Officers of the Surviving Corporations.       (a)  Western Power Surviving Corporation.  On or prior to the Effective Time, the officers and directors of Western Power Surviving Corporation shall resign and shall be replaced by such persons as shall be designated by E-Mobile.     (b)  E-Mobile Surviving Corporation.  The officers and directors of E-Mobile immediately prior to the Effective Time shall be the initial officers and directors of E-Mobile Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of E-Mobile Surviving Corporation. ARTICLE II. CONVERSION OF SECURITIES     SECTION 2.1.  Conversion of Western Power Capital Stock.  At the Effective Time, by virtue of the Western Power Merger and without any action on the part of any of the parties hereto or the holders of any shares of Western Power Common Stock or capital stock of Merger Sub 1:     (a)  Capital Stock of Merger Sub 1.  Each issued and outstanding share of the capital stock of Merger Sub 1 shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.001 per share, of Western Power Surviving Corporation.     (b)  Cancellation of Treasury Stock and E-Mobile-Owned Stock.  All shares of Western Power Common Stock that are owned by Western Power or any Subsidiary (as defined in Section 3.1) of Western Power and any shares of Western Power Common Stock (including any options, warrants or other securities convertible into or exchangeable for such shares) owned by E-Mobile, Merger Sub 2 or any other Subsidiary of E-Mobile shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor.     (c)  Exchange Ratio for Western Power Common Stock.  Subject to Section 2.4(e), each issued and outstanding share of Western Power Common Stock (other than shares to be canceled in accordance with Section 2.1(b) and Dissenting Shares (as defined in Section 2.5)) shall be converted into the right to receive that number of shares of newly issued Parent Common Stock equal to the Western Power Exchange Ratio (as defined in Section 2.4(k)(iii) below). All such shares of Western Power Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Parent Common Stock and an amount equal to certain dividends and distributions described in Section 2.4(c), in each case, upon the surrender of such certificate in accordance with Section 2.4 and without interest.     (d)  Western Power Stock Options.  At the Effective Time, each outstanding option to purchase shares of Western Power Common Stock (a "Western Power Stock Option") under the Western Power Stock Plans (as defined in Section 3.2(a)), whether vested or unvested, shall be 3 -------------------------------------------------------------------------------- deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Western Power Stock Option, the same number of shares of Parent Common Stock as the holder of such Western Power Stock Option would have been entitled to receive pursuant to the Western Power Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Western Power Common Stock purchasable pursuant to such Western Power Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such Western Power Stock Option in accordance with the foregoing.     SECTION 2.2.  Conversion of E-Mobile Capital Stock.  At the Effective Time, by virtue of the E-Mobile Merger and without any action on the part of any of the parties hereto or the holders of any shares of E-Mobile Common Stock or capital stock of Merger Sub 2:     (a)  Capital Stock of Merger Sub 2.  Each issued and outstanding share of the capital stock of Merger Sub 2 shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $0.000001 per share, of E-Mobile Surviving Corporation.     (b)  Cancellation of Treasury Stock and Western Power-Owned Stock.  All shares of E-Mobile Common Stock that are owned by E-Mobile or any Subsidiary of E-Mobile (including treasury stock) and any shares of E-Mobile Common Stock (including any options, warrants or other securities convertible into or exchangeable for such shares) owned by Western Power, Merger Sub 1 or any other Subsidiary of Western Power shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor.     (c)  Exchange Ratio for E-Mobile Common Stock.  Subject to Section 2.4(e), each issued and outstanding share of E-Mobile Common Stock (other than shares to be canceled in accordance with Section 2.2(b)) shall be converted into the right to receive one share (the "E-Mobile Exchange Ratio") of Parent Common Stock. All such shares of E-Mobile Common Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Parent Common Stock and an amount equal to certain dividends and distributions described in Section 2.4(c), in each case, upon the surrender of such certificate in accordance with Section 2.4 and without interest.     (d)  E-Mobile Stock Options.  At the Effective Time, each outstanding option to purchase shares of E- Mobile Common Stock (a "E-Mobile Stock Option") under the E-Mobile Stock Plans (as defined in Section 4.2(a)) or otherwise, whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such E-Mobile Stock Option, the same number of shares of Parent Common Stock as the holder of such E-Mobile Stock Option would have been entitled to receive pursuant to the E-Mobile Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of E-Mobile Common Stock purchasable pursuant to such E-Mobile Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such E-Mobile Stock Option in accordance with the foregoing.     SECTION 2.3.  Cancellation of Parent Common Stock.  At the Effective Time, by virtue of the Mergers and without any action on the part of any holder of any capital stock of Western Power, E-Mobile or Parent, each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall be canceled, and no consideration shall be delivered in exchange therefor. 4 --------------------------------------------------------------------------------     SECTION 2.4.  Exchange of Certificates.  The procedures for exchanging shares of Western Power Common Stock and E-Mobile Common Stock for Parent Common Stock outstanding immediately prior to the Effective Time pursuant to the Mergers are as follows:     (a)  Exchange Agent.  As of the Effective Time, Parent shall deposit with a bank or trust company designated by E-Mobile and Western Power (the "Exchange Agent"), for the benefit of the holders of shares of Western Power Common Stock outstanding immediately prior to the effective time and the holders of shares of E-Mobile Common Stock outstanding immediately prior to the Effective Time, for exchange in accordance with this Section 2.4, through the Exchange Agent, certificates representing the shares of Parent Common Stock issuable pursuant to Sections 2.1 and 2.2 in exchange for outstanding shares of Western Power Common Stock and E-Mobile Common Stock, respectively (such shares of Parent Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund").     (b)  Exchange Procedures.  As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Western Power Common Stock or E-Mobile Common Stock (the "Certificates") whose shares were converted pursuant to Section 2.1 or Section 2.2 into the right to receive shares of Parent Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Western Power and E-Mobile may reasonably specify), and (ii) instructions for effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall immediately be canceled. In the event of a transfer of ownership of Western Power Common Stock or E-Mobile Common Stock prior to the Effective Time which is not registered in the transfer records of Western Power or E-Mobile, respectively, a certificate representing the proper number of shares of Parent Common Stock may be issued to a transferee if the Certificate representing such Western Power Common Stock or E-Mobile Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Immediately after the Effective Time, each outstanding Certificate which theretofore represented shares of Western Power Common Stock or E-Mobile Common Stock shall represent only the right to receive the shares of Parent Common Stock pursuant to the terms hereof and shall not be deemed to evidence ownership of the number of shares of Parent Common Stock into which such shares of Western Power Common Stock or E-Mobile Common Stock would be or were, as the case may be, converted into the right to receive until the Certificate therefor shall have been surrendered in accordance with this Section 2.4.     (c)  Distributions With Respect to Unexchanged Shares.  No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock the holder thereof is entitled to receive in respect thereof until the holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time previously paid with respect to such 5 -------------------------------------------------------------------------------- whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Parent Common Stock.     (d)  No Further Ownership Rights in Western Power Common Stock and E-Mobile Common Stock.  All shares of Parent Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash paid pursuant to subsection (c) of this Section 2.4) shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of Western Power Common Stock or E-Mobile Common Stock theretofore represented by such Certificates, subject, however, to the applicable Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Western Power on such shares of Western Power Common Stock or by E-Mobile on such shares of E-Mobile Common Stock, as the case may be, in accordance with the terms of this Agreement (to the extent permitted under Section 5.1) prior to the date hereof and which remain unpaid at the Effective Time, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Western Power Surviving Corporation or the E-Mobile Surviving Corporation, as the case may be, of the shares of Western Power Common Stock or E-Mobile Common Stock, respectively, which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to one of the Surviving Corporations or Parent for any reason, such Certificates shall be canceled and exchanged as provided in this Section 2.4.     (e)  No Fractional Shares.  No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to cash in lieu of such fractional share, to vote or to any other rights of a stockholder of Parent.     (f)  Termination of Exchange Fund.  Any portion of the Exchange Fund which remains undistributed to the former stockholders of Western Power or E-Mobile on the 180th day after the Effective Time shall be delivered to Parent upon demand, and any former stockholder of Western Power or E-Mobile who has not previously complied with this Section 2.4 shall thereafter look only to Parent for payment of such stockholder's claim for Parent Common Stock and any dividends or distributions with respect to Parent Common Stock.     (g)  No Liability.  None of Western Power, E-Mobile or Parent shall be liable to any holder of shares of Western Power Common Stock or E-Mobile Common Stock, as the case may be, for any shares of Parent Common Stock (or any dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.     (h)  Withholding Rights.  Parent and each of the Surviving Corporations shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Western Power Common Stock or E-Mobile Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or one of the Surviving Corporations, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Western Power Common Stock or E- Mobile Common Stock, as the case may be, in respect of which such deduction and withholding was made.     (i)  Lost Certificates.  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or one of the Surviving Corporations, the posting by such 6 -------------------------------------------------------------------------------- person of a bond in such reasonable amount as Parent or such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the shares of Parent Common Stock, any unpaid dividends and distributions on shares of Parent Common Stock deliverable in respect thereof pursuant to this Agreement.     (j)  Affiliates.  Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any Affiliate (as defined in Section 5.11) of Western Power or E-Mobile shall not be exchanged until Parent has received an Affiliate Agreement (as defined in Section 5.11) substantially in the form of Exhibit C attached hereto from such Affiliate.     (k)  Definitions.   1.Aggregate Western Power Shares. The "Aggregate Western Power Shares" shall mean the aggregate number of shares of Western Power Common Stock (on a fully diluted basis assuming the exercise of all outstanding options and warrants and the conversion of any and all instruments or securities which are convertible into equity securities) outstanding immediately prior to the Effective Time. 2.Aggregate Western Power Share Number. The "Aggregate Western Power Share Number" shall mean such number of newly issued shares of Parent Common Stock that, when issued to the shareholders of Western Power at the Effective Time and including all shares of Parent Common Stock issuable upon the exercise of the options described in Section 2.1(d) above, will result in the shareholders, and upon exercise of the options described in Section 2.1(d) by current option holders, of Western Power owning 7% of the total number of issued and outstanding shares of Parent Common Stock (after giving effect to such issuance but excluding from the total outstanding shares the shares issuable pursuant to Section 5.15 below and shares issued pursuant to or underlying E-Mobile Stock Options) rounded to the nearest whole share (with all fractions of a share being rounded up). 3.Western Power Exchange Ratio. The "Western Power Exchange Ratio" shall mean a fraction (A) the numerator of which is equal to the Aggregate Western Power Share Number and (B) the denominator of which is equal to the Aggregate Western Power Shares.     (l)  Relative Percentage Ownership.  Notwithstanding anything contained in this Section 2.4 to the contrary, the aggregate number of shares issued hereunder to shareholders of E-Mobile (excluding shares issued pursuant to Section 5.15 and shares issued pursuant to or underlying E-Mobile Stock Options) shall constitute 93% of the total number of issued and outstanding shares of Parent Common Stock at the Effective Time on a fully-diluted basis (excluding shares issued pursuant to Section 5.15 and shares issued pursuant to or underlying the E-Mobile Stock Options).     SECTION 2.5.  Dissenting Shares.  Any Western Power Common Stock or E-Mobile Common Stock held by a holder who dissents from the Western Power Merger or the E-Mobile Merger and becomes entitled to obtain payment for the value of such Western Power Common Stock or E-Mobile Common Stock pursuant to the applicable provisions of Delaware law shall be herein called "Dissenting Shares." Any Dissenting Share shall not, after the Effective Time, be entitled to vote for any purpose or receive any dividends or other distributions and shall not be converted into Parent Common Stock; provided, however, that Western Power Common Stock or E-Mobile Common Stock held by a dissenting shareholder who subsequently withdraws a demand for payment, fails to comply fully with the requirements of Delaware law, or otherwise fails to establish the right of such shareholder to be paid the value of such shareholder's shares under Delaware law shall be deemed to 7 -------------------------------------------------------------------------------- be have been converted into Parent Common Stock pursuant to the terms and conditions referred to above. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF WESTERN POWER     Western Power represents and warrants to E-Mobile that the statements contained in this Article III are true and correct except as set forth herein and in the disclosure schedules, attached hereto as Exhibit G, delivered by Western Power to E-Mobile on or before the date of this Agreement (the "Western Power Disclosure Schedule"). The Western Power Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs.     SECTION 3.1.  Organization of Western Power.  Each of Western Power and any corporation or other organization a majority of the voting securities of which are owned by Western Power ("Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation.     SECTION 3.2.  Western Power Capital Structure.       (a) The authorized capital stock of Western Power consists of 20,000,000 shares of Common Stock, $.001 par value, and 5,000,000 shares of preferred stock, $.01 par value. As of the date hereof, (i) 3,328,162 shares of Western Power Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) no shares of Western Power Common Stock were held in the treasury of Western Power or by Subsidiaries of Western Power, and (iii) no shares of Western Power preferred stock were issued and outstanding. The Western Power Disclosure Schedule shows the number of shares of Western Power Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof, the plans under which such options were granted and award agreements pursuant to which "non-plan" options were granted (collectively, the "Western Power Stock Plans"), and the entities or persons to whom such options were granted. As of the date hereof, no other shares of capital stock are issued and outstanding. All shares of Western Power Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. There are no obligations, contingent or otherwise, of Western Power or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Western Power Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations of Subsidiaries entered into in the ordinary course of business. All of the outstanding shares of capital stock of each of Western Power's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by Western Power or another Subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations in Western Power's voting rights, charges or other encumbrances of any nature.     (b) Except as set forth in this Section 3.2 or as reserved for future grants of options under the Western Power Stock Plans, (i) there are no equity securities of any class of Western Power or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Western Power or any of its 8 -------------------------------------------------------------------------------- Subsidiaries is a party or by which it is bound obligating Western Power or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of Western Power or any of its Subsidiaries or obligating Western Power or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of Western Power, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Western Power.     SECTION 3.3.  uthority; No Conflict; Required Filings and Consents.       (a) Western Power has all requisite corporate power and authority to enter into this Agreement and each of the Transaction Documents (as defined below) to which it is a party and to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party. The execution and delivery of this Agreement and each of the Transaction Documents to which it is a party and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party by Western Power have been duly authorized by all necessary corporate action on the part of Western Power, subject only to the approval and adoption of this Agreement by Western Power's stockholders under the DGCL. This Agreement and each of the Transaction Documents to which it is a party have been duly executed and delivered by Western Power and constitute the valid and binding obligations of Western Power, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equitable principles (the "Bankruptcy and Equity Exception"). "Transaction Documents" means the Asset Purchase and Sale Agreement (as defined below)and Consents approving the Asset Purchase and Sale Agreement between Deutsche Financial Services ("Bank") and Western Power (the "Bank Consent Agreement") and between Case Corporation ("Case") and Western Power (the "Case Consent Agreement"), each dated as of the date hereof.     (b) The execution and delivery of this Agreement and each of the Transaction Documents to which it is a party by Western Power does not, and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party will not conflict with, or result in any violation or breach of, any provision of the Articles of Incorporation or Bylaws of Western Power or any of its Subsidiaries.     (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to Western Power or any of its Subsidiaries in connection with the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of an Articles of Merger with respect to the Western Power Merger with the Delaware Secretary of State, (ii) the filing of the Joint Proxy Statement/Prospectus (as defined in Section 3.14 below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Act of 1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or foreign securities laws, and (v) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a Western Power Material Adverse Effect. 9 --------------------------------------------------------------------------------     SECTION 3.4.  SEC Filings.  Western Power has filed all forms, reports and documents required to be filed by Western Power with the SEC since January 1, 1995 (collectively, the "Western Power SEC Reports"). The Western Power SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Western Power SEC Reports or necessary in order to make the statements in such Western Power SEC Reports, in the light of the circumstances under which they were made, not misleading. None of Western Power's Subsidiaries is required to file any forms, reports or other documents with the SEC.     SECTION 3.5.  No Liabilities.  Except as permitted by the Asset Purchase and Sale Agreement, Western Power will have no liablities of any nature as of the Closing Date.     SECTION 3.6.  Taxes.       (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, "Taxes" also includes any obligations under any agreements or arrangements with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. sec. 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity.     (b) Western Power and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a Western Power Material Adverse Effect. There are no audits known by Western Power to be pending or contemplated with respect to Western Power's tax returns. Neither the Internal Revenue Service (the "IRS") nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of Western Power, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a Western Power Material Adverse Effect. Western Power and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a Western Power Material Adverse Effect. Neither Western Power nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such elections that are not reasonably likely, individually or in the aggregate, to have a Western Power Material Adverse Effect. There are no liens for Taxes upon the assets of Western Power or any of its Subsidiaries (other than liens for Taxes that are not yet due or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a Western Power Material Adverse Effect. No extension of a statute of limitations relating to any Taxes is in effect with respect to Western Power and its Subsidiaries. 10 --------------------------------------------------------------------------------     (c) Neither Western Power nor any of its Subsidiaries has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after December 31, 1998, other than a group the common parent of which was Western Power or any Subsidiary of Western Power.     (d) Neither Western Power nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Sec. 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have a Western Power Material Adverse Effect.     SECTION 3.7.  Litigation.  Except as described in the Western Power SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or investigation against Western Power or any of its Subsidiaries, officers or directors related to Western Power, pending or as to which Western Power or any of its Subsidiaries has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a Western Power Material Adverse Effect or a material adverse effect on the ability of Western Power to consummate the transactions contemplated by this Agreement.     SECTION 3.8.  Employment and Consulting Relationships.       (a) As of the Closing Date, Western Power will have no (i) employee benefit plans ("Employee Benefit Plans"), as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) written employment agreements to which Western Power will be a party, (iii) written consulting agreements to which Western Power will be a party, or (iv) compensation, benefit or severance arrangements maintained by Western Power.     (b) None of the execution and delivery of this Agreement or any of the Transaction Documents or the consummation of the transactions contemplated hereunder or thereunder will trigger any "change of control" or similar provisions resulting in the acceleration of benefits or compensation with respect to any agreements with any officer or other key employee of Western Power or any of its Subsidiaries.     SECTION 3.9.  Accounting and Tax Matters.       (a) To the knowledge of Western Power and its Subsidiaries, after consulting with its independent auditors, neither Western Power nor any of its Affiliates (as defined in Section 5.11) has taken or agreed to take any action which would prevent the Western Power Merger, and the Mergers, from constituting a transaction qualifying as a transfer under Section 351 of the Code.     (b) To the knowledge of Western Power and its Subsidiaries, the stockholders of Western Power have no present plan, intention or arrangement to sell or otherwise dispose of any of the Parent Common Stock received in the Western Power Merger that would cause the Western Power Merger or the Mergers to fail to qualify as transfers under Section 351 of the Code.     SECTION 3.10.  Registration Statement; Joint Proxy Statement/Prospectus.  The information to be supplied by Western Power or its Subsidiaries or about Western Power or its Subsidiaries by Western Power's agents for inclusion in the registration statement on Form S-4 pursuant to which shares of Parent Common Stock issued in the Mergers will be registered under the Securities Act (the "Registration Statement"), shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration 11 -------------------------------------------------------------------------------- Statement, in light of the circumstances under which they were made, not misleading. The information supplied by Western Power or its Subsidiaries for inclusion in the joint proxy statement/prospectus to be sent to the stockholders of E-Mobile and Western Power in connection with the meeting of Western Power' stockholders (the "Western Power Stockholders' Meeting") and the meeting of E-Mobile's stockholders (the "E-Mobile Stockholders' Meeting") to consider this Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of Western Power or E-Mobile, at the time of the Western Power Stockholders' Meeting and the E-Mobile Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Western Power Stockholders' Meeting or the E-Mobile Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Western Power or any of its Affiliates, officers or directors should be discovered by Western Power which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, Western Power shall promptly inform E-Mobile.     SECTION 3.11.  No Existing Discussions.  As of the date hereof, neither Western Power nor any of its Affiliates is engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal (as defined in Section 5.3).     SECTION 3.12.  Section 203 of the DGCL Not Applicable.  The Board of Directors of Western Power has taken all actions necessary under the DGCL, including approving the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party, to ensure that Section 203 of the DGCL applicable to a "business combination" (as defined in Section 203 of the DGCL) does not, and will not, apply to the transactions contemplated hereunder and thereunder. Western Power has no prior knowledge that any other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to Western Power or (by reason of Western Power's participation therein) the Western Power Merger or the other transactions contemplated by this Agreement or the other Transaction Documents to which it is a party.     SECTION 3.13  Complete Disclosure.  No representation or warranty of Western Power which is contained in the Agreement, or in a writing furnished or to be furnished pursuant to the Agreement contains or shall contain any untrue statement of fact, omits or shall omit to state any fact which is required to make the statements which are contained herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact relating to the business, affairs, operations, conditions (financial or otherwise) or prospects of Western Power which would materially adversely affect same which has not been disclosed in the Agreement or the Exhibits which are annexed hereto.     SECTION 3.14  No Defense.  It shall not be a defense to a suit for damages for any misrepresentation or breach of covenant or warranty that Western Power knew or had reason to know that any covenant, representation or warranty in the Agreement or furnished or to be furnished to Western Power contained untrue statements. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF E-MOBILE     E-Mobile represents and warrants to Western Power that the statements contained in this Article IV are true and correct, except as set forth on the disclosure schedules, attached hereto as Exhibit H, delivered by E-Mobile to Western Power on or before the date of this Agreement (the "E-Mobile Disclosure Schedule"). The E-Mobile Disclosure Schedule shall be arranged in paragraphs 12 -------------------------------------------------------------------------------- corresponding to the numbered and lettered paragraphs contained in this Article IV and the disclosure in any paragraph shall qualify other paragraphs in this Article IV only to the extent that it is reasonably apparent from a reading of such document that it also qualifies or applies to such other paragraphs.     SECTION 4.1.  Organization of E-Mobile.  Each of E-Mobile and E-Mobile's Material Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted pursuant to the Business Plan, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of E-Mobile and its Subsidiaries, taken as a whole (a "Material Adverse Effect"). Neither E-Mobile nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in E-Mobile or in one or more of its Subsidiaries) any equity or similar interest in, or any interest that is mandatorily convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding securities in any publicly traded company held for investment by E-Mobile and comprising less than five percent (5%) of the outstanding stock of such company. True, correct and complete copies of the Certificate of Incorporation and Bylaws of E-Mobile are attached hereto as Exhibits K and L, respectively. A true, correct and complete copy of the Certificate of Incorporation and other similar organizational documents of each of E-Mobile's Material Subsidiaries (as defined below) has been delivered to Western Power. "E-Mobile's Material Subsidiaries" shall mean those subsidiaries of E-Mobile set forth on the E-Mobile Disclosure Schedule, which Subsidiaries constitute all of E-Mobile's "significant subsidiaries" as defined in Rule 1-02 of Regulation S-X under the Securities Act.     SECTION 4.2.  E-Mobile Capital Structure.       (a) The authorized capital stock of E-Mobile consists of 200,000,000 shares of Common Stock, $0.000001 par value, and 1,000,000 shares of Preferred Stock, $0.000001 par value. As of the date hereof, (i) 52,000,000 shares of E-Mobile Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) no shares of E-Mobile Common Stock were held in the treasury of E-Mobile or by Subsidiaries of E-Mobile, and (iii) no shares of E-Mobile Preferred Stock were issued and outstanding. The E-Mobile Disclosure Schedule shows the number of shares of E-Mobile Common Stock reserved for future issuance pursuant to stock option plans (the "E-Mobile Stock Plans") or otherwise. All shares of E-Mobile Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. There are no obligations, contingent or otherwise, of E-Mobile or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of E-Mobile Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations of Subsidiaries entered into in the ordinary course of business. All of the outstanding shares of capital stock of each of E-Mobile's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are beneficially owned by E-Mobile or another Subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations in E-Mobile's voting rights, charges or other encumbrances of any nature.     (b) Except as set forth in this Section 4.2 or as reserved for future grants of options under the E-Mobile Stock Plans, (i) there are no equity securities of any class of E-Mobile or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which E-Mobile or any of its Subsidiaries is 13 -------------------------------------------------------------------------------- a party or by which it is bound obligating E-Mobile or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of E-Mobile or any of its Subsidiaries or obligating E-Mobile or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of E-Mobile, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of E-Mobile.     SECTION 4.3.  Authority; No Conflict; Required Filings and Consents.       (a) E-Mobile has all requisite corporate power and authority to enter into this Agreement and each of the Transaction Documents to which it is a party and to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party. The execution and delivery of this Agreement and each of the Transactions Documents to which it is a party and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party by E-Mobile have been duly authorized by all necessary corporate action on the part of E-Mobile, subject only to the approval and adoption of this Agreement by E-Mobile's stockholders under the DGCL. This Agreement and each of the Transaction Documents to which it is a party have been duly executed and delivered by E-Mobile and constitute the valid and binding obligations of E-Mobile, enforceable in accordance with their terms, subject to the Bankruptcy and Equity Exception.     (b) The execution and delivery of this Agreement and each of the Transaction Documents to which it is a party by E-Mobile does not, and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of E-Mobile or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which E-Mobile or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to E-Mobile or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which are not, individually or in the aggregate, reasonably likely to have a E-Mobile Material Adverse Effect.     (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to E-Mobile or any of its Subsidiaries in connection with the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of a Certificate of Merger with respect to the E-Mobile Merger with the Delaware Secretary of State, (ii) the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange Act, (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or foreign securities laws, and (iv) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a E-Mobile Material Adverse Effect.     SECTION 4.4.  Business Plan.  E-Mobile has been formed, capitalized and operated to date, and until the Effective Time will be capitalized and operated, consistent with a business plan (the "Business Plan"), a copy of which is attached hereto as Exhibit I. 14 --------------------------------------------------------------------------------     SECTION 4.5.  Financial Statements.  E-Mobile is newly formed and, except as contemplated in the Business Plan, has no material assets and, through the date hereof, has had no material operations. A copy of the unaudited balance sheet and statement of operations of E-Mobile as of, and for the period from inception to, September 30, 2000, is included with the E-Mobile Disclosure Schedules. E-Mobile will prepare and deliver to Parent unaudited financial statements and such other financial statements, whether audited or unaudited, as may be required by Parent to comply with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Any such financial statements so delivered by E-Mobile shall be prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved ("GAAP").     SECTION 4.6.  Licenses and Permits.  E-Mobile has each of the operating licenses and permits listed on the E-Mobile Disclosure Schedule, which constitute all of the material licenses and permits which E-Mobile is required to have to carry on its business as presently conducted and as set forth in the Business Plan. All such licenses and permits are in full force and effect in accordance with their terms. There exists no event, occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any further condition would become a default under any of the licenses or permits. None of the licenses or permits will be canceled or revoked, nor become void, as a result of the transactions provided for by this Agreement.     SECTION 4.7.  Leases.  E-Mobile is not a party to any leases of real and personal property. All leases, if any, described in the E-Mobile Disclosure Schedule are in all material respects in full force and effect in accordance with their terms. There exists no event, occurrence, condition or act which, with the giving of notice, the lapse of time, or the happening of any further event, occurrence, condition or act, would become a material default under any of the leases. E-Mobile has not violated any term of any lease and is in compliance with all material obligations to be performed pursuant to each lease. E-Mobile has obtained a certificate of occupancy, for each location owned or leased by it. E-Mobile's use of leasehold properties does not violate any certificates of occupancy, or violate any zoning laws or regulations. E-Mobile has not received any complaint that the use of any leased properties constitutes a noxious use.     SECTION 4.8.  Property.       (a) E-Mobile owns no real property.     (b) All property of E-Mobile (except leased property and real property) is owned free and clear of any mortgage, pledge, lien, conditional sale or security agreement, encumbrance or charge. E-Mobile is not in default under any conditional sales agreement. All of E-Mobile's properties and equipment are in good working order and operating condition and repair and shall be in good working order and operating condition and repair.     SECTION 4.9.  Contracts.  E-Mobile is not party to any material contracts (other than the leases and insurance contracts described in Section 4.7 and Section 4.23) including, but not limited to, license agreements. All of the contracts listed in the E-Mobile Disclosure Schedule have been entered into in the ordinary course of business and neither E-Mobile nor any other party to any such contract is in default under any such contract.     SECTION 4.10.  No Undisclosed Liabilities.  Neither E-Mobile nor any of its subsidiaries has any material liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, and there is no existing condition, situation or set of circumstances known to E-Mobile which could be expected to result in such a liability or obligation, except (a) liabilities or obligations reflected in the E-Mobile financial statements provided from time to time and (b) liabilities or obligations incurred in the ordinary course of business which do not and would not reasonably be expected to have, individually or in the aggregate, an E-Mobile Material Adverse Effect. 15 --------------------------------------------------------------------------------     SECTION 4.11.  Guarantor of Payment.  E-Mobile is not a guarantor of payment or collection of any obligation.     SECTION 4.12.  Absence of Certain Changes or Events.  Since the date of the Business Plan, E-Mobile and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with the Business Plan and its financial statements and, since such date, there has not been (i) any Material Adverse Change in E-Mobile and its Subsidiaries, taken as a whole (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry in which E-Mobile competes) or any development or combination of developments of which the management of E-Mobile is aware that, individually or in the aggregate, has had, or is reasonably likely to have, a E-Mobile Material Adverse Effect (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry in which E-Mobile competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to E-Mobile or any of its Subsidiaries having a E-Mobile Material Adverse Effect; (iii) any material change by E-Mobile or its Subsidiaries in their respective accounting methods, principles or practices; or (iv) any other action or event that would have required the consent of Western Power pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement and that, individually or in the aggregate, has had or is reasonably likely to have a E-Mobile Material Adverse Effect.     SECTION 4.13.  Taxes.  As of the date hereof, E-Mobile has not been required to file any Tax return and has not paid, or been required to pay, any material Taxes and is not subject to, and has not been subject to, any audits, administrative or court proceedings or claims with respect to Taxes.     SECTION 4.14.  Intellectual Property.  Other than as set forth in the E-Mobile Disclosure Schedule, each of E-Mobile and its Subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, applications for such patents, trademarks, trade names, service marks and copyrights, technology, know-how, processes, computer software programs or applications, and other intellectual property and tangible or intangible proprietary information or material which are necessary to conduct, or to be used in the conduct, of its business as currently conducted and as proposed to be conducted, as set forth in the Business Plan, including, but not limited to, the Brainze and Bluetooth technology. Neither E-Mobile or any of its Subsidiaries have received any notice of any claims, have knowledge of any threatened claims, nor know of any facts which would form the basis of any claim, asserted by any person, to the effect that the sale or use of any product or process now used or offered by E-Mobile or any of its Subsidiaries, or proposed to be sold or used, including, but not limited to, the Brainze and Bluetooth technology, infringes on any patents or infringes upon the use of any such trademarks, trade names, service marks, copyrights, technology, know-how, computer software programs or applications, processes or other intellectual property of another person or challenges or questions the validity or effectiveness of any such license or agreement. The sale and use of any such products and processes by E-Mobile and its Subsidiaries, and the use of any such patents, trademarks, trade names, service marks, copyrights, technology, know-how, computer software programs or applications, processes or other intellectual property by E-Mobile and its Subsidiaries, do not infringe upon the rights of any person. The foregoing provisions of this Section 4.14 of this Agreement shall not be applicable if the cumulative effect of all erroneous representations pursuant to this Section 4.14 of this Agreement are not reasonably likely to have an E-Mobile Material Adverse Effect.     SECTION 4.15.  Agreements, Contracts and Commitments.  Neither E-Mobile nor any of its Subsidiaries has breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment which would be required to be filed as an exhibit under Item 601 of Regulation S-K under the Securities Act ("E-Mobile Material Contracts") in such a manner as, individually or in the aggregate, is reasonably likely to have a E- 16 -------------------------------------------------------------------------------- Mobile Material Adverse Effect. Each E-Mobile Material Contract that has not expired by its terms is in full force and effect.     SECTION 4.16.  Litigation.  There is no action, suit or proceeding, claim, arbitration or investigation against E-Mobile or any of its Subsidiaries, officers or directors related to E-Mobile, pending or as to which E-Mobile or any of its Subsidiaries has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a E-Mobile Material Adverse Effect or a material adverse effect on the ability of E-Mobile to consummate the transactions contemplated by this Agreement.     SECTION 4.17.  Environmental Matters.       (a) To the knowledge of E-Mobile and its Subsidiaries, except for such matters that, individually or in the aggregate, are not reasonably likely to have a E-Mobile Material Adverse Effect: (i) E-Mobile and its Subsidiaries are in material compliance with all applicable environmental laws; (ii) the properties currently owned or operated by E-Mobile and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any hazardous substances; (iii) the properties formerly owned or operated by E-Mobile or any of its Subsidiaries were not contaminated with hazardous substances during the period of ownership or operation by E-Mobile or any of its Subsidiaries; (iv) neither E-Mobile nor its Subsidiaries are subject to liability for any hazardous substance disposal or contamination on any third party property; (v) neither E-Mobile nor any of its Subsidiaries has been associated with any release or threat of release of any hazardous substance; (vi) neither E-Mobile nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that E-Mobile or any of its Subsidiaries may be in violation of or liable under any environmental law; (vii) neither E-Mobile nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any environmental law or relating to hazardous substances; and (viii) there are no circumstances or conditions involving E-Mobile or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of E-Mobile pursuant to any environmental law.     SECTION 4.18.  Employment and Consulting Relationships.       (a) E-Mobile has no (i) Employee Benefit Plans, as defined in Section 3.8(a), (ii) written employment agreements to which E-Mobile is a party, (iii) written consulting agreements to which E-Mobile is a party, (iv) compensation, benefit or severance arrangements maintained by E-Mobile not otherwise listed above, (v) confidentiality agreements with employees or consultants, and (vi) restrictive covenants with employees.     (b) None of the execution and delivery of this Agreement or any of the Transaction Documents or the consummation of the transactions contemplated hereunder or thereunder will trigger any "change of control" or similar provisions resulting in the acceleration of benefits or compensation with respect to any agreements with any officer or other key employee of E-Mobile or any of its Subsidiaries.     SECTION 4.19.  Compliance With Laws.  Each of E-Mobile and its Subsidiaries has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a E-Mobile Material Adverse Effect. 17 --------------------------------------------------------------------------------     SECTION 4.20.  Accounting and Tax Matters.       (a) To the knowledge of E-Mobile and its Subsidiaries, after consulting with its independent auditors, neither E-Mobile nor any of its Affiliates (as defined in Section 5.11) has taken or agreed to take any action which would prevent the Mergers from constituting transactions qualifying as transfers under Section 351 of the Code.     (b) To the knowledge of E-Mobile and its Subsidiaries, the stockholders of E-Mobile have no present plan, intention or arrangement to sell or otherwise dispose of any of the Parent Common Stock received in the E-Mobile Merger that would cause the Mergers to fail to qualify as transfers under Section 351 of the Code.     SECTION 4.21.  Registration Statement; Joint Proxy Statement/Prospectus.  The information to be supplied by E-Mobile or its Subsidiaries or about E-Mobile or its Subsidiaries by E-Mobile's agents for inclusion in the Registration Statement shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information to be supplied by E-Mobile or its Subsidiaries or about E-Mobile or its Subsidiaries by E-Mobile's agents for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of E-Mobile or Western Power, at the time of the E-Mobile Stockholders' Meeting and the Western Power Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the E-Mobile Stockholders' Meeting or the Western Power Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to E-Mobile or any of its Affiliates, officers or directors should be discovered by E-Mobile which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, E-Mobile shall promptly inform Western Power.     SECTION 4.22.  Labor Matters.  Neither E-Mobile nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is E-Mobile or any of its Subsidiaries the subject of any material proceeding asserting that E-Mobile or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of E-Mobile, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving E-Mobile or any of its Subsidiaries.     SECTION 4.23.  Insurance.  All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by E-Mobile or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of E-Mobile and its Subsidiaries and their respective properties and assets, are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards and are in full force and effect with premiums being fully paid to date, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a E-Mobile Material Adverse Effect.     SECTION 4.24.  No Existing Discussions.  As of the date hereof, neither E-Mobile nor any of its Affiliates is engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal. 18 --------------------------------------------------------------------------------     SECTION 4.25.  Section 203 of the DGCL Not Applicable.  The Board of Directors of E-Mobile has taken all actions necessary under the DGCL, including approving the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party, to ensure that Section 203 of the DGCL applicable to a "business combination" (as defined in Section 203 of the DGCL) does not, and will not, apply to the transactions contemplated hereunder and thereunder. E-Mobile has no prior knowledge that any other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to E-Mobile or (by reason of E-Mobile's participation therein) the E-Mobile Merger or the other transactions contemplated by this Agreement or the other Transaction Documents to which it is a party.     SECTION 4.26.  Complete Disclosure.  No representation or warranty of E-Mobile which is contained in the Agreement, or in a writing furnished or to be furnished pursuant to the Agreement contains or shall contain any untrue statement of fact, omits or shall omit to state any fact which is required to make the statements which are contained herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact relating to the business, affairs, operations, conditions (financial or otherwise) or prospects of E-Mobile which would materially adversely affect same which has not been disclosed in the Agreement or the Exhibits which are annexed hereto.     SECTION 4.27.  No Defense.  It shall not be a defense to a suit for damages for any misrepresentation or breach of covenant or warranty that E-Mobile knew or had reason to know that any covenant, representation or warranty in the Agreement or furnished or to be furnished to E-Mobile contained untrue statements. ARTICLE V COVENANTS     SECTION 5.1.  Conduct of Business.  Except as set forth on Section 5.1 of the Western Power Disclosure Schedule or the E-Mobile Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Western Power and E-Mobile each agrees as to itself and its respective Subsidiaries (except to the extent that the other party shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, or, with regard to E-Mobile, consistent with the Business Plan, to pay its debts and taxes when due, to pay or perform its other obligations when due, and, to the extent consistent with such business, use all reasonable efforts consistent with past practices and policies to (i) preserve intact its present business organization, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. Except as expressly contemplated by this Agreement (including the Exhibits attached hereto) or as set forth on Section 5.1 of the Western Power Disclosure Schedule or the E-Mobile Disclosure Schedule, and except that actions taken by Western Power and described in Sections 5.1 (a), (e), (f) and (k) shall not require the consent of E-Mobile, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Western Power and E-Mobile each shall not (and shall not permit any of its respective Subsidiaries to), without the written consent of the other party:     (a) Accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan of such party or authorize cash payments in exchange for any options granted under any of such plans, except as required by the terms of such plans or any related agreements in effect as of the date of this Agreement;     (b) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital 19 -------------------------------------------------------------------------------- stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock;     (c) Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or securities convertible into or exchangeable for shares of its capital stock, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities, other than (i) the grant of options consistent with past practices to employees, officers, directors or consultants, but in no event grant more than the total number of authorized options available under such party's stock option plans and (ii) the issuance of shares of Western Power Common Stock or E-Mobile Common Stock, as the case may be, pursuant to the exercise of options or warrants outstanding on the date of this Agreement;     (d) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets (other than inventory and other items in the ordinary course of business), except, in the case of E-Mobile, as may be consistent with the Business Plan;     (e) Sell, lease, license, mortgage, pledge, subject to lien, charge or otherwise dispose of any of its properties or assets, except for transactions in the ordinary course of business; provided, however, that in no event shall either party enter into any agreement, option or other arrangements (including without limitation any joint venture) involving the licensing of such party's name or system in any foreign country, except for transactions in the ordinary course of business;     (f)  except in accordance with past practices and, in the case of E-Mobile, the Business Plan, (i) increase or agree to increase the compensation payable or to become payable to its directors, officers, employees or consultants, (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, any consultants, employees, officers or directors (iii) enter into any collective bargaining agreement (other than as required by law or extensions to existing agreements in the ordinary course of business), or (iv) establish, adopt, enter into or amend any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers, employees or consultants;     (g) Amend or propose to amend its Certificate of Incorporation or Articles of Incorporation, as the case may be, or Bylaws;     (h) Incur any obligation or liability (absolute or contingent), including, but not limited to, any debt or guarantee of any debt, or issue or sell any debt securities, or guarantee any debt securities of others, except for liabilities incurred and obligations under contracts entered in the ordinary course of business;     (i)  Take any action or omit to do any act that would or is reasonably likely to result in a material breach of any provision of this Agreement or any of the Transaction Documents to which it is a party or in any of its representations and warranties set forth in this Agreement or any of the Transaction Documents to which it is a party being untrue on and as of the Closing Date;     (j)  Make or rescind any material express or deemed election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or change any of its methods of reporting income or deductions for federal income Tax purposes from those employed in the preparation of its federal income tax 20 -------------------------------------------------------------------------------- return for the taxable year ending July 31, 2000 with respect to Western Power, except as may be required by applicable law;     (k) Settle any stockholder litigation relating to the transactions contemplated hereby; or     (l)  Take, or agree in writing or otherwise to take, any of the actions described in Sections (a) through (k) above.     SECTION 5.2.  Cooperation; Notice; Cure.  Subject to compliance with applicable law, from the date hereof until the Effective Time, each of Western Power and E-Mobile shall confer on a regular and frequent basis with one or more representatives of the other party to report on the general status of ongoing operations and shall promptly provide the other party or its counsel with copies of all filings made by such party with the SEC or with any Governmental Entity in connection with this Agreement, the Mergers and the transactions contemplated hereby and thereby. Each of Western Power and E-Mobile shall notify the other of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of Western Power or E-Mobile under this Agreement to be breached or that renders or will render untrue any representation or warranty of Western Power or E-Mobile contained in this Agreement. Each of Western Power and E-Mobile also shall notify the other in writing of, and will use all commercially reasonable efforts to cure, before the Closing Date, any violation or breach, as soon as practical after it becomes known to such party, of any representation, warranty, covenant or agreement made by Western Power or E-Mobile. No notice given pursuant to this paragraph shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein.     SECTION 5.3.  No Solicitation.  Western Power and E-Mobile each shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transaction involving such party or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any third party concerning, or provide any nonpublic information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal.     SECTION 5.4.  Joint Proxy Statement/Prospectus; Registration Statement.       (a) As promptly as practicable after the execution of this Agreement, Western Power and E-Mobile shall prepare and file with the SEC the Joint Proxy Statement/Prospectus and will cause Parent to prepare and file with the SEC the Registration Statement in which the Joint Proxy Statement/Prospectus will be included as a prospectus. Western Power and E-Mobile shall use all reasonable efforts to cause the Registration Statement to become effective as soon after such filing as practical. The Joint Proxy Statement/ Prospectus shall include the recommendation of the Board of Directors of Western Power in favor of this Agreement and the Western Power Merger and the recommendation of the Board of Directors of E-Mobile in favor of this Agreement and the E-Mobile Merger.     (b) Western Power and E-Mobile shall make all necessary filings with respect to the Merger under the Securities Act, the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. 21 --------------------------------------------------------------------------------     (c) Western Power and E-Mobile shall use their best efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Joint Proxy Statement/ Prospectus and the Registration Statement) in connection with the transactions contemplated by this Agreement.     SECTION 5.5.  Nasdaq Quotation.  Western Power agrees to use its reasonable best efforts to continue the quotation of Western Power Common Stock on the Nasdaq Small Cap Market during the term of this Agreement.     SECTION 5.6.  Access to Information.  Upon reasonable notice, Western Power and E-Mobile shall each (and shall cause each of their respective Subsidiaries to) afford to the officers, employees, accountants, counsel and other representatives of the other, access, during normal business hours during the period prior to the Effective Time, to all its personnel, properties, books, contracts, commitments and records and, during such period, each of Western Power and E-Mobile shall, and shall cause each of their respective Subsidiaries to, furnish promptly to the other (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (b) all other information concerning its business, properties and personnel as such other party may reasonably request. The parties will hold any such information which is nonpublic in confidence. No information or knowledge obtained in any investigation pursuant to this Section 5.6 shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger.     SECTION 5.7.  Stockholders Meetings.  Western Power and E-Mobile each shall call a meeting of its respective stockholders to be held as promptly as practicable for the purpose of voting, in the case of Western Power, upon this Agreement and the Western Power Merger and, in the case of E-Mobile, upon this Agreement and the E-Mobile Merger. Subject to Sections 5.3 and 5.4, Western Power and E-Mobile shall, through their respective Boards of Directors, recommend to their respective stockholders approval of such matters and shall coordinate and cooperate with respect to the timing of such meetings and shall use their best efforts to hold such meetings on the same day and as soon as practicable after the date hereof. Unless otherwise required to comply with the applicable fiduciary duties of the respective directors of Western Power and E-Mobile, as determined by such directors in good faith after consultation with outside legal counsel, each party shall use all reasonable efforts to solicit from stockholders of such party proxies in favor of such matters.     SECTION 5.8.  Legal Conditions to Merger.       (a) Western Power and E-Mobile shall each use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by Western Power or E-Mobile or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby including, without limitation, the Mergers, and (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Mergers required under (A) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws and (B) any other applicable law. Western Power and E-Mobile shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. 22 --------------------------------------------------------------------------------     (b) Western Power and E-Mobile agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their respective best efforts to obtain any government clearances required for Closing, to respond to any government requests for information, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Order") that restricts, prevents or prohibits the consummation of the Mergers or any other transactions contemplated by this Agreement.     (c) Each of Western Power and E-Mobile shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, all reasonable efforts to obtain any third party consents related to or required in connection with the Mergers.     SECTION 5.9.  Public Disclosure.  Subject to Western Power's obligations pursuant to the securities laws, Western Power and E-Mobile shall agree on the form and content of the initial press release regarding the transactions contemplated hereby and thereafter shall consult with each other before issuing, and use all reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation.     SECTION 5.10.  Tax-Free Transfer.  Western Power and E-Mobile shall each use all reasonable efforts to cause the Mergers to be treated as transfers within the meaning of Section 351 of the Code.     SECTION 5.11.  Affiliate Agreements.  Upon the execution of this Agreement, Western Power and E-Mobile will provide each other with a list of those persons who are, in Western Power's or E-Mobile's respective reasonable judgment, "affiliates" of Western Power or E-Mobile, as the case may be, within the meaning of Rule 144(a) (each such person who is an "affiliate" of Western Power or E-Mobile within the meaning of Rule 144(a) is referred to as an "Affiliate") promulgated under the Securities Act. Western Power and E-Mobile shall provide each other such information and documents as the other party shall reasonably request for purposes of reviewing such list and shall notify the other party in writing regarding any change in the identity of its Affiliates prior to the Closing Date. Western Power and E-Mobile shall each use all reasonable efforts to deliver or cause to be delivered to each other prior to the Effective Time from each of its Affiliates, an executed Affiliate Agreement, substantially similar to the form attached hereto as Exhibit C, by which each Affiliate of Western Power and each Affiliate of E-Mobile agrees to comply with the applicable requirements of Rule 145 promulgated under the Securities Act ("Rule 145") and for the Mergers to qualify as transfers within the meaning of Section 351 of the Code (an "Affiliate Agreement"). Parent shall be entitled to place appropriate legends on the certificates evidencing any Parent Common Stock to be received by such Affiliates of Western Power or E-Mobile pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for Parent Common Stock, consistent with the terms of the Affiliate Agreements (provided that such legends or stop transfer instructions shall be removed, when such shares of Parent Common Stock are generally transferable without any restrictions imposed by Rule 145, upon the request of any stockholder that is not then an Affiliate of Parent).     SECTION 5.12.  Nasdaq Quotation.  Western Power and E-Mobile shall cause Parent to promptly prepare and submit an application to the Nasdaq National Market, if Parent is eligible for such listing, or, if not so eligible, to another national securities exchange or market to list or quote the shares of Parent Common Stock to be issued in the Mergers and upon exercise or conversion of Western Power Stock Options and the E-Mobile Stock Options, and shall use all reasonable efforts to cause such shares to be approved for listing or quotation on the Nasdaq National Market or such other exchange or market, as the case may be, prior to the Effective Time, subject to official notice of issuance. 23 --------------------------------------------------------------------------------     SECTION 5.13.  Stock Plans.       (a) Immediately prior to the Effective Time, Western Power shall have no more than 585,000 Western Power Stock Options outstanding. At the Effective Time, each outstanding Western Power Stock Option under the Western Power Stock Plans and each outstanding E-Mobile Stock Option under the E-Mobile Stock Plans, in each case whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Western Power Stock Option or E-Mobile Stock Option, as the case may be the same number of shares of Parent Common Stock as the holder of such Western Power Stock Option or E-Mobile Stock Option, as the case may be, would have been entitled to receive pursuant to the Western Power Merger or the E-Mobile Merger, respectively, had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Western Power Common Stock or E-Mobile Common Stock, as the case may be, purchasable pursuant to such Western Power Stock Option or such E-Mobile Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such Western Power Stock Option or E-Mobile Stock Option, as the case may be, in accordance with the foregoing.     (b) As soon as practicable after the Effective Time, Parent shall deliver to the participants in the Western Power Stock Plans and the E-Mobile Stock Plans appropriate notice setting forth such participants' rights pursuant thereto and the grants pursuant to Western Power Stock Plans or E-Mobile Stock Plans, as the case may be, shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.13 after giving effect to the Mergers).     (c) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery under Western Power Stock Plans and E-Mobile Stock Plans assumed in accordance with this Section 5.13. As soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms), or another appropriate form with respect to the shares of Parent Common Stock subject to such options and shall use its best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding.     (d) The Board of Directors of each of Western Power and E-Mobile shall, prior to or as of the Effective Time, take all necessary actions, pursuant to and in accordance with the terms of the Western Power Stock Plans and the instruments evidencing the Western Power Stock Options, or the E-Mobile Stock Plans and the instruments evidencing the E-Mobile Stock Options, as the case may be, to provide for the conversion of the Western Power Stock Options and the E-Mobile Stock Options into options to acquire Parent Common Stock in accordance with this Section 5.13, and that no consent of the holders of the Western Power Stock Options or E-Mobile Stock Options is required in connection with such conversion.     (e) At the Effective Time, the Parent shall adopt the stock plan (the "Parent Stock Plan") substantially in the form attached hereto as Exhibit D, pursuant to which a reserve of shares shall be established for the grant of options in an amount equal to fifteen percent (15%) of the total shares outstanding at the Effective Time. The shares reserved for issuance pursuant to the Parent Stock Plan shall be in addition to Western Power Stock Options and E-Mobile Stock Options outstanding, and assumed by Parent, at the Effective Time.     SECTION 5.14.  Brokers or Finders.  Except for 600,000 shares which Western Power has agreed to issue to the Rubin Family Trust in connection with the transactions contemplated hereby, each of E-Mobile and Western Power represents, as to itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any 24 -------------------------------------------------------------------------------- broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. Each of E-Mobile and Western Power agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or any of its Affiliates.     SECTION 5.15.  Private Placements.       (a) As soon as practical after the date hereof, and in no event later than the Effective Date, E-Mobile shall complete a private placement of equity securities in a gross amount not less than $6,000,000 (the "Private Placement") from the sale of not more than 3,000,000 shares of E-Mobile Common Stock.     (b) In addition to the sale of shares pursuant to the Private Placement, E-Mobile shall have the right, but not the obligation, to offer and sell additional shares of E-Mobile Common Stock (the "Additional Placement"), as management of E-Mobile shall deem necessary to carry out its Business Plan, through the Effective Date.     SECTION 5.16.  Sale of Western Power Assets.  Subject to approval of the Western Power shareholders, at the Effective Time, Western Power shall sell (the "Western Power Asset Sale") to the "Management Purchasers" listed on Exhibit E, and the Management Purchasers shall purchase, substantially all of the assets of Western Power (other than cash held by Western Power) and the Management Purchasers shall assume all of the liabilities of Western Power in accordance with the terms of a "Asset Purchase and Sale Agreement" substantially in the form attached hereto as Exhibit F.     SECTION 5.17.  Post-Merger Parent Corporate Governance.       (a) At the Effective Time, the total number of persons serving on the Board of Directors of Parent shall be six (unless otherwise agreed in writing by Western Power and E-Mobile prior to the Effective Time), two of whom shall be Western Power Directors, four of whom shall be E-Mobile Directors (as such terms are defined below). The persons to serve initially on the Board of Directors of Parent at the Effective Time who are Western Power Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Western Power prior to the Effective Time; and the persons to serve initially on the Board of Directors of Parent at the Effective Time who are E-Mobile Directors shall be selected solely by and at the absolute discretion of the Board of Directors of E-Mobile prior to the Effective Time. The term "Western Power Director" means any person serving as a Director of Western Power or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and any successor director appointed or elected pursuant to Article III, Section 1 of the Bylaws of Parent; and the term "E-Mobile Director" means any person serving as a Director of E-Mobile or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and any successor director appointed or elected pursuant to Article III, Section 1 of the Bylaws of Parent.     (b) The officers of Parent at the Effective Time shall be selected by and at the absolute discretion of the Board of Directors of E-Mobile.     (c) Each of Western Power and E-Mobile shall take such action as shall reasonably be deemed by either thereof to be advisable to give effect to the provisions set forth in this Section 5.17, including without limitation incorporating such provisions in the Bylaws of Parent in effect at the Effective Time.     SECTION 5.18.  Confidentiality Agreements and Restrictive Covenants.  E-Mobile shall, at or prior to the Closing Date, enter into confidentiality agreements and restrictive covenants with all employees to protect the confidential nature of the technology and business plans and operations of E-Mobile. 25 --------------------------------------------------------------------------------     SECTION 5.19.  Lock-Up.       (a) For a period beginning on the date hereof and ending on the earlier of (i) ninety (90) days following the closing of an underwritten public offering of common stock by Parent, or (ii) twelve (12) months followingsix (6) months from the Effective Time, (the "Western Power Lock-Up Period"), eighty percent (80%) of the aggregate of (i) all shares of Western Power Common Stock held by officers, directors and 5% shareholders of Western Power, including shares underlying options or warrants held by the officers, directors and 5% shareholders of of Western Power, and (ii) all shares issuable to to the officers, directors and 5% shareholders of Western Power pursuant to the Merger, including shares underlying options or warrants held by officers, directors or shareholders of Western Power at the Effective Time, shall be subject to a lock-up agreement pursuant to which each such person agrees that he/she/it will not sell, hypothecate or otherwise transfer any such shares of Western Power Common Stock or Parent Common Stock (the "Western Power Lock-Up Obligation"). Notwithstanding anything herein to the contrary, the Western Power Lock-Up Obligation (x) shall not apply to any shares of Western Power Common Stock held by, or Parent Common Stock issued to, certain shareholders pursuant to the settlement of a law suit between those shareholders and American United Global, Inc. under which American United Global transferred 750,000 shares of Western Power Common Stock to the said shareholders, but (y) shall apply to 960,000 shares of Western Power Common Stock held by American United Global.     (b) For a period ending six (6) months from the Effective Time (the "E-Mobile Lock-Up Period"), eighty percent (80%) of all shares issuable to the officers, directors and five percent 5% shareholders of E-Mobile pursuant to the Merger (excluding shares issuable to persons or entities which become 5% shareholders pursuant to purchases of securities of E-Mobile, at a price of $5.00 per share or greater, in the Private Placement or Additional Placement described in Section 5.15 above), including shares underlying options or warrants held by officers, directors and 5% shareholders of E-Mobile at the Effective Time or granted to officers or directors of E-Mobile during the E-Mobile Lock-Up Period, shall be subject to a lock-up agreement pursuant to which each such person agrees that he/she/it will not sell, hypothecate or otherwise transfer any such shares of the Parent Common Stock (the "E-Mobile Lock-Up Obligation").     (c) In order to carry out the purposes of the Western Power Lock-Up Obligation and the E-Mobile Lock-Up Obligation (collectively, the "Lock-Up Obligation"), simultaneous with the execution hereof, each party subject to the Lock-Up Obligation will enter into a Lock-Up Agreement in the form attached hereto as Exhibit K, and all certificates evidencing shares of Parent Common Stock which are subject to the Lock-Up Obligation shall bear a legend prohibiting the sale of such shares during the Lock-Up Period without the prior written consent of the Parent. ARTICLE VI CONDITIONS TO MERGER     SECTION 6.1.  Conditions to Each Party's Obligation to Effect the Mergers.  The respective obligations of each party to this Agreement to effect the Mergers shall be subject to the satisfaction or waiver in writing by each of E-Mobile and Western Power prior to the Effective Time of the following conditions:     (a)  Stockholder Approval.  This Agreement, the Western Power Merger and the E-Mobile Merger shall have been approved in the manner required under the DGCL by the respective holders of the issued and outstanding shares of capital stock of Western Power and E-Mobile.     (b)  Approvals.  Other than the filing provided for by Section 1.4, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, 26 -------------------------------------------------------------------------------- any Governmental Entity the failure of which to file, obtain or occur is reasonably likely to have a Western Power Material Adverse Effect or a E-Mobile Material Adverse Effect shall have been filed, obtained or occurred.     (c)  Registration Statement.  The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order.     (d)  No Injunctions.  No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule, regulation which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers.     (e)  Consents Under Western Power Agreements.  Western Power shall have obtained the consent or approval of any person whose consent or approval shall be required under any agreement or instrument in order to permit the consummation of the transactions contemplated hereby, except those of which, if not obtained, would not, individually or in the aggregate, have (i) a Western Power Material Adverse Effect or (ii) a material adverse effect on the business, properties, financial condition or results of operations of Parent after the Merger (a "Parent Material Adverse Effect").     (f)  Consents Under E-Mobile Agreements.  E-Mobile shall have obtained the consent or approval of any person whose consent or approval shall be required under any agreement or instrument in order to permit the consummation of the transactions contemplated hereby, except those which, if not obtained, would not, individually or in the aggregate, have (i) a E-Mobile Material Adverse Effect or (ii) a Parent Material Adverse Effect.     (g)  Dissenters' Rights.  Holders of no more than 5% of the issued and outstanding shares of Western Power Common Stock shall have made the demands and given the notices required under Delaware law to assert dissenters' appraisal rights.     (h)  Completion of Sale of Western Power Assets.  The Western Power Asset Sale shall have been completed and the Secured Asset Purchase Note delivered in the manner set forth in Section 5.16 above.     SECTION 6.2.  Additional Conditions to Obligations of Western Power.  The obligation of Western Power to effect the Western Power Merger is subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by Western Power:     (a)  Representations and Warranties.  The representations and warranties of E-Mobile set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a E-Mobile Material Adverse Effect (without regard to any materiality limitations contained in any such representation or warranty), or a material adverse effect upon the consummation of the transactions contemplated hereby; and Western Power shall have received a certificate signed on behalf of E-Mobile by the chief executive officer and the chief financial officer of E-Mobile to such effect.     (b)  Performance of Obligations of E-Mobile.  E-Mobile shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Western Power shall have received a certificate signed on behalf of E-Mobile by the chief executive officer and the chief financial officer of E-Mobile to such effect. 27 --------------------------------------------------------------------------------     (c)  Tax Opinion.  Western Power shall have received the opinion of tax counsel to Western Power to the effect that, for Federal income tax purposes, the Western Power Merger will be treated as a transfer within the meaning of Section 351 of the Code (it being agreed that E-Mobile shall provide reasonable cooperation, including the delivery of such certifications as shall be reasonably requested, to tax counsel to Western Power to enable it to render such opinion).     (d)  Fairness Opinion.  The Board of Directors of Western Power shall have received an opinion of Capitalink, L.C. to the effect that the terms of the Mergers are fair to Western Power and its stockholders from a financial point of view.     (e)  Transaction Documents.  E-Mobile shall have executed each of the Transaction Documents to which it is a party, each of which shall be in full force and effect and legally binding against E-Mobile and no material breach by E-Mobile shall have occurred thereunder as of the Closing Date.     SECTION 6.3.  Additional Conditions to Obligations of E-Mobile.  The obligations of E-Mobile to effect the E-Mobile Merger are subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by E-Mobile:     (a)  Representations and Warranties.  The representations and warranties of Western Power set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a Western Power Material Adverse Effect (without regard to any materiality limitations contained in any such representation or warranty), or a material adverse effect upon the consummation of the transactions contemplated hereby; and E-Mobile shall have received a certificate signed on behalf of Western Power by the chief executive officer and the chief financial officer of Western Power to such effect.     (b)  Performance of Obligations of Western Power.  Western Power shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date; and E-Mobile shall have received a certificate signed on behalf of Western Power by the chief executive officer and the chief financial officer of Western Power to such effect.     (c)  Tax Opinion.  E-Mobile shall have received a written opinion from tax counsel to E-Mobile, to the effect that each of the Mergers will be treated for Federal income tax purposes as transfers within the meaning of Section 351 of the Code (it being agreed that Western Power shall provide reasonable cooperation, including the delivery of such certifications as shall be reasonably requested, to tax counsel to E-Mobile to enable it to render such opinion).     (d)  Transaction Documents.  Western Power shall have duly executed each of the Transaction Documents to which it is a party and such Transaction Documents shall be in full force and effect and legally binding against Western Power and no material breach by Western Power shall have occurred thereunder as of the Closing Date. 28 -------------------------------------------------------------------------------- ARTICLE VII TERMINATION AND AMENDMENT     SECTION 7.1.  Termination.  This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(g), by written notice by the terminating party to the other party), whether before or after approval of the matters presented in connection with the Mergers by the stockholders of Western Power or E-Mobile:     (a) by mutual written consent of Western Power and E-Mobile; or     (b); by either Western Power or E-Mobile if the Mergers shall not have been consummated by May 31, 2001 (the "Outside Date"); provided, however, that if the Mergers shall have not been consummated by the Outside Date, the Outside Date shall automatically be extended until July 31, 2001 (the "Extension Date") unless both parties object in writing to such extension; provided, further, however, that if the Mergers shall not have been consummated by the Extension Date as a result of any action taken, or failure to act, by any governmental or regulatory authority including, but not limited to, the withholding of, or a delay in, any approval in connection with any aspect of the transactions which are the subject of this Agreement, then the Extension Date shall automatically be extended until a date which is a reasonable time subsequent to the date upon which such governmental or regulatory action is resolved which will allow the parties to complete the procedures required to consummate the transactions which are the subject of this Agreement; and provided, further, however, that the right to terminate this Agreement pursuant to this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation pursuant to this Agreement has been the cause of or resulted in the failure of the Mergers to occur on or before such date; or     (c) by either Western Power or E-Mobile if a court of competent jurisdiction or other Governmental Entity shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers; or     (d) (i) by Western Power, if, at the E-Mobile Stockholders' Meeting (including any adjournment or postponement thereof), the requisite vote of the stockholders of E-Mobile in favor of the approval and adoption of this Agreement and the E-Mobile Merger shall not have been obtained; or (ii) by E-Mobile if, at the Western Power Stockholders' Meeting (including any adjournment or postponement thereof), the requisite vote of the stockholders of Western Power in favor of the approval and adoption of this Agreement and the Western Power Merger shall not have been obtained; or     (e) by Western Power or E-Mobile, if there has been a breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this Agreement, which breach (i) will cause the conditions set forth in Section 6.2(a) or (b) (in the case of termination by Western Power) or 6.3(a) or (b) (in the case of termination by E-Mobile) not to be satisfied, and (ii) shall not have been cured within 20 business days following receipt by the breaching party of written notice of such breach from the other party.     SECTION 7.2.  Effect of Termination.  In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Western Power, E-Mobile, Parent or their respective officers, directors, stockholders or Affiliates, except as set forth in Sections 7.3 and 8.3 and except that such termination shall not limit liability for a willful breach of this Agreement; provided that, the provisions of Sections 7.3 and 8.3 of this Agreement shall remain in full force and effect and survive any termination of this Agreement. 29 --------------------------------------------------------------------------------     SECTION 7.3.  Fees and Expenses.  Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, if the Mergers are not consummated; provided, however, that if the Mergers are consummated, then, after the effective date, Western Power shall pay for all fees and expenses incurred by E-Mobile in connection with the Mergers and the transactions contemplated hereunder.     SECTION 7.4.  Amendment.  This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of Western Power or E-Mobile, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto; provided, however, that this Agreement may be amended in writing without obtaining the signatures of Western Power, E-Mobile or Parent solely for the purpose of adding Merger Sub 1 and Merger Sub 2 as parties to this Agreement.     SECTION 7.5.  Extension; Waiver.  At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions of the other parties hereto contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII. MISCELLANEOUS     SECTION 8.1.  Survival of Representations, Warranties and Agreements.  All representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time.     SECTION 8.2.  Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given if telecopied (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a)  if to Western Power, to Western Power & Equipment Corp. 4601 N.E. 77th Avenue, Suite 200 Vancouver, Washington 98662 Attention: Telecopy: with a copy to Mintz & Fraade, P.C. 488 Madison Avenue New York, New York 10022 Attention: Frederick Mintz, Esq. Telecopy: (212) 486-0701 30 -------------------------------------------------------------------------------- (b)  if to E-Mobile, to E-Mobile, Inc. c/o Michael Sanders, Esq. Vanderkam & Sanders 440 Louisiana Street, Suite 475 Houston, Texas 77002 Telecopy: (713) 54708910 with copies to: Vanderkam & Sanders 440 Louisiana Street, Suite 475 Houston, Texas 77002 Attention: Michael Sanders, Esq. Telecopy (713) 547-8910 Berkman-Wechsler Law Offices 6 Wissotzky Street Tel Aviv, 62338, Israel Attention: Ofira Gordon Telecopy: 011-972-3-604-5775     SECTION 8.3.  Indemnification.       (a)  Indemnification by E-Mobile.  In order to induce Western Power to enter into and perform this Agreement, E-Mobile does hereby indemnify, protect, defend and save and hold harmless Western Power and each of its shareholders, affiliates, officers, directors, control persons, employees, attorneys, agents, partners and trustees and personal representatives of any of the foregoing ("Indemnified Parties"), from and against any loss resulting to any of them from:      (i) Any material loss, liability, cost, damage, or expense which the Indemnified Parties may suffer, sustain or incur arising out of or due to a breach by E-Mobile of any covenant, representation or warranty made in this Agreement.     (ii) Without in any manner limiting the indemnification under this Section 8.3 of this Agreement, E-Mobile shall also indemnify and save harmless each of the Indemnified Parties from any and all damages, losses, settlement, obligations, liabilities, claims, actions or causes of actions, encumbrances, fines, penalties, and costs and expenses suffered, sustained, incurred or required to be paid by any Indemnified Party (including without limitation, fees and disbursements of attorneys, engineers, laboratories, contractors and consultants) because of, or arising out of or relating to any "Environmental Liabilities" (as defined below) in connection with E-Mobile and/or activities of E-Mobile, including, but not limited to, any land, building facilities and improvements owned or in any manner used by E-Mobile or in connection with E-Mobile and activities which occurred or arise out of an act, transaction or occurrence prior to the execution of this Agreement. For purposes of the indemnification set forth in this Section 8.3 of this Agreement, "Environmental Liabilities" shall include the cost and liabilities with respect to the presence, removal, utilization, generation, storage, transportation, disposal or treatment of any hazardous materials or any release, spill, leak, pumping, pouring, emitting, emptying, discharge, injection, escaping, leaching, dumping or disposing into the environment (air, land or water) of any Hazardous Materials, as defined under applicable state and federal environmental laws (each a "Hazardous Materials Release") including, without limitation, cleanups, remedial and response actions, remedial investigations and feasibility studies, permits 31 -------------------------------------------------------------------------------- and licenses required by or undertaken in order to comply with the requirements of, any federal, state or local law, regulation agency or court, any damages for injury to person, property or natural resources, claims of governmental agencies or third parties for cleanup costs and costs of removal, discharge and satisfaction of all liens, encumbrances and restrictions of the real property, buildings and improvements owned by or used by E-Mobile relating to the foregoing. Hazardous Materials Release shall also include by means of any contamination, leaking, corrosion or rupture of or from underground or above ground storage tanks, pipes or pipelines.     (iii) The indemnification, which is set forth in this Section 8.3 of this Agreement shall be deemed to include not only the specific liabilities or obligation with respect to which such indemnity is provided, but also all reasonable costs, expenses, counsel fees, and expenses of settlement relating thereto, whether or not any such liability or obligation shall have been reduced to judgment.     (b)  Indemnification by Western Power.  In order to induce E-Mobile to enter into and perform this Agreement, Western Power does hereby indemnify, protect, defend and save and hold harmless E-Mobile and each of its shareholders, affiliates, officers, directors, control persons, employees, attorneys, agents, partners and trustees and personal representatives of any of the foregoing ("Indemnified Parties"), from and against any loss resulting to any of them from:      (i) Any material loss, liability, cost, damage, or expense which E-Mobile may suffer, sustain or incur arising out of or due to a breach by Western Power of any covenant, representation or warranty made in this Agreement.     (ii) Without in any manner limiting the indemnification under this Section 8.3 of this Agreement, Western Power shall also indemnify and save harmless each of the Indemnified Parties from any and all damages, losses, settlement, obligations, liabilities, claims, actions or causes of actions, encumbrances, fines, penalties, and costs and expenses suffered, sustained, incurred or required to be paid by any Indemnified Party (including without limitation, fees and disbursements of attorneys, engineers, laboratories, contractors and consultants) because of, or arising out of or relating to any Environmental Liabilities in connection with Western Power and/or activities of Western Power, including, but not limited to, any land, building facilities and improvements owned or in any manner used by Western Power or in connection with Western Power and activities which occurred or arise out of an act, transaction or occurrence prior to the execution of this Agreement. For purposes of the indemnification set forth in this Section 8.3 of this Agreement, "Environmental Liabilities" shall include the cost and liabilities with respect to the presence, removal, utilization, generation, storage, transportation, disposal or treatment of any hazardous materials or any release, spill, leak, pumping, pouring, emitting, emptying, discharge, injection, escaping, leaching, dumping or disposing into the environment (air, land or water) of any Hazardous Materials (each a "Hazardous Materials Release") including, without limitation, cleanups, remedial and response actions, remedial investigations and feasibility studies, permits and licenses required by or undertaken in order to comply with the requirements of, any federal, state or local law, regulation agency or court, any damages for injury to person, property or natural resources, claims of governmental agencies or third parties for cleanup costs and costs of removal, discharge and satisfaction of all liens, encumbrances and restrictions of the real property, buildings and improvements owned by or used by Western Power relating to the foregoing. Hazardous Materials Release shall also include by means of any contamination, leaking, corrosion or rupture of or from underground or above ground storage tanks, pipes or pipelines. 32 --------------------------------------------------------------------------------     (iii) The indemnification, which is set forth in this Section 8.3 of this Agreement shall be deemed to include not only the specific liabilities or obligation with respect to which such indemnity is provided, but also all reasonable costs, expenses, counsel fees, and expenses of settlement relating thereto, whether or not any such liability or obligation shall have been reduced to judgment.     (c)  Third Party Claims.  If any demand, claim, action or cause of action, suit, proceeding or investigation is brought against an Indemnified Party for which the Indemnified Party intends to seek indemnity from the other party hereto (the "Indemnifying Party"), then the Indemnified Party within twenty-one (21) days following such Indemnified Party's receipt of such demand or claim, shall notify the Indemnifying Party which notice shall contain a reasonably thorough description of the nature and amount of the claim of indemnification (the "Claim Notice"). The Indemnifying Party shall have ten (10) days from receipt of the Claim Notice sent pursuant to Section 8.2 of this Agreement to exercise its option to undertake, conduct and control the defense of such claim or demand. Such option to undertake, conduct and control the defense of such claim or demand shall be exercised by notifying the Indemnified Party pursuant to Section 8.2 of this Agreement within such ten (10) day period. The failure of the Indemnified Party to notify the Indemnifying Party of any such demand, claim, action or cause of action, suit, proceeding or investigation shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have under this Section 8.3 of this Agreement except to the extent such failure to notify the Indemnifying Party prejudices the Indemnifying Party. The Indemnified Party shall use all reasonable efforts to assist in the vigorous defense of such matters. All costs and expenses incurred by the Indemnified Party in defending such third party claims shall be paid by the Indemnifying Party. If the Indemnified Party desires to participate in any such defense or settlement, it may do so at its sole cost and expense (it being understood that the Indemnifying Party shall be entitled to control the defense). The Indemnified Party shall not settle any such claim. If the Indemnifying Party does not elect to control the defense of any such claim or demand, the Indemnified Party shall be entitled to undertake, conduct and control the defense of such claim or demand; provided that the Indemnifying Party shall be entitled, if it so desires, to participate therein (it being understood that in such circumstances, the Indemnified Party shall be entitled to control the defense). Regardless of which party has undertaken to defend any claim, the Indemnifying Party may not without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any such claim or demand; provided however, that if any settlement would result in the imposition of a consent order, injunction or decree which would restrict the future activity or conduct of the Indemnified Party, the consent of the Indemnified Party shall be a condition to any such settlement. Notwithstanding the foregoing provisions of this Section 8.3 of this Agreement, as a condition to the Indemnifying Party either having the right to defend the subject claim, or having control over settlement as indicated in the immediately proceeding sentence, the Indemnifying Party shall execute an agreement in the form which is annexed hereto as Exhibit J, acknowledging its liability for indemnification pursuant to Section 8.3 of this Agreement. Whether the Indemnifying Party shall control and assume the defense of such claim or demand or only participate in the defense or settlement of any such claim or demand, the Indemnified Party shall give the Indemnifying Party and its counsel access, during normal business hours, to the relevant business records and other documents, and shall permit them to consult with the employees and counsel of the Indemnified Party.     (d)  General.  Nothing which is contained in Section 8.3 of this Agreement shall be construed as liquidated damages for any breach under this Agreement. In addition, there is no obligation to elect any remedy which is set forth in this Section 8.3 of this Agreement; moreover, resort to such remedy shall not be construed to be a waiver of any other rights or remedies for damages or otherwise. 33 --------------------------------------------------------------------------------     SECTION 8.4.  Interpretation.  When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement", "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to November 1, 2000.     SECTION 8.5.  Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.     SECTION 8.6.  Entire Agreement; No Third Party Beneficiaries.  This Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) except as provided in Section 8.3, are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Each party hereto agrees that, except for the representations and warranties contained in this Agreement, neither Western Power nor E-Mobile makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other's representatives of any documentation or other information with respect to any one or more of the foregoing.     SECTION 8.7.  Governing Law.  This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable conflicts of law.     SECTION 8.8.  Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.     IN WITNESS WHEREOF, Western Power, E-Mobile and Parent have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. WESTERN POWER & EQUIPMENT CORP.   E-MOBILE, INC.   By:   /s/ CHARLES DEAN MCLAIN    -------------------------------------------------------------------------------- Its: Chairman of the Board and Chief Executive Officer       By:   /s/ NECHEMIA DAVIDSON     -------------------------------------------------------------------------------- Its: Chairman of the Board of Directors               E-MOBILE HOLDINGS, INC.               By:   /s/ NECHEMIA DAVIDSON     -------------------------------------------------------------------------------- Its: Chairman of the Board of Directors 34 -------------------------------------------------------------------------------- QUICKLINKS TABLE OF CONTENTS EXHIBITS TABLE OF DEFINED TERMS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER ARTICLE I. THE MERGERS ARTICLE II. CONVERSION OF SECURITIES ARTICLE III. REPRESENTATIONS AND WARRANTIES OF WESTERN POWER ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF E-MOBILE ARTICLE V COVENANTS ARTICLE VI CONDITIONS TO MERGER ARTICLE VII TERMINATION AND AMENDMENT ARTICLE VIII. MISCELLANEOUS

> EXHIBIT 10 > > AGREEMENT > >   > >           This Agreement (this "Agreement") dated as of the 30th day of > October 2000, is by and between Harris Corporation ("Harris") and Teltronics, > Inc. ("Teltronics "). > > > >   > > RECITALS > > > >           WHEREAS, Harris and Teltronics are parties to that certain Asset > Sale Agreement made as of the 30th day of June 2000 (the "Asset Sale > Agreement"); and > > > >           WHEREAS, Teltronics executed and delivered to Harris on June 30, > 2000, a Secured Promissory Note, originally issued in the principal amount of > $6,884,355.29 and as amended on August 17, 2000 ("Harris Promissory Note") > pursuant to the terms of the Asset Sale Agreement; and > > > >           WHEREAS, as of the date hereof, Teltronics and Harris desire to > amend the Promissory Note; and > > > >           WHEREAS, pursuant to the Asset Sale Agreement the contract between > Harris and Board of Education of the City School District of New York ("NYCBOE > Contract") has been subcontracted to Teltronics (the "Subcontract"); and > > > >           WHEREAS, Harris has received payment under the NYCBOE Contract and > Harris and Teltronics desire to allocate such monies received by Harris under > the NYCBOE Contract; and > > > >           WHEREAS, the parties have agreed to modify the Asset Sale Agreement > and the Harris Promissory Note and desire to set forth such modifications to > both as set forth in this Agreement. > > > >           NOW, THEREFORE, for and in consideration of the covenants set forth > herein and for other good and valuable consideration the receipt and > sufficiency of which is hereby acknowledged, the parties hereto, intending to > be legally bound, hereby agree as follows: > > > > 1.     Amendment to Terms of Harris Promissory Note > > . Harris and Teltronics have agreed to extend the due date of the Harris > Promissory Note to December 31, 2000, and to make other modifications to the > provisions and undertakings contained in the Harris Promissory Note. Harris > and Teltronics agree to make such changes by amending and restating the Harris > Promissory Note as set forth in Exhibit A, attached hereto. > > > > > > > 1 > > > 2.     Amendments to Asset Sale Agreement > > . > > > >      (a)     401K Plan. Harris and Teltronics have agreed to amend the Asset > Sale Agreement, specifically Article 9, Section 9.6 Employees and Employee > Benefit Plans , to eliminate the asset transfer and in its place grant full > vesting to the employees affected by the sale and to make other changes to > Section 9.6, as set forth in the form of First Amendment to Asset Sale > Agreement attached as Exhibit B hereto. > > > >       > > (b)     Representations and Warrants. The parties hereto agree to amend the > Asset Sale Agreement as follows: (i) Section 13.2 Survival of Representation > and Warranties; and Contracts to modify the termination of the survival of > certain representations and warranties of Harris to December 1, 2000, from > "nine months," and (ii) Section 11.1(a) and (b) to clarify that following > December 1, 2000, "Buyers Damages" shall no longer include claims for any > misrepresentation by the Seller in the Asset Sale Agreement. Such amendments > shall be as set forth in Exhibit B, attached hereto. > > > > > > 3.     Allocation of Payment Received > > . The parties agree that Harris' receipt of check number 40685 from NYCBOE in > the amount EIGHT MILLION FIVE HUNDRED NINETY-NINE THOUSAND FORTY-TWO DOLLARS > AND EIGHTY CENTS ($8,599,042.80) is allocated to Harris and Teltronics as > follows: Harris Six Million Five Hundred Ninety-Nine Thousand Forty-Two > Dollars and Eighty Cents ($6,559,042.80) and Teltronics Two Million Dollars > ($2,000,000). As of the date herein, Teltronics hereby acknowledges receipt of > the Two Million Dollars ($2,000,000) under NYCBOE Contract for their > performance to-date of the Subcontract, specifically, retrofit tasks. > Furthermore, Teltronics acknowledges that ONE MILLION DOLLARS ($1,000,000) has > been paid in cash to Teltronics and ONE MILLION DOLLARS ($1,000,000) has been > or will be applied to satisfy the outstanding obligations owed by Teltronics > to Harris, as identified in Exhibit 1 attached hereto. > > > > > > 4.     40/60% Split > > . (a) In accordance with the Asset Sale Agreement, the parties hereto > acknowledge and agree that any and all monies received in respect of Phase I > of the NYCBOE Contract for the Retrofit Project and for Maintenance and MAC > Services subsequent to the payment referenced in Section 3 shall first be > applied to monies owed Harris for work or services performed or products > provided under or in respect of the NYCBOE Contract. For purposes hereof "Net > Receipts" shall mean all proceeds payable to Teltronics under the NYCBOE > Contract in respect of Phase I of the NYCBOE Contract for the Retrofit Project > and for Maintenance and MAC Services, reduced by any and all monies which are > paid to Harris in respect of products and services to support the NYCBOE > Contract. > > > > > >      (b)     Teltronics acknowledges and agrees that the Net Receipts of any > and all monies received by Teltronics, either from Harris or NYCBOE, under the > Subcontract shall be allocated as follows: > > > >           (i)     Forty percent (40%) of the Net Receipts shall be payable to > Harris and applied in the following order. (a) First to satisfy any and all > outstanding payment > > > 2 > > > > obligations Teltronics may and Harris agree are owed to; (b) then to satisfy > Harris Promissory Note. > > > >           (ii)     Sixty percent (60%) of the Net Receipts shall be payable to > or retained by Teltronics. > > > > 5.     Performance Bond Requirements > > . (a) If and to the extent Harris provides a Performance Bond to NYCBOE after > assignment of the NYCBOE Contract to Teltronics, then within ten (10) days > following Harris delivery of a Performance Bond to NYCBOE, Teltronics shall > use its best efforts to deliver to Harris a Performance Bond payable to Harris > as security for Teltronics' full and faithful performance under the NYCBOE > Contract for 50% of the amount and in the same form as that which Harris > submits to NYCBOE. > > > > > >      (b)     If and to the extent Harris provides a Performance Bond to > NYCBOE, then Teltronics shall indemnify, defend and hold Harris harmless from > and against every loss, cost, damage, expense, claim, or demand (including > attorneys' fees and court costs in connection therewith) with respect to any > and all damages alleged, assessed, or incurred by Harris (whether in contract, > tort, or strict liability) resulting from any or otherwise arising out of or > in any way connected to either with the failure of completion of the NYCBOE > Contract, any default thereunder or the calling or redemption by NYCBOE of all > or a portion Harris' performance bond. > > > >      (c)     Teltronics further agrees that, throughout the term of NYCBOE > Contract, Teltronics shall maintain or cause to be maintained the insurance > requirement called out in NYCBOE Contract naming Harris as an additional > insured. > > > > 6.     No Other Changes > > . Neither party to this Agreement intends to release the other parties from > the other obligations set forth in the Asset Sale Agreement or in the other > Transaction Agreements. Additionally, except as set forth herein, neither > party intends to release the other from any breach of a representation, > warranty, or covenant set forth in the Asset Sale Agreement, or any other > Transaction Agreement or any other matter which would otherwise require > indemnification of one party by the other under the Asset Sale Agreement, or > any other Transaction Agreement. > > > > > > 7.     Miscellaneous > > . > > > > > >      7.1     No Third-Party Beneficiary. > > Nothing in this Agreement expressed or implied is intended or shall be > construed upon or given to any person, other than the parties hereto, any > rights or remedies under or by reason of this Agreement. > > > > > >      7.2     Severability; No Waiver. > > If any term or provision of this Agreement or the application thereof to any > person or circumstances shall, to any extent, be invalid or unenforceable, the > remainder of this Agreement or the application of such term or provision to > persons or circumstances other than those as to which it is held invalid or > unenforceable shall not be affected thereby, and each term and provision of > this Agreement shall be valid > > > > > > 3 > > > > > and enforceable to the extent permitted by law. No course of dealing between > any of the parties hereto and no delay or failure in exercising any rights > hereunder shall operate as a waiver of or otherwise prejudice any rights of a > party hereunder except as expressly contemplated by the terms of this > agreement. > > > >      7.3     Successors and Assigns. > > The provisions hereof shall inure to the benefit of and be binding upon the > parties hereto and their respective successors, heirs, executors, > administrators, and permitted assigns. This Agreement may not be assigned by a > party without the prior written consent of the other parties. > > > > > >      7.4     GOVERNING LAW. > > THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS > OF THE STATE OF FLORIDA. > > > > > >      7.5     Entire Agreement; Amendment; Waivers. > > This Agreement, the attachments hereto, the Asset Sale Agreement, and the > other Transaction Documents constitute the entire agreement between the > parties with respect to the subject matter hereof and supersedes any prior > oral or written agreement, representations, promises or course of dealings. > Neither this Agreement nor any of the terms hereof may be terminated, amended > or waived orally, but only by an instrument in writing executed by the parties > hereto. > > > > > >      7.6     Construction. > > Except where specifically defined in this Agreement all capitalized terms used > in this Agreement shall have the same meaning as set forth in the Asset Sale > Agreement. > > > >   > >   > > [INTENTIONALLY LEFT BLANK] > > > > > 4 > > > >      7.7     Counterparts. This Agreement may be executed in two or more > counterparts, each of which shall be deemed an original, but all of which > together shall constitute one and the same instrument. > > > >   > >      IN WITNESS WHEREOF, the parties have caused this Agreement to be duly > executed as of the date first set forth above. > > > > HARRIS CORPORATION TELTRONICS, INC. > > By: > > /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > > > By: > > /s/ Ewen R. Cameron > > -------------------------------------------------------------------------------- > > Name: Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name: Ewen R. Cameron > > -------------------------------------------------------------------------------- > > Title: President - Network Support Div. > > -------------------------------------------------------------------------------- > > Title: President & CEO > > -------------------------------------------------------------------------------- > > > > > > > 5 > > > > EXHIBIT 1 > > > >   > >      Harris' receipt of the ONE MILLION DOLLARS ($1,000,000) from Teltronics > as referenced in Section 3 has or will be applied by Harris as follows in > satisfaction of the following outstanding obligations owed by Teltronics to > Harris. > > > >   Item Amount > > Ernst & Young > > $300,000.00   COBRA and Benefit Program >     July 1 through October 31 > $99,379.70   DOC Stamps $24,095.24   Whitestone Lease $32,959.50   New York > Lease $45,819.00   New York Parking $929.85   New York Porter $2,190.00   > Material (July) $494,626.71* > > > > > > > Note - This Exhibit is not intended to list all outstanding payment > obligations owed by Teltronics to Harris. > > > > *The total invoices is for $1,070,782.91 and covers inventory received by > Teltronics. Teltronics acknowledges that at least this amount of inventory was > received but is reviewing the inventory to verify the total figure. > > > > 6 > > > > EXHIBIT A > > > > AMENDED AND RESTATED > > SECURED PROMISSORY NOTE > > > >   > >   > > $7,096,622.91 Originally Dated:          June 30, 2000 > Restated As Of:       October 4, 2000 > >   > >      FOR VALUE RECEIVED, the undersigned TELTRONICS, INC., a Delaware > corporation ("Maker") hereby promises to pay to HARRIS CORPORATION or order > ("Payee"), at 1025 West NASA Boulevard, Melbourne, Florida 32919, or at such > other address as Payee may from time to time designate to Maker in writing, > the principal sum of SEVEN MILLION NINETY-SIX THOUSAND SIX HUNDRED TWENTY-TWO > DOLLARS AND NINETY-ONE CENTS ($7,096,622.91), in lawful money of the United > States of America which, at the time of payment, shall be legal tender for the > payment of all debts, public and private together with interest at the rate of > ten and one-half percent (10.5%) per annum computed on the basis of a 360-day > year. > > > >      This Amended and Restated Secured Promissory Note is given as an > amendment, extension, and restatement of the Secured Promissory Note dated > June 30, 2000 in the original principal amount of $6,884,355.29. As of the > restated as of date, there is $212,267.62 of accrued interest due under the > Note. In lieu of payment of such amounts on the date hereof, the Payee has > agreed to permit the Maker to add such amount as, and to become principal of > this Note and to hereafter bear interest. > > > >      1.     Payment of Principal and Interest. (a)     Interest on this Note > shall be payable in arrears commencing on November 1, 2000, at the applicable > rate per annum described herein and shall be payable on the first day of each > month until the entire unpaid principal balance on this Note is paid in full. > > > >           (b)     The entire unpaid principal balance on this Note, together > with all accrued and unpaid interest or other sums due hereunder, shall be due > and payable on December 31, 2000, if not sooner paid or declared to be due or > required to be prepaid as set forth below. > > > >           (c)     If any day for payment of principal of, or interest on, this > Note shall be a day other than a business day, such payment shall be made on > the next succeeding business day. > > > >           (d)     All payments hereunder shall be applied first to all fees, > expenses and other amounts (exclusive of principal and interest) then due > hereunder, next to interest, then due and the balance to the principal then > due. > > > >           (e)     The Maker shall not be obligated to pay and Payee shall not > collect interest at a rate in excess of the maximum permitted by law or the > maximum that will not subject the Payee to any civil or criminal penalties. If > because of the acceleration of maturity, the payment > > > > 1 > > > of interest in advance or any other reason, the Maker is required, under the > provisions of this Note, to pay interest at a rate in excess of such maximum > rate, the rate of interest under such provisions shall immediately and > automatically be reduced to such maximum rate, and any payment made in excess > of such maximum rate together with interest thereon at the rate provided > herein from the date of such payment, shall be immediately and automatically > applied to the payment of expenses owing to the Payee and then to the > reduction of the unpaid principal balance of this Note as of the date on which > such excess payment was made. If the amount to be so applied to reduction of > the unpaid principal balance exceeds the unpaid principal balance, the amount > of such excess shall be refunded by the payee to the Maker. > > > >      2.     Prepayment of Principal. > > > >           (a)     Required Prepayment. Notwithstanding any other provision of > this Note, the Maker shall be required to prepay an amount equal to the net > proceeds from any sale of debt or equity securities of Maker after the date > hereof. Such prepayment(s) shall be required to be made within five (5) days > after each such sale. The Payee shall have the right to require that this Note > be prepaid in full (i) upon the sale, transfer or other disposition by Maker > of all or substantially all of its property, assets or business or (ii) upon > any merger, reorganization or consolidation in which Maker is not the > resulting or surviving entity or (iii) upon any merger, reorganization, sale > of stock or other similar event pursuant to which the current owners of the > stock of Maker cease to own less than fifty (50%) percent of the voting stock > of Maker. > > > >           (b)     Optional Prepayment. Provided that maker has paid all > amounts owing to Payee in respect of the services rendered and products sold, > or other, under any other contracts or arrangements between Maker and Payee, > including in respect of the Board of Education of the City School District of > New York, Maker may prepay principal of this Note in whole or in part at any > time without penalty or premium together with accrued interest on the amount > prepaid from the date hereof to the date of the prepayment and the payment of > all other fees, expenses and sums due and owing hereunder. Nothing in this > paragraph (b) shall alter, amend or modify the requirement that Maker pay this > Note in full on December 31, 2000, to the extent it has not prior to such date > been paid in full. > > > >      3.     Late Charges; Default Interest. After maturity (whether by > acceleration, required prepayment or otherwise) of this Note or after the > occurrence of an Event of Default with respect to any payment of principal or > interest due on this Note, this Note shall bear interest, payable on demand, > at a rate of twelve and one-half (12.5%) percent per annum, but not in excess > of the maximum rate allowed by law. > > > >      4.     Security. This Note is secured by and entitled to the benefit of a > Security Agreement of Maker to Payee (the "Security Agreement"). > > > >      5.     Affirmative Covenants. So long as this Note shall remain unpaid, > Maker shall, unless waived by the advance written consent of the Payee: > > > >           (a)     Legal Existence. Maintain its existence in good standing in > the jurisdiction of Delaware, and operate its business in the ordinary course. > > > > > > 2 > > >           (b)     Taxes. Pay and discharge when due all taxes, upon or with > respect to Maker and upon the income, profits and property of Maker. > > > >           (c)     Insurance. Maintain insurance with financially sound > insurance carriers on such of its property, against such risks, and in such > amounts as is customarily maintained by similar businesses of similar size. > > > >           (d)     Condition of Property. At all times, maintain, protect and > keep its assets, equipment and all other property in good order and condition > (ordinary wear and tear excepted). > > > >           (e)     Observance of Legal Requirements. Observe and comply in all > respects with all laws, ordinances, orders, judgments, rules, regulations, > certifications, franchises, permits, licenses, directions and requirements of > all governmental bodies, which now or at any time hereafter may be applicable > to Maker. > > > >           (f)     Inspection. Upon the occurrence of an Event of Default > hereunder, or an event which, with notice or lapse of time, or both, would > constitute an Event of Default, permit representatives of Payee at all > reasonable times during normal business hours, upon prior notice to Maker, to > visit the offices of Maker, to examine the books and records of the Maker and > accountants' reports relating thereto, and to make copies or extracts > therefrom, and to discuss the affairs of Maker with the officers thereto, and > to examine and inspect the property of Maker, provided that in all such events > Payee shall use reasonable efforts to avoid or minimize any interference with > the operations of the business of Maker. > > > >      6.     Events of Default. Any of the following events shall constitute an > "Event of Default" under this Note: > > > >           (a)     A failure by Maker to pay any installment of principal of, > interest on or any other sum due under, this Note, within three (3) days after > it shall become due; or > > > >           (b)     A default by Maker in the performance of any covenant > contained herein or in the Security Agreement and such default shall continue > for ten (10) days; or > > > >           (c)     A proceeding shall have been instituted by or against Maker > or any of its Affiliates (i) seeking to have an order for relief entered in > respect of it or seeking a declaration or entailing a finding that the Maker > or any of its Affiliates is insolvent or a similar declaration or finding, or > seeking dissolution, winding-up charter revocation or forfeiture, liquidation, > reorganization, arrangement, adjustment, composition or other similar relief > with respect to Maker or any Affiliate or its or their assets or debts under > any applicable federal or state law relating to bankruptcy, insolvency, relief > of debtors or protection of creditors, termination of legal status or any > other similar law now or hereafter in effect, or (ii) seeking appointment of a > receiver, trustee, custodian, liquidator, assignee, sequestrator or other > similar official for Maker or any of its Affiliates, or for all or any > substantial part of its properties, and, in the case of clause (i) or (ii), if > against Maker, such proceeding shall remain undismissed and unstayed, or an > order or decree approving or ordering any of the foregoing shall be entered > and continued unstayed > > > > 3 > > > and in effect, for a period of thirty (30) consecutive days (for purposes > hereof, "Affiliate" means any person or entity which directly or indirectly > controls the Maker or is controlled by the Maker); or > > > >           (d)     Any one of Maker or its Affiliates shall become insolvent, > shall become generally unable to pay its debts as they become due, shall > voluntarily suspend transaction of its businesses, shall make a general > assignment for the benefit of creditors, or shall dissolve, wind-up or > liquidate any substantial part of its properties, or shall take any corporate > action in furtherance of any of the foregoing; or > > > >           (e)     One or more judgments for the payment of money or attachment > against any of its properties shall have been entered against Maker which > judgment(s) or attachment(s) in the aggregate exceeds $50,000.00; or > > > >           (f)     Maker (i) fails to pay when due any amount owed with respect > to any indebtedness for borrowed money or (ii) defaults in the performance of > any of the terms governing any such indebtedness and as a consequence thereof, > such indebtedness shall have become or been declared to be due prior to its > stated maturity. > > > >      7.     Remedies. At any time after occurrence and during the continuance > of an Event of Default, Payee may, at its option and without notice or demand, > do any one or more of the following: > > > >           (a)     Declare the entire unpaid principal balance of this Note, > together with interest accrued thereon if any, and all other sums due from > Maker hereunder, to be immediately due and payable; or > > > >           (b)     Exercise any other right or remedy as may be provided in > this Note, the Security Agreement or as otherwise provided at law or in equity > or otherwise. > > > >      8.     Costs and Attorney's Fees. In any suit, action or proceeding for > the collection of this Note or to enforce any of Payee's rights hereunder, > Payee may recover all reasonable and actual costs of and other expenses in > connection with the suit, action or proceeding, including attorney fees and > disbursements, paid or incurred by Payee, together with any and all other > amounts provided by law. Maker also agrees to pay any recording, stamp, or > other taxes or fees relating to this Note or the Security Agreement. > > > >      9.     Remedies Cumulative. The rights and remedies provided to Payee in > this Note and the Security Agreement (a) are not exclusive and are in addition > to any other rights and remedies Payee may have at law or in equity, (b) shall > be cumulative and concurrent, (c) may be pursued singly, successively or > together against Maker, at the sole discretion of Payee, and (d) may be > exercised as often as occasion therefor shall arise. The failure to exercise > or delay in exercising any such right or remedy shall not be construed as a > waiver or release thereof. > > > >      10.     Waivers and Agreements. Maker and all endorsers, sureties and > guarantors, jointly and severally: (a) waive presentment for payment, demand, > notice of demand, notice of > > > > 4 > > > nonpayment or dishonor, protest and notice of protest of this Note, and all > other notices (not expressly provided for in this Note) in connection with the > delivery, acceptance, performance, default, or enforcement of the payment of > this Note; and (b) agree that the liability of each of them shall be > unconditional without regard to the liability of any other party and with > respect to any such endorser, surety or guarantor, shall not be affected in > any manner by any indulgence, extension of time, renewal, waiver or > modification granted or consented to by Payee at any time; such endorsers, > sureties and guarantors, jointly or severally, further (c) consent to any and > all indulgences, extensions of time, renewals, waivers or modifications > granted or consented to by Payee at any time; and (d) agree that additional > makers, endorsers, guarantors or sureties may become parties to this Note > without notice to them or affecting their liability under this Note. > > > >      11.     Payee's Waivers. Payee shall not be deemed, by any act or > omission or commission, to have waived any of its rights or remedies hereunder > unless such waiver is in writing and signed by Payee. Such a written waiver > signed by Payee shall waive Payee's rights and remedies only to the extent > specifically stated in such written waiver. A waiver as to one or more > particular events of defaults shall not be construed as continuing or as a bar > to or waiver of any right or remedy as to another or subsequent event or > default. > > > >      12.     Miscellaneous. > > > >           (a)     Successors and Assigns. The words "Payee" and "Maker" shall > include the respective distributees, successors and permitted assigns of Payee > and Maker, respectively. The provisions of this Note shall bind and inure to > the benefit of Payee and Maker and their respective distributees, successors > and assigns. Notwithstanding the foregoing, Maker shall have no right to > distribute, assign, delegate, or otherwise transfer this Note of any of > Maker's obligations hereunder without the prior written consent of Payee. > > > >           (b)     No Set-Off. All payments hereunder shall be made without > set-off or counterclaim under any circumstances and in such amounts as may be > necessary in order that all such payments shall not be less than the amounts > otherwise specified to be paid hereunder. > > > >           (c)     Amendment of Note. This Note may be modified, amended, > discharged or waived only by an agreement in writing signed by the party > against whom enforcement of any such modification, amendment, discharge or > waiver is sought. > > > >           (d)     Governing Law. This Note shall be governed by and construed > according to the laws of the State of Florida without regard to its conflict > of laws principles. > > > >           (e)     Partial Invalidity. The unenforceability or invalidity of > any one or more provisions shall not render any other provisions herein > contained unenforceable or invalid. > > > >           (f)     Waiver of Jury Trial; Jurisdiction. The Payee and the Maker > hereby waive trial by jury in any litigation in any court with respect to, in > connection with, or arising out of this Note or the validity, protection, > interpretation, collection or enforcement thereof, or any other claim or > dispute howsoever arising between the Payee and the Maker hereunder. The Maker > hereby irrevocably submits to the jurisdiction of any state court located in > > > 5 > > > Brevard County, Florida, or in a federal court located in the Middle District > of Florida for the purpose of any suit, actions, proceedings, or judgments > relating or arising out of this Note. > > > >           (g)     Notice. All notices, requests, demands and other > communications given pursuant to any provision of this Note shall be given in > writing by U.S. certified or registered mail with return receipt requested and > postage prepaid, or by any twenty-four (24) hour courier service with proof of > delivery, addressed to the party for which it is intended at the address of > that party first stated above or such other address of which that party shall > have given notice in the manner provided herein. Any such mail notice shall be > deemed to have been given two days after being deposited in the mail. Any such > courier notice shall be deemed to have been given on the business day > following the business day so deposited. > > > > > > > > > > > > > > > > > > 6 > >   > >      IN WITNESS WHEREOF, TELTRONICS, INC. has executed this AMENDED AND > RESTATED SECURED PROMISSORY NOTE the day and year first written above. > > > >   > >   MAKER: > TELTRONICS, INC. > > By:            Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:      Ewen Cameron > Title:          President and CEO > > PAYEE: > HARRIS CORPORATION > > By:            /S/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:      Daniel R. Pearson > Title:          President - Network Support Division > > ATTEST: > > /s/ Mark E. Scott > > -------------------------------------------------------------------------------- > > > > > > STATE OF FLORIDA: > COUNTY OF MANATEE: > > > >      I hereby certify, that on this day, before me, an officer duly authorized > in the State and County aforesaid to take acknowledgements, personally > appeared Ewen Cameron, President and CEO of Teltronics, Inc., known to me to > be the person described in and who executed the foregoing instrument and he > acknowledged before me that he executed the same. > > > >      Witness my hand and official seal in the County and State last aforesaid > this 30th day of June, 2000. > > > > > (Seal) /s/ Susan D. Maslanka > > -------------------------------------------------------------------------------- > > Notary Public > > My commission expires     7/13/03     > > > > > > 7 > > > > > > EXHIBIT B > > > > > > FIRST AMENDMENT > TO > ASSET SALE AGREEMENT > >   > >      THIS FIRST AMENDMENT to the Asset Sale Agreement (the "Amendment") is > made as of October 25, 2000 ("Effective Date"), between Harris Corporation > ("Harris") and Teltronics, Inc. (" Buyer"). > > > > R E C I T A L S > > > >      Buyer and Harris are parties to that certain Asset Sale Agreement dated > June 30, 2000 (the "Agreement"). The parties to the Agreement desire to amend > the Agreement as set forth herein. Capitalized terms used but not defined > herein shall have the meanings set forth in the Agreement. > > > >      NOW THEREFORE, in consideration of the mutual promises and covenants > herein contained and for other good and valuable consideration, the receipt > and sufficiency of which is hereby acknowledged, the parties hereto agree as > follows: > >      1.      Amendment to Article 9 - Additional Covenants of the Parties.  > Section 9.6 titled: "Employee and Employee Benefit Plans": 1) Section 9.6(a). > Section 9.6(a)is hereby amended to read in its entirety as follows: > > > > "Effective as of the Closing Date, the employment by Seller of each individual > listed on the Disclosure Statement shall cease. Each such individual shall > become an employee of Buyer as of the later of (i) the Closing Date, and (ii) > the first day such individual performs an hour of service for the Buyer, > provided that such day occurs no later than August 1, (each such employee > shall be hereinafter referred to as a "Transferring Employee" and the day such > employee becomes an employee of Buyer shall be hereinafter referred to as his > or her "Transfer Date"). Nothing in this Agreement shall create any obligation > on the part of Buyer to continue the employment of any Transferring Employee > for any period of time." > > 2) Section 9.6(b). Section 9.6(b) is hereby amended to read in its entirety as > follows: > > "Except as otherwise required by applicable law or the terms of the applicable > Seller Plan, as of the Closing Date each Transferring Employee shall cease > participation in all Welfare Plans sponsored or maintained by Seller or any of > its affiliates and shall cease active participation and accrual of benefits > under any Pension Plan sponsored or maintained by Seller or any of its > affiliates as of the Closing Date." > > 3) Section 9.6(c). Section 9.6(c) is hereby amended to read in its entirety as > follows: > > "Commencing as of a Transferring Employee's Transfer Date, such Transferring > Employee shall be eligible for those Plans and other employee benefits in > effect for similarly situated existing employees of Buyer. Buyer shall credit > Transferring Employees for their length of service with Seller and any of its > affiliates for all employment and benefit purposes, including for purposes of > eligibility, vesting and any pre-existing condition limitations under Buyer's > Plans. Buyer shall credit each Transferring Employee with amounts paid under > Seller's Plans prior to the Transferring Employee's Transfer Date toward the > satisfaction of applicable deductibles or out-of-pocket maximums under the > corresponding Welfare Plans of Buyer for calendar year 2000. Buyer shall be > responsible for providing each Transferring Employee (and each such employee's > qualified beneficiaries within the meaning of section 4980B(f) of the Code) > who has a "qualifying event" (within the meaning of section 4980B(f) of the > Code) on or after such Transferring Employee's Transfer Date with the > continuation of group health coverage required by section 4980B(f) of the > Code." > > 4) Section 9.6(d). Section 9.6(d) is hereby amended to read in its entirety as > follows: > > "After the Closing Date, Seller shall have no liability or obligation for any > short-term or long-term disability, sick pay or salary continuation benefits > except to the extent expressly provided under the terms of Seller's Plans. > After a Transferring Employee's Transfer Date, Buyer shall have the liability > and obligation for any short-term or long-term disability, sick pay or salary > continuation benefits maintained by Buyer for its employees incurred in > respect of the Transferring Employee." > > 5) Section 9.6(f). Section 9.6(f) is hereby amended to read in its entirety as > follows: > > "Buyer shall have the obligation and liability for any workers' compensation > or similar workers' protection claim of a Transferring Employee incurred on or > after such Transferring Employee's Transfer Date." > > 6) Section 9.6(g). Section 9.6(g) is hereby amended to read in its entirety as > follows: > > "Seller shall cause the account of each employee whose employment is > terminated in connection with the transactions described in this Agreement to > become fully vested as of the Closing Date." > >      2.      Amendment to Section 11.1(b) - Buyer's Damages. Section 11.1(b) > is hereby amended to read in its entirety as follows: "(b) > > The term "Buyer's Damages" means all Damages sustained, incurred or suffered > by the Buyer, its officers, directors, Affiliates or employees after the > Closing resulting from or arising in connection with (i) any misrepresentation > by the Seller contained in or made pursuant to this Agreement in any > certificate, instrument or agreement delivered to the Buyer as part of the > Closing under this Agreement for which a claim is made in writing by the Buyer > prior to December 2, 2000; or (ii) any breach of warranty or any default in > the performance of any covenant or obligation of the Seller under this > Agreement." > >      3.      Amendment to Section 13.2 - Survival of Representation and > Warranties; and Covenants. Section 13.2 is hereby amended by deleting the > phrase "nine (9) months following the Closing Date" in the first sentence and > substituting in its place "time expiring on December 1, 2000." > >       4.     Effectiveness. This Amendment shall be effective when executed by > Buyer and Harris. > >      5.     Counterparts. This Amendment may be executed in two or more > counterparts (including by means of telecopied signature pages), all of which > shall be considered one and the same agreement. > >      6.     No Other Amendment. Except as expressly set forth in this > Amendment, no other amendment or modifications is made to any other provisions > of the Asset Sale Agreement, and the Asset Sale Agreement shall remain in full > force and effect, as amended hereby, and so amended, Buyer and Harris hereby > reaffirm all of their respective rights and obligations thereunder. > >      IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment > as of the date first written above. > > > >   BUYER: > TELTRONICS, INC. > > By:            Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:      Ewen Cameron > Title:          President and CEO > > HARRIS: > HARRIS CORPORATION > > By:            /S/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:      Daniel R. Pearson > Title:          President - Network Support Division

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10 SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT     THIS SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT ("Agreement"), dated effective August 9, 1999 ("Effective Date"), is by and between INTEL CORPORATION, a Delaware corporation with an office at 2111 NE 25th Avenue, Hillsboro, Oregon ("Intel") and THRUSTMASTER, INC. an Oregon corporation with an office at 7175 NW Evergreen Parkway, #400, Hillsboro, Oregon ("Thrustmaster"). RECITALS A.Intel is a manufacturer of microprocessors, software and systems. Intel is developing certain technologies (as further defined in Section 1.6 the "Intel Software") that will enable audio communication for multiple parties connected via an Internet server to engage in multi-player audio-enabled PC games and other audio-enabled group activities. B.Thrustmaster is a manufacturer of software communications solutions for personal computers. C.Intel desires to license the Intel Software to Thrustmaster in order to develop the market segment for audio-enabled online PC Gaming, and Thrustmaster desires to license the Intel Software from Intel in order to extend the capabilities of Thrustmaster's product line. D.The parties now wish to set forth the terms and conditions under which, inter alia, (i) Intel will license the Intel Software to Thrustmaster (ii) Thrustmaster will develop and license to Intel certain Thrustmaster Software that will be developed by Thrustmaster for use in conjunction with the Intel Software, and (iii) Intel will receive warrants to purchase shares of Thrustmaster common stock in form attached hereto as Exhibit E.     NOW THEREFORE, based on the Recitals and the terms and conditions herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows: AGREEMENT SECTION 1. DEFINITIONS     In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: 1.1"Derivative Work" means a work based upon one or more preexisting works, such as a translation, abridgment, condensation, modification, or any other form in which a work may be recast, transformed, or adapted. 1.2"Embed" means to incorporate the Intel Software into a PC application such that the user is not required to use a window outside that PC application to select a feature provided by the Intel Software. 1.3"Intel Derivatives" means any Derivative Works of the Thrustmaster Software created by Intel. 1.4"Intel Documentation" means manuals and other materials supplied to Thrustmaster by Intel, in any medium, relating to build environment, design, maintenance, installation, operation, or training relating to the Intel Software. 1.5"Intel's Intellectual Property Rights" means copyrights in the Intel Software as delivered and, to the minimum extent necessary to exercise the copyright license, (i) claims of patents and patent applications that read on inventions incorporated in the Intel Software as delivered and (ii) trade secrets in the Intel Software as delivered. "Intel's Intellectual Property Rights" do not include any patent or patent application claims relating to semiconductors, chipsets or semiconductor manufacturing technology. -------------------------------------------------------------------------------- 1.6"Intel Software" means Intel® Multi-Point Audio Software, Intel® Launch & Connect Software and Presence Software components as more fully described in Exhibit A, and includes any bug fix or updates for such Software as may be provided by INTEL at its discretion, all as delivered by Intel to Thrustmaster hereunder. 1.7"Licensed Products" means any software developed by Thrustmaster (other than the Thrustmaster Software) that incorporates the Intel Software, and is (i) distributed by Thrustmaster with the Thrustmaster Hardware or Thrustmaster Headsets or (ii) available via download from any Thrustmaster or other websiteor (iii) bundled with software developed by PC application independent software vendors or (iv) distributed as stand-alone products via retail channels or (v) bundled with hardware developed by PC independent hardware vendors or PC original equipment manufacturers. The term "Licensed Products" shall include Thrustmaster Hardware and Thrustmaster Headsets when bundled with the Intel Software. 1.9"Maintenance Release" means any release or 'patch' to an existing software release designed primarily to correct bugs or errors in previous releases or to maintain compatibility with general purpose software applications, web browsers, operating systems, hardware or commonly used formats. 1.10"Major Release" means a significantly enhanced, improved, or revised release of software, including but not limited to any substitute or replacement thereof, other than a Maintenance Release and a Minor Release. A Major Release is customarily signified in the software industry by a new, larger digit to the left of the decimal point in a version number, such as x.1, where "x" denotes the Major Release number. 1.12"Minor Release" means a moderate improvement or enhancement to an existing software release, other than a Major Release or a Maintenance Release. A Minor Release is customarily signified in the software industry by a change in the digit that appears to the right of the decimal point following the version number, such as 1.x, where "x" denotes the Minor Release number. 1.13"New Release" means Minor Releases and Major Releases. 1.14"Object Code" means the machine-readable and machine-executable computer programming code that is compiled and/or assembled from the Source Code. 1.15"Pre-Release" means any Alpha, Beta or other version of a software or hardware product that is distributed internally and externally on a limited basis for testing and evaluation purposes and that is not designated as a product release by the developing party. 1.16"Retail Purchase" means actual purchase of a Licensed Product by an ultimate end-user. The Retail Purchase numbers reported to Intel by Thrustmaster will be a percentage of total units shipped less returns as reported in Thrustmaster's quarterly and/or audited annual financial statements, e.g., 10Q, 10K. 1.18"Source Code" means computer-programming code, in human-readable format and in electronic form, from which Object Code is compiled or assembled. 1.19"Thrustmaster Documentation" means manuals and other materials supplied to Intel by Thrustmaster, in any medium, relating to build environment, design, maintenance, installation, operation, or training relating to the Thrustmaster Software. 1.20"Thrustmaster Hardware" means PC game controllers and related products designed, developed, and manufactured by or for Thrustmaster for the PC game market segment and sold under the Thrustmaster name. 1.21"Thrustmaster Headsets" means headsets designed, developed and manufactured by or for Thrustmaster and sold under the Thrustmaster name. 2 -------------------------------------------------------------------------------- 1.22"Thrustmaster Intellectual Property Rights" means copyrights in the Licensed Products and Thrustmaster Software and, to the minimum extent necessary to exercise the copyright license, (i) claims of patents and patent applications that read on inventions incorporated in the Licensed Products and Thrustmaster Software as delivered and (ii) trade secrets in the Licensed Products and Thrustmaster Software as delivered. 1.23"Thrustmaster Software" means software developed by Thrustmaster for the purposes of creating Internet communication and community solutions that is more fully described in Exhibit B. Thrustmaster Software will not include the Intel Software, in whole or in part. All software developed by Thrustmaster that contains the Intel Software as permitted by this Agreement is a "Licensed Product". 1.24"Warrants" means the warrants, in form attached hereto as Exhibit E, to purchase 200,000 shares of Thrustmaster common stock, with a price per share determined in accordance with Section E of this Agreement. SECTION 2. THRUSTMASTER OBLIGATIONS 2.1Licensed Product Road Map Documentation. Thrustmaster shall provide Intel documentation, to the satisfaction of Intel, demonstrating Thrustmaster's road map for distribution of the Intel Software as permitted by this Agreement. The road map documentation shall contain marketing data, product information, technical information, and such other information, as the parties shall agree ("Road Map Documentation"). Thrustmaster shall provide Intel the initial Road Map Documentation within two (2) weeks of execution of this Agreement. Thrustmaster shall provide Intel updates to the Road Map Documentation with the reports submitted to Intel as described in Exhibit C.2. 2.2Licensed Products. Thrustmaster shall use best efforts to integrate the Intel Software into or adapt the Intel Software for use with Licensed Products. Thrustmaster shall use best efforts to market, promote and distribute the Licensed Products as permitted by this Agreement and meet the marketing and distribution requirements and milestones set forth in and reported according to Exhibit C attached hereto and incorporated herein by this reference. If Intel, at its discretion, elects to put out a Maintenance Release or New Release of the Intel Software and elects to provide the same to Thrustmaster under the terms and conditions of this Agreement, Thrustmaster shall use reasonable commercial efforts to stop distributing the then current version of the Intel Software within ninety (90) days of receiving the Maintenance Release or New Release of the Intel Software, and distribute the Maintenance Release or New Release in a New Release of the Licensed Products. 2.3Thrustmaster shall deliver the Thrustmaster Software to Intel in source and object code form for Intel's use in accordance with the license grant set forth in Section 4.7 and 4.8. Thrustmaster shall provide Intel all Thrustmaster Documentation for Intel to compile the Thrustmaster Software Object Code from Source Code. 2.5Pre-Release Intel Software. Thrustmaster shall evaluate all Pre-Release Intel Software provided by Intel to Thrustmaster and provide Intel written evaluation reports no later than two weeks after delivery of the Pre-Release Intel Software to Thrustmaster. Thrustmaster's evaluation shall include evaluation of Pre-Release Intel Software compatibility with the top five major PC sound cards. The top five major PC sound cards shall be measured and determined by independently reported sales out data. 2.6Pre-Release/Licensed Products. Thrustmaster shall provide Intel copies of all Pre-Release Licensed Products, both Source Code and Object Code, as soon as the Releases are made or otherwise 3 -------------------------------------------------------------------------------- available, subject to the license restrictions herein. Thrustmaster shall use commercially reasonable efforts to incorporate any suggestions made by Intel in regard to the Licensed Products. 2.7New Release/Maintenance Release. Thrustmaster shall provide Intel all New Releases/ Maintenance Releases of the Licensed Products subject to the license restrictions herein. 2.8PC Game Independent Software Vendors. Thrustmaster shall use best efforts to engage independent software vendors, and obtain their written commitment to bundle Licensed Products with compatible PC game software applications in accordance with the milestones set forth in and reported according to Exhibit C. As between Intel and Thrustmaster, these distribution milestones shall be deemed to be Thrustmaster's obligation. 2.9Warrants. Upon execution of this Agreement, Thrustmaster shall issue to and deliver to Intel the Warrants at a purchase price per share equal to the best price given to any investor in Thrustmaster's private placement round being conducted on or about August, 1999. If Thrustmaster is unable to raise private financing by the Effective Date of this Agreement, Thrustmaster shall issue and deliver to Intel the Warrants at a purchase price per share equal to a 15% discount on the average closing price for Thrustmaster shares for the five (5) business days preceding the Effective Date of this Agreement. Intel's obligations under this Agreement and Thrustmaster's license rights are expressly conditioned on Thrustmaster's delivery of the Warrants to Intel. Intel shall have the right to exercise the Warrants upon delivery thereof to Intel or any time thereafter at Intel's discretion as set forth in the Warrants. No breach of this Agreement shall be considered a breach of the Warrants, but a breach of the terms of the Warrants by Thrustmaster shall be considered a material breach of this Agreement by Thrustmaster. 2.10Thrustmaster shall use commercially reasonable efforts to ensure all Licensed Products comply with the compatibility requirements in Exhibit H of this Agreement. 2.11Board Observer. Thrustmaster shall, at Intel's request, take any and all corporate action necessary to allow Intel to have a non-voting observer attend Thrustmaster's board of directors meetings. The rights of the Intel observer shall be consistent with those customary in the industry and as Intel and Thrustmaster may agree. The observer position shall be open for Intel's continued use and participation in all Thrustmaster Board of Director meetings and activities for as long as Intel holds greater than fifty (50) percent of such Thrustmaster Warrants or any Thrustmaster stock converted there from and issued herein. 2.12Non-Solicitation. Thrustmaster covenants and agrees that it will not directly or indirectly solicit the services or employment of any Intel Architecture Labs green badge contractor or blue badge employee without the express prior written consent of Intel. This Section 2.12 shall survive any termination or expiration of this Agreement for a period of one (1) year. 2.13Necessary Licenses. Thrustmaster shall obtain any and all licenses from third parties that Thrustmaster deems necessary to distribute the Intel Software and all other software licensed from Intel whether pursuant to this Agreement or otherwise. SECTION 3. INTEL OBLIGATIONS 3.1Intel Software. Intel shall use reasonable commercial efforts to (i) release the first code drop of the Intel Multi-Point Audio Software in Source Code and the Intel Launch & Connect Software and Presence Software components in Object Code to Thrustmaster no later than the Effective Date (ii) release the final code drop of the Intel Multi-Point Audio Software in Source Code by October 18, 1999 and (iii) release the final code drop of the Intel Launch & Connect Software and Presence Software components in Source Code by September 17, 1999 to Thrustmaster. 4 -------------------------------------------------------------------------------- 3.2Intel Training. Intel will, at a mutually agreeable time, provide 2-3 days of training to Thrustmaster technical representatives on the Intel Software at Intel's Hillsboro, OR facilities. 3.3Pre-Release Intel Software. Intel shall provide Thrustmaster with copies of Pre-Release Intel Software, when and as selected by Intel at its discretion, but no later than 1 week after such Pre Release Intel Software is released to a third party Thrustmaster competitor in the on-line gaming market. Thrustmaster may use the Alpha and Beta releases for internal, non-commercial purposes only, and shall not disclose or distribute them to any third party except as expressly agreed in writing by Intel. Thrustmaster shall provide Intel feedback on Pre-Release Intel Software as set forth in Section 2.5. 3.4Maintenance Releases. If Intel at its discretion elects to do a Maintenance Release of the Intel Software, and Intel elects to make such Maintenance Release available to other similarly situated licensees of the Intel Software, Intel will provide such Maintenance Release to Thrustmaster. SECTION 4. LICENSES 4.1Intel Software Source Code. Subject to the terms and conditions of this Agreement, Intel hereby grants to Thrustmaster a worldwide, non-exclusive, non-transferable, non-sublicensable license under Intel's Intellectual Property Rights to use the Intel Software Source Code to the extent and as delivered pursuant to Section 3.1, for internal use only, solely for the purposes of (i) integrating the Intel Software Object Code into the Licensed Products, (ii) adapting the Intel Software so that the Intel Software Object Code can be used and distributed in conjunction with the Licensed Products, (iii) creating Derivative Works of the Intel Software for incorporation into Licensed Products in Object Code form or (iv) providing technical support for the Thrustmaster Software and Licensed Products. Thrustmaster shall provide and hereby grants Intel a worldwide, unrestricted license, with rights to sublicense, with written approval from Thrustmaster which shall not be unreasonably withheld, under Thrustmaster's intellectual property rights in all Derivative Works of the Intel Software prepared by Thrustmaster, to use, make, copy, publicly perform, publicly display, sell, offer to sell, distribute and import such Derivative Works; provided that Intel will not need written approval for bug fixes and similar basic improvements to the Intel Software made by Thrustmaster. 4.3Intel Software Object Code. Subject to the terms and conditions of this Agreement, Intel hereby grants to Thrustmaster a worldwide, non-exclusive, non-transferable license to reproduce, distribute through multiple levels of distribution under end user license agreements no less restrictive than that attached as Exhibit F, publicly display and publicly perform the Intel Software, only in Object Code form and only incorporated into or distributed with Licensed Products. 4.4Sublicense. Subject to Intel's prior written approval, which shall not be unreasonably withheld, Thrustmaster shall have the right to sublicense the Intel Software, in Object Code form only, to independent software vendors and only for incorporation into or distribution with software applications that incorporate or are compatible with the Intel Software; provided that such independent software vendors (i) agree to be bound by license terms at least as restrictive as those set forth in this Agreement as determined by Intel, (ii) shall have no rights to further sublicense the Intel Software, (iii) agree to provide a reasonable number of their Intel Software compatible software applications to Intel for marketing and promotional purposes on terms similar to those set forth in Section 4.6. Thrustmaster covenants and agrees to enforce the sublicense agreements at its sole cost and expense and at Intel's reasonable request. 4.5Intel Documentation. Subject to the terms and conditions of this Agreement, Intel hereby grants to Thrustmaster a worldwide, non-exclusive, non-sublicensable copyright license under Intel's copyrights in the Intel Documentation to use and reproduce the Intel Documentation for internal use only, solely for the purposes of (i) integrating the Intel Software Object Code into the 5 -------------------------------------------------------------------------------- Licensed Products, (ii) adapting the Intel Software so that the Intel Software Object Code can be used and distributed in conjunction with Licensed Products, (iii) developing the Thrustmaster Software or (iv) providing technical support for the Thrustmaster Software and Licensed Products. 4.6Restrictions on Thrustmaster. Thrustmaster shall not assign, sub-license, lease, or in any other way transfer, use, perform, display or disclose the Intel Software, including any New Release or Maintenance Release, to any third party or reproduce or distribute any part of the Intel Software except as specifically provided in this Agreement. Thrustmaster agrees that it will not use the Intel Software to create, license, or sell a home intercom based stand-alone product, or a product with the primary purpose of enabling home intercom-type communication between PCs until 12/31/00, and the license grants contained in this Agreement shall not be construed in any way contrary to this restriction. 4.7Thrustmaster Software Source Code. Thrustmaster hereby grants to Intel under Thrustmaster Intellectual Property Rights a perpetual, worldwide, non-exclusive, royalty-free license to use and reproduce the Thrustmaster Software Source Code and create Intel Derivatives for internal use only. The Intel Derivatives and all intellectual property rights therein shall be the property of Intel subject to Thrustmaster's ownership of the Thrustmaster Software. 4.8Thrustmaster Software Object Code. Thrustmaster hereby grants to Intel a worldwide, non-exclusive, royalty-free license to use, reproduce, publicly display, and publicly perform the Thrustmaster Software and Intel Derivatives in Object Code form. 4.9Thrustmaster Documentation. Thrustmaster hereby grants to Intel under Thrustmaster's copyrights in the Thrustmaster Documentation a worldwide, non-exclusive, royalty-free copyright license to use, reproduce, make Intel Derivatives, perform and display the Thrustmaster Documentation for internal use only. 4.10Licensed Products. Thrustmaster hereby grants to Intel a non-exclusive, worldwide, royalty free license to use, reproduce a reasonable number of copies, distribute a reasonable number of copies, publicly perform and publicly display the Licensed Products for promotional purposes to demonstrate the Intel Software, the Thrustmaster Software included in the Licensed Products, and other relevant Intel products. 4.11Restrictions on Intel. Intel shall not assign, sub-license, lease, or in any other way transfer, use, perform, display or disclose the Thrustmaster Software, including any New Release or Maintenance Release, to any third party or reproduce or distribute any part of the Thrustmaster Software except as specifically provided in this Agreement. SECTION 5. PROPRIETARY RIGHTS 5.1Intel General. The Intel Software, including all New Releases and Maintenance Releases (whether prepared by Intel or any third party), and all intellectual property rights therein, in whole or in part, and all copies of the Intel Software, including all New Releases and Maintenance Releases, are and shall remain owned by and be the sole and exclusive property of Intel, subject only to Thrustmaster's ownership of the Thrustmaster Software, Thrustmaster Derivative Works and the license rights granted to Thrustmaster by Intel under this Agreement. 5.2Thrustmaster General. The Thrustmaster Software, including all New Releases and Maintenance Releases (whether prepared by Thrustmaster or any third party), and all intellectual property rights therein, in whole or in part, and all copies of the Thrustmaster Software, including all New Releases and Maintenance Releases, are and shall remain owned by and be the sole and exclusive property of Thrustmaster, subject only to Intel's ownership of the Intel Software, Intel Derivatives and the license rights granted to Intel by Thrustmaster under this Agreement. 6 -------------------------------------------------------------------------------- 5.3Intel Software Source Code Control Restrictions. Thrustmaster shall not disclose or otherwise make any part of the Intel Software Source Code, (whether or not modified by Thrustmaster), available, in any form, to any person other than Thrustmaster employees whose job performance requires such access in order to prepare Licensed Product(s) and Maintenance Release(s) as permitted by this Agreement. The Intel Software Source Code shall at all times be under the direct control of the individual identified in attached Exhibit G or such other individual that the parties may agree from time to time; provided, however, that any such individual shall have primary responsibility for the preparation of Licensed Products and Maintenance Releases as permitted by this Agreement. All use of the Intel Software Source Code and all copies thereof shall be confined to the location identified in attached Exhibit G. Thrustmaster shall not move the Intel Software Source Code to any other location without the express written consent of Intel. The Intel Software Source Code and all copies thereof shall be conspicuously labeled "Intel Confidential." Thrustmaster shall instruct all employees on these obligations with respect to use, copying, protection, and confidentiality of Intel Software Source Code. Even after this Agreement terminates, the obligations of this section shall remain in effect until the Intel Software Source Code rightfully becomes publicly known. 5.4Thrustmaster Software Source Code Control Restrictions. Except as expressly permitted by the terms of this Agreement, Intel shall not disclose or otherwise make any part of the Thrustmaster Software Source Code, (whether or not modified by Intel), available, in any form, to any person other than Intel employees and contractors. The Thrustmaster Software Source Code and all copies thereof shall be conspicuously labeled "Thrustmaster Confidential." Intel shall instruct all employees and contractors on these obligations with respect to use, copying, protection, and confidentiality of Thrustmaster Software Source Code. Even after this Agreement terminates, the obligations of this section shall remain in effect until the Thrustmaster Software Source Code rightfully becomes publicly known. 5.5No Other Rights in Intel Property. No rights or licenses are granted by Intel to Thrustmaster under this Agreement, expressly, by estoppel or by implication, with respect to any proprietary information or patent, copyright, trade secret or other intellectual property right owned or controlled by Intel, except as expressly provided in this Agreement. 5.6No Other Rights in Thrustmaster Property. No rights or licenses are granted by Thrustmaster to Intel under this Agreement, expressly, by estoppel or by implication, with respect to any proprietary information or patent, copyright, trade secret or other intellectual property right owned or controlled by Thrustmaster, except as expressly provided in this Agreement. SECTION 6. TECHNICAL SUPPORT AND UPDATES 6.1Thrustmaster. Thrustmaster shall provide all technical and other support at all levels for its customers, the Thrustmaster Software and all Licensed Products in a manner consistent with the terms and conditions of this Agreement. 6.2Intel. Intel will provide Thrustmaster commercially reasonable technical support of the Intel Software until 11/1/99 or up to the first shipment of Licensed Products to an outlet where the Licensed Products are available for Retail Purchase or internet download, whichever is sooner; provided, however, that Intel shall have no obligation to assign more than one (1) engineer to providing the support at any one time during this period. Following the first shipment of Licensed Products to an outlet where it is available for Retail Purchase, Intel shall have no further obligation to provide Thrustmaster support for the Intel Software through the term of this Agreement or thereafter. INTEL SHALL NOT BE REQUIRED TO PROVIDE ANY OTHER TECHNICAL OR OTHER SUPPORT, ASSISTANCE, INSTALLATION, TRAINING OR OTHER SERVICES EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT. 7 -------------------------------------------------------------------------------- INTEL SHALL NOT BE REQUIRED TO PROVIDE ANY MAINTENANCE RELEASES, NEW RELEASES, UPDATES, ENHANCEMENTS OR EXTENSIONS TO THE INTEL SOFTWARE OF ANY KIND OR PROVIDE ANY TECHNICAL SUPPORT FOR THE LICENSED PRODUCTS AND THRUSTMASTER SOFTWARE. SECTION 7. MARKETING AND PROMOTION 7.1Thrustmaster. Thrustmaster shall use best efforts to market and distribute Licensed Products as set forth in and reported according to Exhibit C. 7.2Press Release. The parties will issue a press release describing the Intel-Thrustmaster cooperation in relation to the Intel Software at such time as the parties may agree after execution of this Agreement. Text of the press release will be subject to the prior review and approval of Intel and Thrustmaster. SECTION 8. COPYRIGHTS, ATTRIBUTION, TRADEMARK 8.1Copyrights. The Intel Software and the Thrustmaster Software are copyrighted and are protected by United States copyright laws and international treaty provisions. Thrustmaster shall not remove or obscure any of Intel's or its vendors' copyright notices or other proprietary notices from the Intel Software and Intel shall not remove or obscure any of Thrustmaster's or its vendors' copyright notices or other proprietary notices from Thrustmaster Software. 8.2Attribution. Each Licensed Product shall display "Portions Copyright 1999 Intel Corporation" in "About" boxes of Licensed Products. Thrustmaster and its licensees shall display "Intel® Multi-Point Audio, Launch & Connect, and Presence technologies by Intel Corporation" (or such other attribution that Intel may reasonably request) in 10 point or larger type in start-up or "splash" screens of Licensed Products. Intel shall at its discretion provide Thrustmaster with an Intel® Optimizer logo bit-map for this attribution, which Thrustmaster shall, if requested by Intel, employ in the Licensed Products and packaging of the Licensed Products as reasonably requested by Intel. All use of the Intel® Optimizer logo shall be in accordance with the license terms, guidelines, restrictions and requirements set forth in attached Exhibit D and as may be provided by Intel to Thrustmaster from time to time. Thrustmaster shall, if requested to employ the Intel Optimizer Logo, execute the license agreement in the form contained in Exhibit D. 8.3Trademarks. No rights or licenses are granted by this Agreement, expressly or by implication, to use any Intel trademark or trade name, or any word or mark similar thereto, in connection with any products manufactured, used or sold by Thrustmaster, or as part of Thrustmaster's corporate, firm or trade name, or for any other purpose, except as expressly provided for in this Agreement. No rights or licenses are granted by this Agreement, expressly or by implication, to use any Thrustmaster trademark or trade name, or any word or mark similar thereto, in connection with any products manufactured, used or sold by Intel, or as part of Intel's corporate, firm or trade name, or for any other purpose, except as expressly provided for in this Agreement. SECTION 9. NO WARRANTIES; LIMITED LIABILITY 9.1INTEL SOFTWARE AS IS. INTEL MAKES NO WARRANTY OF ANY KIND REGARDING THE INTEL SOFTWARE AND ANY SUPPORT, INPUT, RECOMMENDATIONS, ASSISTANCE OR OTHER CONTRIBUTIONS OF ANY KIND THAT INTEL MAY MAKE TO THRUSTMASTER IN REGARD TO THE THRUSTMASTER SOFTWARE. THE INTEL SOFTWARE IS LICENSED TO THRUSTMASTER ON AN "AS IS" BASIS. INTEL SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT AND FITNESS FOR A PARTICULAR PURPOSE. 8 -------------------------------------------------------------------------------- 9.2THRUSTMASTER SOFTWARE AS IS. THRUSTMASTER MAKES NO WARRANTY OF ANY KIND REGARDING THE THRUSTMASTER SOFTWARE AND ANY SUPPORT, INPUT, RECOMMENDATIONS, ASSISTANCE OR OTHER CONTRIBUTIONS OF ANY KIND THAT THRUSTMASTER MAY MAKE TO THE INTEL SOFTWARE. THRUSTMASTER SOFTWARE IS LICENSED TO INTEL ON AN "AS IS" BASIS. THRUSTMASTER SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT AND FITNESS FOR A PARTICULAR PURPOSE. 9.3LIMITED LIABILITY. EXCEPT FOR THRUSTMASTER'S DUTY TO INDEMNIFY, DEFEND AND HOLD INTEL HARMLESS WITHOUT LIMITATION PURSUANT TO SECTION 13 OF THIS AGREEMENT, AND EXCEPT FOR A MATERIAL BREACH BY THRUSTMASTER OF THE INTEL SOFTWARE SOURCE CODE CONTROL RESTRICTIONS CONTAINED IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE OF ANY KIND. IN NO EVENT SHALL A PARTY OTHERWISE BE LIABLE TO THE OTHER UNDER THIS AGREEMENT IN AN AMOUNT EXCEEDING THE CASH PAYMENTS RECEIVED BY IT FROM THE OTHER PARTY. As used in this Section 9.3, the term "CASH PAYMENTS" shall not include the Warrants or any value obtained by Intel therefrom. SECTION 10. TERM AND TERMINATION 10.1Term. The term of this Agreement shall commence on the Effective Date and shall continue for [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] years thereafter. This Agreement may be extended for such additional term and under such conditions as the parties may mutually agree in a duly executed writing. 10.2Termination. Subject to Section 10.4, either party may terminate this Agreement and the perpetual licenses granted by it herein for cause in the event of a material breach of the terms of this Agreement or the perpetual license by the other party, provided that the non-breaching party gives written notice of such material breach to the breaching party and the breaching party has not cured such material breach within thirty (30) days of receipt of such notice. 10.3Failure to Meet Milestones.     10.3.1 If Thrustmaster fails to meet any of the distribution milestones set for [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] as set forth in and reported according to Exhibit C, Intel has the right to terminate this Agreement and the license rights granted to Thrustmaster by Intel in this Agreement pursuant with section 10.4 of this Agreement. 10.4Effect of Termination. 9 --------------------------------------------------------------------------------     10.4.1 Licenses. The licenses granted by Intel to Thrustmaster and by Thrustmaster to Intel pursuant to Section 4 of this Agreement may only be revoked for uncured material breach of the license terms as provided in this Agreement. Each party reserves the right to verify the other party's compliance with this Agreement and the licenses granted herein by reasonable means, and each party agrees to cooperate with the other in that regard. In the event that a party is in material breach of any of the licenses granted herein, the non-breaching party has the right to terminate all license rights granted to the breaching party herein upon thirty (30) days written notice to the breaching party if the breaching party fails to correct such material breach within the thirty (30) day notice period. For the purpose of this Section 10, however, Thrustmaster shall be deemed to be in uncured material breach of this Agreement and its license rights if Thrustmaster fails to meet the milestones set forth in and reported according to Exhibit C as described in Section 10.3.1.     10.4.2 If Thrustmaster's license to distribute the Intel Software terminates pursuant to Section 10.1 or Section 10.3, Thrustmaster shall have the right to distribute finished goods inventory of the Licensed Products for ninety (90) days beyond the termination date.     10.4.3 If Intel terminates this Agreement or any license herein because of Thrustmaster's uncured material breach, Thrustmaster will turn over any Thrustmaster Software pointer, which determines the URL that hosts the multipoint audio conference for end users, to Intel, and hereby assigns and transfers all of its ownership and other rights in the same to Intel.     10.4.4 Other. Sections 2.9, 4 (except to the extent a license is terminated for uncured material breach as provided in this Agreement), 5, 6.1, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17 shall survive any termination or expiration of this Agreement. SECTION 11. CONFIDENTIALITY AND NON-DISCLOSURE 11.1Source Code. The Intel Software Source Code constitutes proprietary, confidential, and trade secret information of Intel, and the Thrustmaster Software Source Code constitute proprietary, confidential, and trade secret information of Thrustmaster. Each of the parties shall ensure that the Source Code of the other party receives at least the same degree of confidentiality that is accorded to its own Source Code. Except as expressly permitted by this Agreement, neither party shall disclose the other party's Source Code to any third party absent prior written approval from the other party and a prior written confidentiality and nondisclosure agreement with each such third party that is satisfactory to the other party at its sole discretion. This provision is supplemented by Section 5.3 of this Agreement. 11.2CNDA. Except as expressly provided herein, this Agreement and all disclosures relating thereto, shall be governed by corporate nondisclosure agreement ("CNDA") number 3300. In addition, this Agreement and the terms thereof are confidential and shall not be disclosed to any third party without the prior written consent of the non-disclosing party. Notwithstanding anything else in this Agreement or the CNDA to the contrary, either party is free to use residuals of the confidential information of the other party for any purpose, including use in development, manufacture, promotion, sale and maintenance of its own products and services. The term "residuals" as used herein means information in nontangible form retained in the unaided memories of persons who have access to the confidential information. 10 -------------------------------------------------------------------------------- SECTION 12. NOTICES     All notices required or permitted to be given hereunder shall be in writing, shall make reference to this Agreement, and shall be delivered by hand, or dispatched by prepaid nationally recognized overnight air courier or by registered or certified airmail, postage prepaid, addressed as follows:     Such notices shall be deemed served on the earlier of: (i) actual receipt by addressee, (ii) two (2) days after deposit with a nationally recognized overnight air courier or (iii) five (5) days after appropriate mailing. Either party may give written notice of a change of address and, after notice of such change has been received, any notice or request shall thereafter be given to such party at such changed address. SECTION 13. INDEMNITY     Thrustmaster shall defend, indemnify, and hold Intel harmless from and against any loss, cost, liability, damages and expense (including reasonable attorney fees) arising from any action or claim brought or threatened against Thrustmaster or Intel or their customers alleging that the Thrustmaster Software or any Licensed Product infringes any patent, copyright, trademark, trade secret, or other intellectual property right of any third party provided that Intel (i) promptly notifies Thrustmaster in writing of any such suit or proceeding brought against it, (ii) provides Thrustmaster at its sole discretion with sole control over the defense or settlement of such suit or proceeding, and (iii) provides reasonable information and assistance in the defense and/or settlement of any such claim or action brought against it. Without limiting Thrustmaster's duty to defend and hold Intel harmless, Thrustmaster's indemnity obligation hereunder shall not apply to any successful suit or proceeding brought directly against Intel based solely upon a claim that the Intel Software or a part thereof (except any Thrustmaster modification) alone and not in combination with any other technology or product, constitutes a direct infringement of any United States patent, copyright, trademark, trade secret, or other intellectual property right of any third party; provided that Thrustmaster (i) promptly notifies Intel in writing of any such suit or proceeding if Intel has not itself received notice thereof, (ii) provides Intel at its sole discretion and at its own expense with sole control over the defense or settlement of such suit or proceeding, (iii) provides reasonable information and assistance in the defense and/or settlement of any such claim or action, and (iv) a court of competent jurisdiction (after appropriate appeals have been filed) concludes that Intel's direct actions regarding the Intel Software, or a part thereof (except any Thrustmaster modification), alone and not in combination with any other technology or product constitutes a direct infringement of any United States patent issued prior to the Effective Date, copyright, trademark, trade secret, or other intellectual property right of any third party and that Intel has direct liability to such third party. The exception to Thrustmaster's indemnity obligation in this Section 13 is specifically intended to cover the limited situation where Intel is found by a court of competent jurisdiction to be directly liable to a third party for direct (as opposed to any indirect) infringement and is not in any way intended to otherwise limit Thrustmaster's liability to Intel or to any third party in regard to Licensed Products or any part thereof.  Intel shall have no obligation of any kind to defend, indemnify or hold Thrustmaster harmless from any claim brought against Thrustmaster that may implicate the Intel Software, but Intel will provide Thrustmaster reasonable information and assistance in regard to the defense or settlement of any such claim. The parties agree that this Section 13 is consistent with the intent of the indemnity provision in the parties' first agreement relating to multi-point audio. SECTION 14. FORCE MAJEURE     Neither party shall be liable for any failure to perform due to unforeseen circumstances or causes beyond that party's reasonable control, including, but not limited to, acts of God, war, riot, embargoes, acts of civil or military authorities, delay in delivery by vendors, fire, flood, earthquake, accident, strikes, inability to secure transportation, facilities, fuel, energy, labor or materials. In the event of force 11 -------------------------------------------------------------------------------- majeure, the time for delivery or other performance will be extended for a period equal to the duration of the delay caused thereby. SECTION 15. ASSIGNMENT, SALE OR TRANSFER     Neither party shall transfer or assign any of its rights under this Agreement to any person except as expressly permitted herein. Any attempt to assign any rights, duties or obligations hereunder without the other party's written consent, which shall not be unreasonably withheld, shall be void. SECTION 16. RELATIONSHIP OF THE PARTIES     This Agreement shall not be construed to create a partnership, joint venture or other agency relationship between the parties. Neither party hereto will be deemed the agent or legal representative of the other for any purpose whatsoever and each party will act as an independent contractor with regard to the other in its performance under this Agreement. Nothing herein will authorize either party to create any obligation or responsibility whatsoever, express or implied, on behalf of the other or to bind the other in any manner, or to make any representation, commitment or warranty on behalf of the other. SECTION 17. MISCELLANEOUS 17.1Export Restrictions. The Intel Software, the Thrustmaster Software and the Licensed Products may be controlled for export purposes by the U.S. Government. Neither party shall export, either directly or indirectly, any such material without first obtaining any required license or other approval from the U.S. Department of Commerce or any other agency or department of the United States Government as required. The parties agree to provide reasonable cooperation to one another in connection with obtaining any such licenses or approvals. 17.2Governing Law. Any claim arising under or relating to this Agreement shall be governed by the internal substantive laws of the State of Delaware, without regard to principles of conflict of laws. Any dispute arising out of this Agreement shall be brought in, and the parties consent to personal and exclusive jurisdiction of and venue in, the state and federal courts within Washington or Multnomah County, Oregon. 17.3Integration. This Agreement, together with the and the CNDA, constitute the entire agreement between Thrustmaster and Intel relating to the subject matter hereof. This Agreement shall only be amended by a writing signed by both parties. 17.4Headings. The headings to the paragraphs and subparagraphs of this Agreement are to facilitate reference only, do not form a part of this Agreement, and will not in any way affect the interpretation thereof. 17.5Severability. The terms and conditions of this Agreement are severable. If any paragraph, provision, or clause in this Agreement shall be found or be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the remainder of this Agreement shall be valid and enforceable and the parties shall use good faith to negotiate a substitute, valid and enforceable provision that most nearly effects the parties' intent in entering into this Agreement. 17.6Remedies. The rights and remedies provided in this Agreement are in addition to any other rights and remedies provided at law or in equity. 17.7Injunctive Relief. Both parties agree that damages alone would be insufficient to compensate the licensing party for a breach of source code control and non-disclosure provisions of this Agreement, acknowledges that irreparable harm would result from such a breach of this 12 -------------------------------------------------------------------------------- Agreement, and consents to the entering of an order for injunctive relief to prevent such a breach or further breach and the entering of an order for specific performance to compel performance of such obligations under this Agreement. 17.8Counterparts. This Agreement may be executed in counterparts.     IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written above INTEL CORPORATION   THRUSTMASTER, INC.   By:       /s/ D. CRAIG KINNIE    --------------------------------------------------------------------------------       By:       /s/ F.G. HAUSMANN JR.    --------------------------------------------------------------------------------           D. Craig Kinnie -------------------------------------------------------------------------------- Printed Name               F.G. Hausmann Jr. -------------------------------------------------------------------------------- Printed Name   Title:       V.P. Intel --------------------------------------------------------------------------------       Title:       President and CEO --------------------------------------------------------------------------------   Date:       8/9/99 --------------------------------------------------------------------------------       Date:       8/9/99 -------------------------------------------------------------------------------- 13 -------------------------------------------------------------------------------- EXHIBIT A DESCRIPTION OF SOFTWARE AND DOCUMENTATION Description 1.  Intel® Multi-point Audio Software Component:   Windows* 95 and Windows* 98 compatible software that allows the user, in conjunction with some method to exchange IP addresses, the ability to create and join an internet telephony conference with the user limit to be determined by the container application. 2.  Distributed Presence Component:   Windows* 95 and 98 compatible software that allows an application, in conjunction with a Microsoft Internet Locator Service Server, the ability to advertise the presence of one or more local users and to monitor the presence of peers on each local user's peer list. 3.  Intel® Launch & Connect Software Component:   Windows* 95 and 98 compatible software that allows a controlling application to dynamically enumerate applications/protocols in common between two endpoints, launch and then automatically connect a selected application/protocol at the two endpoints or to a third party server. Software     The following components are included in the Software licensed to Thrustmaster hereunder:     The Intel® Multi-point Audio component component will include the following: 1.A COM based client component API. 2.API documentation. 3.Sample test application.     The Distributed Presence Component will include the following: 1.A COM based client component API. 2.API documentation. 3.Sample test application.     This Intel® Launch & Connect Component will include the following: 1.A COM based client component API. 2.API and usage documentation. 3.Sample test application. 4.Launching support for a limited set of H323 phone applications, games that support Microsoft's DirectPlayLobby Application Programming Interface, and applications that conform to the Launch & Connect native launching API. 14 -------------------------------------------------------------------------------- EXHIBIT B Description of Licensed Products     Software that provides a meeting and launching capability for the Intel Software.     The Thrustmaster Software may include the following: 1.A HTTP server hosting a web page 2.An Internet location server 3.A buddy list or other presence detection utility 15 -------------------------------------------------------------------------------- EXHIBIT C Milestones C.1Thrustmaster shall achieve the following Licensed Products download milestones:         Licensed Products Downloads and/or Retail Purchases     Date   Cumulative Total [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] C.2Thrustmaster shall report the cumulative totals above within thirty (30) days of the specific milestone date together with such data and supporting documentation as Intel shall reasonably request. C.3Thrustmaster shall achieve the following milestones regarding distribution of the Licensed Products in the PC gaming markets: * Sign [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] agreements with ISVs or internet game related sites for distribution of the Licensed Products to on-line gaming users by [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] * Sign [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] total agreements with ISVs or internet game related sites for distribution of the Licensed Products to on-line gaming users by [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]. Thrustmaster agrees to maintain at least [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] agreements with ISVs or internet game related sites through [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]. C.4The milestone dates set forth in the Exhibit C are based on the assumption that Intel will deliver the Intel Software to Thrustmaster on the date set forth in Section 3.1. If actual delivery of the Intel Software to Thrustmaster under Section 3.1 is a date later than that specified in Section 3.1, the [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] milestone shall be reduced to match Thrustmaster's actual Retail Purchases through [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC], and subsequent quarterly cumulative milestones shall be reduced to reflect the [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] Retail Purchases adjustment. 16 -------------------------------------------------------------------------------- EXHIBIT D INTEL OPTIMIZER LOGO TRADEMARK LICENSE AGREEMENT     THIS INTEL OPTIMIZER LOGO TRADEMARK LICENSE AGREEMENT ("Agreement") is made by Intel Corporation having offices at            ("Intel") and Thrustmaster, Inc., having offices at            ("Licensee").     WHEREAS, Intel and Licensee have entered into that certain Software Development and License Agreement dated      ("Software License") wherein Intel licensed to Licensee certain multi-point audio remote server software (as defined in the Software License, the "Intel Software") for distribution, including but not limited to distribution with Licensee's PC game controllers and headsets (as defined in the Software License, the "Licensed Products").     WHEREAS, the Software License provides that Thrustmaster shall, at Intel's request, use the Intel Optimizer Logo as set forth in this Agreement in conjunction with distribution of the Intel Software with Licensed Products;     WHEREAS, Intel has a specific Intel Optimizer Logo (as defined below, the "Licensed Logo") that is associated with specific optimized code (as defined below, the "Optimized Code") that is part of the Intel Software; and     WHEREAS, Intel has now requested Thrustmaster to use the Licensed Logo in conjunction with the distribution of the Optimized Code with Licensed Products and Thrustmaster has agreed to do the same;     NOW THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, and for other good and valuable consideration receipt of which is hereby acknowledged, the parties agree as follows: 1.  Definitions.   In addition to the definitions set forth in the Recitals, the following terms have the following meanings: 1.1"Licensed Logo" means the Logo set forth in Exhibit A hereto, said Logo including the INTEL trademark, and the OPTIMIZER designation. 1.2"Licensed Name" means the name "Intel® Optimizer [Party Line] or such other name that Intel may designate at its discretion". 1.3"Licensed Marks" means the Licensed Logo and the Licensed Name. 1.4"Intel Marks" means the Licensed Marks, the INTEL trademark and trade name, and any other marks belonging to Intel. 1.5"Optimized Code" means those specific Intel Software files identified on attached Exhibit B, as delivered to Licensee under the Software License. The Optimized Code is the software that is specifically associated with the Licensed Logo under this Agreement 2.  License Grant.  Subject to Licensee's full compliance with the terms of this Agreement, Intel hereby grants to Licensee a non-exclusive, non-transferable, royalty-free, revocable license to use the Licensed Marks in connection with Licensed Products solely to indicate that the Licensed Products contain the Optimized Code. 17 -------------------------------------------------------------------------------- 3.  Product Quality.   3.1The Licensed Marks shall be used only on and in connection with Licensed Products that contain the Optimized Code and that meet the quality and performance standards customary in the software industry. 3.2Licensee shall make no alterations or modifications to the Optimized Code with which the Licensed Marks are used except as necessary to integrate the Optimized Code into Licensed Products; provided that such modification does not affect the performance and functionality of the Optimized Code. For the purpose of this Agreement, Licensee agrees that it will not change, modify, or alter the Optimized Code in any other way. If Licensee makes any other modification to the Optimized Code, this Agreement, including but not limited to Licensee's right to use the Licensed Marks, shall terminate immediately with respect to the modified Optimized Code. 3.3Licensee shall comply with all applicable laws and regulations in the manufacture, assembly, marketing, and sale of Licensed Products with which the Licensed Marks are used. 4.  Proper Usage.   4.1Licensee shall comply with the usage and other requirements set forth in Exhibit A hereto. 4.2Licensee shall comply with any additional usage guidelines for the Licensed Marks provided by Intel from time to time. Licensee shall not alter the Licensed Logo in any way, and shall use the camera-ready or electronic artwork of the Licensed Logo provided by Intel. 4.3Licensee shall display Licensed Marks only in a positive manner. 5.  Right to Inspect.   5.1Intel shall have the right at its discretion to review, inspect, and test any Licensed Product with which the Licensed Marks are used, as well as associated users manuals, collateral, advertising, and promotional materials, including web sites, to determine compliance with the terms of this Agreement. Upon reasonable notice, Licensee shall cooperate fully in providing Intel access to such Licensed Products and materials. 5.2Licensee will deliver to Intel two (2) copies of each Licensed Product, including source and object code for the Optimized Code as contained in such Licensed Product, at least forty five (45) days prior to the commercial release of such Licensed Product for the purpose of Intel verifying at its discretion that the Optimized Code has not been modified inconsistent with the provisions of this Agreement. As used in this Section 5.2, "Licensed Product" shall include all major, minor and maintenance releases of a Licensed Product, each of which shall be separately submitted to Intel as set forth in this Section 5.2 unless otherwise agreed by Intel in writing. Licensee may submit pre-release versions of Licensed Product in order to meet the requirements of this Section 5.2 if the Optimized Code is not modified in the final release. Intel will use commercially reasonable efforts to review the Optimized Code as included in the Licensed Product and notify Licensee whether the Licensed Product can carry the Intel Marks as permitted under this Agreement. If Intel fails to give notice within fifteen (15) days of its receipt of the Licensed Product that is subject to review, Licensee may use the Licensed Marks with such Licensed Product unless and until such right is terminated as permitted by this Agreement. 18 -------------------------------------------------------------------------------- 6.  Protection of Interest.   6.1Acknowledgment of Rights.  Licensee acknowledges Intel's exclusive rights to the Intel Marks and all goodwill associated therewith, and acknowledges that any and all use of the Intel Marks by Licensee inures to the sole benefit of Intel. Licensee shall not challenge Intel's exclusive rights in and to the Intel Marks, and shall not do anything that might harm the reputation or goodwill of Intel or the Intel Marks. Licensee shall take no action inconsistent with Intel's rights in the Intel Marks. If at any time Licensee acquires any rights in, or registration(s) or application(s) for the Intel Marks by operation of law or otherwise, Licensee will immediately and at no expense to Intel assign such rights, registrations, and/or applications to Intel, along with any and all associated goodwill. 6.2Enforcement.  In the event that Licensee becomes aware of any unauthorized use of the Intel Marks by a third party, Licensee shall promptly notify Intel in writing and shall cooperate fully, at Intel's expense, in any enforcement of Intel's rights against such third party. The right to enforce Intel's rights in the Intel Marks rests entirely with Intel and shall be exercised at Intel's sole discretion; Licensee shall not commence any action or claim to enforce Intel's rights in the Intel Marks. 7.  DISCLAIMER BY INTEL.  INTEL MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND RESPECTING THE INTEL MARKS, INCLUDING THE VALIDITY OF INTEL'S RIGHTS IN THE INTEL MARKS IN ANY COUNTRY, AND HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES THAT MIGHT OTHERWISE BE IMPLIED BY APPLICABLE LAW. 8.  Relationship Between the Parties.  No agency, partnership, joint venture, franchise, or employment relationship is created between Intel and Licensee as a result of this Agreement. Neither party is authorized to create any obligation, express or implied, on behalf of the other party. 9.  Waiver:  The failure of either party to enforce at any time the provisions of this Agreement shall in no way be construed to be a present or future waiver of such provisions, nor in any way affect the ability of any party to enforce each and every provision thereafter. 10.  Indemnity:  Licensee agrees to indemnify, defend, and hold Intel harmless from all loss, cost liability and expense incurred by Intel and any of its subsidiaries or affiliated entities that arise out of a claim concerning Licensee's manufacturing, use or sale of Licensed Products incorporating the Intel Software except as specifically set forth in the Software License and except where such claims are based solely on Licensee's permitted use of the Licensed Marks. Intel agrees to provide Licensee with prompt notice of any such claims and shall provide Licensee with reasonable assistance (at Licensee's expense) in defense or settlement of such claims as set forth in the Software License. 11.  LIMITATION OF LIABILITY:  NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 12.  Term and Termination:   12.1Term: This Agreement shall remain in effect until its expiration or termination as provided herein 12.2Expiration: This Agreement will expire in the event that Licensee ceases to do business for any reason or in the event the Software License is terminated for any reason. 19 -------------------------------------------------------------------------------- 12.3Termination: Either party may terminate this Agreement with or without cause upon thirty (30) days advance written notice. Either party may terminate this Agreement for breach by the other party upon written notice. Opportunity to cure the breach may be given, but is not required under this Agreement. 12.4Effect of Expiration or Termination: Upon any termination or expiration of this Agreement, Licensee shall immediately cease use of the Licensed Marks and Intel Marks, even if Licensee continues to rightfully distribute the Intel Software as permitted in the Software License. 12.5Continuing Obligations: Obligations of the parties under the provision of paragraphs 1, 5, 6, 7, 8,10, 11, 12.4, 13, 14, 16 shall remain in force notwithstanding the termination of expiration of this Agreement. 13.  Assignment:  This Agreement shall be binding upon and inure to the benefit of the successor and permitted assignees of the parties hereto. The rights granted to Licensee and Licensee's obligations hereunder are personal. Licensee shall not assign this Agreement or any right or obligation hereunder, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or substantially all or any part of Licensee' business or assets or otherwise, either voluntarily, by operation of law, or otherwise, without the prior written consent of Intel, which Intel may give or withhold at its sole discretion. Any such purported assignment or transfer shall be deemed a material breach of this Agreement and shall be null and void. 14.  Choice of Law and Jurisdiction:  The validity, construction and performance of this Agreement shall be governed by the laws of the State of Delaware and the United States of America, without reference to conflict of laws principles. Any dispute arising out of this Agreement shall be brought in, and the parties consent to personal and exclusive jurisdiction of and venue in, the state and federal courts within Santa Clara County, California. 15.  Equitable Relief:  Licensee agrees that damages alone would be insufficient to compensate Intel for a breach of this Agreement, acknowledges that irreparable harm would result from a breach of this Agreement, and consents to the entering of an order for injunctive relief to prevent a breach or further breach or any further action which could cause some loss or dilution of Intel's goodwill, reputation, or rights in any Intel Marks, and the entering of an order for specific performance to compel performance of any obligations under this Agreement. 16.  Severability:  If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, such determination shall not affect the validity of the remaining provisions unless Intel determines at its discretion that the court's determination causes this Agreement to fail in any of its essential purposes. 17.  Entire Agreement:  This Agreement, together with the Software License, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all proposals, oral or written, all negotiations, conversation, and/or discussions between the parties relating to this Agreement and all past courses of dealing or industry customs. This Agreement may not be modified except in a wiring signed by authorized representative of both parties. 18.  Notices.  Notices shall be given as set forth in the Software Agreement. 20 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties by their duly authorized representatives, hereby execute this Amendment to the Agreement. INTEL CORPORATION   THRUSTMASTER, INC.   -------------------------------------------------------------------------------- Signature       -------------------------------------------------------------------------------- Signature   -------------------------------------------------------------------------------- Printed Name       -------------------------------------------------------------------------------- Printed Name   -------------------------------------------------------------------------------- Title       -------------------------------------------------------------------------------- Title   -------------------------------------------------------------------------------- Date       -------------------------------------------------------------------------------- Date 21 -------------------------------------------------------------------------------- EXHIBIT E Warrant     THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 144. WARRANT TO PURCHASE COMMON STOCK OF THRUSTMASTER, INC. (Subject to Adjustment) NO.         THIS CERTIFIES THAT, for value received, Intel Corporation, or its permitted registered assigns ("Holder"), is entitled, subject to the terms and conditions of this Warrant, at any time or from time to time after 5:00 p.m. PST December 4, 1998 (the "Effective Date"), and before 5:00 p.m. Pacific Time, five (5) years from the Effective Date (the "Expiration Date"), to purchase from Thrustmaster, Inc. an Oregon corporation (the "Company") Eighty-eight thousand nine hundred and eighty eight (88988) shares of Warrant Stock (as defined in Section 1 below) of the Company at a price per share of Four and thirteen sixteenths dollars (US$413/16) (the "Purchase Price"). Both the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Purchase Price are subject to adjustment and change as provided herein. This Warrant is issued pursuant to that certain Software Development and License Agreement dated as of the Effective Date between the Company and Holder. This Warrant replaces the warrant issued and delivered to Holder by the Company effective as of August 9, 1999. 1.CERTAIN DEFINITIONS.     As used in this Warrant the following terms shall have the following respective meanings:     "Fair Market Value" of a share of Warrant Stock as of a particular date shall mean: (a) if traded on a securities exchange or the Nasdaq National Market, the Fair Market Value shall be deemed to be the average of the closing prices of the Common Stock of the Company on such exchange or market over the 5 business days ending immediately prior to the applicable date of valuation; (b) if actively traded over-the-counter, the Fair Market Value shall be deemed to be the average of the closing bid prices over the 30-day period ending immediately prior to the applicable date of valuation; and (c) if there is no active public market, the Fair Market Value shall be the value thereof, as agreed upon by the Company and the Holder; provided, however, that if the Company and the Holder cannot agree on such value, such value shall be determined by an independent valuation firm experienced in valuing businesses such as the Company and jointly selected in good faith by the Company and the Holder (with the fees and expenses of the valuation firm paid for by the Company.     "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976.     "Registered Holder" shall mean any Holder in whose name this Warrant is registered upon the books and records maintained by the Company.     "Warrant" as used herein, shall include this Warrant and any warrant delivered in substitution or exchange therefor as provided herein. 22 --------------------------------------------------------------------------------     "Warrant Stock" shall mean the Common Stock of the Company and any other securities at any time receivable or issuable upon exercise of this Warrant. 2.EXERCISE OF WARRANT 2.1.Payment.     Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by the delivery (including, without limitation, delivery by facsimile) of the form of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"), duly executed by the Holder, to the Company, and as soon as practicable after such date, surrendering (a) this Warrant, and (b) payment, (i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder; or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by multiplying the number of shares of Common Stock being purchased upon such exercise by the then effective Purchase Price (the "Exercise Amount"), except that if Holder is subject to HSR Act Restrictions (as defined in Section 2.5 below), the Exercise Amount shall be paid to the Company within five (5) business days of the termination of all HSR Act Restrictions. 2.2.Net Issue Exercise.     In lieu of the payment methods set forth in Section 2.1(b) above, the Holder may elect to exchange all or some of the Warrant for shares of Warrant Stock equal to the value of the amount of the Warrant being exchanged on the date of exchange. If Holder elects to exchange this Warrant as provided in this Section 2.2, Holder shall tender to the Company the Warrant for the amount being exchanged, along with written notice of Holder's election to exchange some or all of the Warrant, and the Company shall issue to Holder the number of shares of the Warrant Stock computed using the following formula: X = Y (A-B) -------------------------------------------------------------------------------- A     Where X = the number of shares of Warrant Stock to be issued to Holder; Y = the number of shares of Warrant Stock purchasable under the amount of the Warrant being exchanged; A = the Fair Market Value of one share of the Company's Warrant Stock; and B = the Purchase Price. All references herein to an "exercise" of the Warrant shall include an exchange pursuant to this Section 2.2. 2.3."Easy Sale" Exercise.     In lieu of the payment methods set forth in Section 2.1(b) above, when permitted by law and applicable regulations (including Nasdaq and NASD rules), the Holder may pay the Purchase Price through a "same day sale" commitment from the Holder, whereby the Holder irrevocably elects to exercise this Warrant and to sell a portion of the Shares so purchased to pay for the Purchase Price and the Holder commits upon sale of such Shares to forward the Purchase Price directly to the Company. 2.4.Stock Certificates; Fractional Shares.     As soon as practicable on or after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share equal to such fraction of the current Fair Market Value of one whole share of Warrant Stock as of the date of exercise of this Warrant. No fractional shares or scrip representing fractional shares shall be issued upon an exercise of this Warrant. 23 -------------------------------------------------------------------------------- 2.5.HSR Act.     The Company hereby acknowledges that exercise of this Warrant by Holder may subject the Company and/or the Holder to the filing requirements of the HSR Act and that Holder may be prevented from exercising this Warrant until the expiration or early termination of all waiting periods imposed by the HSR Act ("HSR Act Restrictions"). If on or before the Expiration Date Holder has sent the Notice of Exercise to Company and Holder has not been able to complete the exercise of this Warrant prior to the Expiration Date because of HSR Act Restrictions, the Holder shall be entitled to complete the process of exercising this Warrant in accordance with the procedures contained herein notwithstanding the fact that completion of the exercise of this Warrant would take place after the Expiration Date or the completion of the IPO. 2.6.Partial Exercise; Effective Date of Exercise.     In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the shares of Warrant Stock purchasable hereunder. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above. 3.VALID ISSUANCE: TAXES.     All shares of Warrant Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. 4.ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.     The number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) and the Purchase Price are subject to adjustment upon occurrence of the following events: 4.1.Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares.     The Purchase Price of this Warrant shall be proportionally decreased or increased (as applicable) and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased or decreased (as applicable) to reflect any stock split or subdivision, or combination or reverse stock split, respectively, of the Company's Warrant Stock. 4.2Adjustment for Dividends or Distributions of Stock or Other Securities or Property.     In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Warrant Stock (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (a) securities of the Company or (b) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, the Holder of this Warrant on exercise hereof at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the shares of Warrant Stock (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period giving effect to all adjustments called for by this Section 4. 24 -------------------------------------------------------------------------------- 4.3.Reclassification.     If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Purchase Price therefore shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4. 4.4.Adjustment for Capital Reorganization, Merger or Consolidation.     In case of any capital reorganization of the capital stock of the Company (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Purchase Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. 5.CERTIFICATE AS TO ADJUSTMENTS.     In each case of any adjustment in the Purchase Price, or number or type of shares issuable upon exercise of this Warrant, the Company shall promptly send a certificate to the Holder detailing the computation of the adjustment. 6.LOSS OR MUTILATION.     Upon receipt of evidence reasonably satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant. 7.RESERVATION OF COMMON STOCK.     The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and, if and when necessary, will take all steps necessary to amend its charter documents to provide sufficient reserves of shares of Warrant Stock. All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens and encumbrances, except encumbrances or restrictions arising under federal or state securities laws. 8.TRANSFER AND EXCHANGE.     Subject to the terms and conditions of this Warrant and compliance with all applicable securities laws, this Warrant and all rights hereunder may be transferred to any Registered Holder parent, subsidiary or affiliate, in whole or in part, upon notice to the Company and surrender of this Warrant 25 -------------------------------------------------------------------------------- and the payment of any necessary transfer tax or other governmental charge imposed upon such transfer. 9.RESTRICTIONS ON TRANSFER.     The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the SEC under the Securities Act of 1933, as amended (the "1933 Act"), covering the disposition or sale of this Warrant or the Warrant Stock issued or issuable upon exercise hereof and registration or qualification under applicable state securities laws, such Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants or Warrant Stock unless either (i) the Company has received an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such registration is not required in connection with such disposition or (ii) the sale of such securities is made pursuant to SEC Rule 144. 10.COMPLIANCE WITH SECURITIES LAWS.     By acceptance of this Warrant, the holder hereby represents, warrants and covenants that any shares of stock purchased upon exercise of this Warrant or acquired upon conversion thereof shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof; that the Holder is able to bear the economic risk of holding such shares as may be acquired pursuant to the exercise of this Warrant for an indefinite period; that the Holder understands that the shares of stock acquired pursuant to the exercise of this Warrant or acquired upon conversion thereof will not be registered under the 1933 Act and will be "restricted securities" within the meaning of Rule 144 under the 1933 Act; and that all stock certificates representing shares of stock issued to the Holder upon exercise of this Warrant or upon conversion of such shares may have affixed thereto an appropriate legend reflecting such restricted nature. 11.NO RIGHTS OR LIABILITIES AS STOCKHOLDER.     This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. 12.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.     The Company hereby represents and warrants to Holder that the statements in the following paragraphs of this Section 12 are all true and correct:     12.1. Organization, Good Standing and Qualification.     The Company is a corporation duly organized, validly existing and in good standing under, and by virtue of, the laws of the State of Oregon and has all requisite corporate power and authority to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction where failure to be so qualified would have a material adverse effect on its financial condition, business, prospects or operations.     12.2. Due Authorization; Consents.     All corporate action on the part of the Company, its officers, directors and shareholders necessary for (a) the authorization, execution and delivery of, and the performance of all obligations of the Company under this Warrant, and (b) the authorization, issuance, reservation for issuance and delivery of all of the equity securities issuable upon exercise of this Warrant (and, if applicable, the Common Stock issuable upon conversion thereof). This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors' rights generally and to general equitable principles. All consents, approvals and authorizations of, and registrations, qualifications and filings with, any federal or state governmental agency, authority or 26 -------------------------------------------------------------------------------- body, or any third party, required in connection with the execution, delivery and performance of this Warrant and the consummation of the transactions contemplated hereby and thereby have been obtained.     12.3. Valid Issuance of Stock.     The outstanding shares of the capital stock of Company are duly and validly issued, fully paid and non-assessable.     12.4. SEC Reports; Financial Statements.     The Company has duly filed with the SEC the Company's annual report on Form 10-K for the year ended December 31, 1997, and its quarterly reports on Form 10-Q for the quarter ended March 31, 1998, (collectively, the "Company SEC Reports"). As of their respective filing dates, the Company SEC Reports complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed document with the SEC. Each of the consolidated financial statements (including, in each case, any related notes) contained in the Company SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted for by Form 10-Q) and presented fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as at the respective dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements are subject to normal and recurring year-end adjustments which are not expected to be material in amount.     12.5. Governmental Consents.     All consents, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings with any US., federal or state governmental authority on the part of Company required in connection with the consummation of the transactions contemplated herein shall have been obtained prior to and be effective as of the Effective Date.     12.6. Disclosure.     No representation or warranty by the Company in this Warrant contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading. 13.NOTICES.     All notices and other communications from the Company to the Holder shall be given in writing via certified mail, return receipt requested, hand delivery or overnight delivery to 2200 Mission College Boulevard, Mail Stop SC4-210, Santa Clara, California 95052, Attention: Treasurer. 14.LAW GOVERNING.     This Warrant shall be construed and enforced in accordance with, and governed by, the laws of the State of Oregon. 27 -------------------------------------------------------------------------------- 15.NO IMPAIRMENT.     The Company will not, by amendment of its Articles of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant. 16.NOTICES OF RECORD DATE.     In case (a) the Company shall take a record of the holders of its Warrant Stock, for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities or to receive any other right; (b) of any consolidation, merger or reorganization of the Company, any reclassification of the capital stock of the Company, or any conveyance of all or substantially all of the assets of the Company to another corporation in which holders of the Company's stock are to receive stock, securities or property of another corporation; (c) of any voluntary dissolution, liquidation or winding-up of the Company; or (d) of any redemption or conversion of all outstanding Common Stock or Warrant Stock; then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, or (ii) the date on which such transaction or event is to take place, and the time, if any is to be fixed, as of which the holders of record of Warrant Stock, shall be entitled to exchange their shares of Warrant Stock for securities or other property deliverable upon such event or transaction. Such notice shall be delivered at least thirty (30) days prior to the date therein specified. 17.SEVERABILITY.     If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 18.INFORMATION RIGHTS.     The Company shall deliver to each holder of this Warrant or any securities issued (directly or indirectly) upon exercise hereof, upon request, copies of the Company's reports on Forms 10-K, 10-Q, and 8-K and Annual Reports to Shareholders promptly after such documents are filed with the SEC. 19.NO INCONSISTENT AGREEMENTS.     The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of this Warrant or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to holders of the Company's securities under any other agreements, except rights that have been waived. 20.SATURDAYS, SUNDAYS AND HOLIDAYS.     If the Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration Date shall automatically be extended until 5:00 p.m. the next business day.     [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 28 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the Effective Date. INTEL CORPORATION   THRUSTMASTER, INC.   By:   --------------------------------------------------------------------------------       By:   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Printed Name       -------------------------------------------------------------------------------- Printed Name   -------------------------------------------------------------------------------- Title       -------------------------------------------------------------------------------- Title     SIGNATURE PAGE TO WARRANT 29 -------------------------------------------------------------------------------- Exhibit F INTEL SOFTWARE LICENSE AGREEMENT (Final, Single User) IMPORTANT—READ BEFORE COPYING, INSTALLING OR USING.     Do not use or load this software and any associated materials (collectively, the "Software") until you have carefully read the following terms and conditions. By loading or using the Software, you agree to the terms of this Agreement. If you do not wish to so agree, do not install or use the Software.     LICENSE.  You may copy the Software onto a single computer for your personal, noncommercial use, and you may make one back-up copy of the Software, subject to these conditions: 1.You may not copy, modify, rent, sell, distribute or transfer any part of the Software except as provided in this Agreement, and you agree to prevent unauthorized copying of the Software. 2.You may not reverse engineer, decompile, or disassemble the Software. 3.You may not sublicense or permit simultaneous use of the Software by more than one user. 4.The Software may include portions offered on terms in addition to those set out here, as set out in a license accompanying those portions.     OWNERSHIP OF SOFTWARE AND COPYRIGHTS.  Title to all copies of the Software remains with Intel or its suppliers. The Software is copyrighted and protected by the laws of the United States and other countries, and international treaty provisions. You may not remove any copyright notices from the Software. Intel may make changes to the Software, or to items referenced therein, at any time without notice, but is not obligated to support or update the Software. Except as otherwise expressly provided, Intel grants no express or implied right under Intel patents, copyrights, trademarks, or other intellectual property rights. You may transfer the Software only if the recipient agrees to be fully bound by these terms and if you retain no copies of the Software.     LIMITED MEDIA WARRANTY.  If the Software has been delivered by Intel on physical media, Intel warrants the media to be free from material physical defects for a period of ninety days after delivery by Intel. If such a defect is found, return the media to Intel for replacement or alternate delivery of the Software as Intel may select.     EXCLUSION OF OTHER WARRANTIES.  EXCEPT AS PROVIDED ABOVE, THE SOFTWARE IS PROVIDED "AS IS" WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OF ANY KIND INCLUDING WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE. Intel does not warrant or assume responsibility for the accuracy or completeness of any information, text, graphics, links or other items contained within the Software.     LIMITATION OF LIABILITY.  IN NO EVENT SHALL INTEL OR ITS SUPPLIERS BE LIABLE FOR ANY DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST PROFITS, BUSINESS INTERRUPTION, OR LOST INFORMATION) ARISING OUT OF THE USE OF OR INABILITY TO USE THE SOFTWARE, EVEN IF INTEL HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME JURISDICTIONS PROHIBIT EXCLUSION OR LIMITATION OF LIABILITY FOR IMPLIED WARRANTIES OR CONSEQUENTIAL OR INCIDENTAL DAMAGES, SO THE ABOVE LIMITATION MAY NOT APPLY TO YOU. YOU MAY ALSO HAVE OTHER LEGAL RIGHTS THAT VARY FROM JURISDICTION TO JURISDICTION.     TERMINATION OF THIS AGREEMENT.  Intel may terminate this Agreement at any time if you violate its terms. Upon termination, you will immediately destroy the Software or return all copies of the Software to Intel. 30 --------------------------------------------------------------------------------     APPLICABLE LAWS.  Claims arising under this Agreement shall be governed by the laws of California, excluding its principles of conflict of laws and the United Nations Convention on Contracts for the Sale of Goods. You may not export the Software in violation of applicable export laws and regulations. Intel is not obligated under any other agreements unless they are in writing and signed by an authorized representative of Intel.     GOVERNMENT RESTRICTED RIGHTS.  The Software is provided with "RESTRICTED RIGHTS." Use, duplication, or disclosure by the Government is subject to restrictions as set forth in FAR52.227-14 and DFAR252.227-7013 et seq. or its successor. Use of the Software by the Government constitutes acknowledgment of Intel's proprietary rights therein. Contractor or Manufacturer is Intel Corporation, 2200 Mission College Blvd., Santa Clara, CA 95052. 31 -------------------------------------------------------------------------------- Exhibit G Thrustmaster Management of Intel Software Source Code 1.0Thrustmaster manager responsible for Intel Software Source Code: Loren Winzeler 2.0Location of Intel Software Source Code: source servers; hard media locked in fire safe (Corporate HQ) 32 -------------------------------------------------------------------------------- Exhibit H Ensuring compatability between Intel Multi-point Audio derived applications     The Intel Multi-point Audio SDK can be integrated with many types of applications to provide multi-participant audio conferencing. Follow these directions to ensure that the applications you build are compatible with each other as well as all other applications that have been built using Intel Multi-point Audio. For Install /Uninstall Compatibility If you are using the Intel Multi-point Audio SDK as Released     All applications using this release of the Intel Multi-point Audio SDK unmodified (no source level changes) should follow these steps to ensure that they do not conflict with other applications also using this SDK. 1)File Locations for Intel Multi-point Audio core files Files that implement Intel Multi-point Audio core functionality must be placed in a well known directory common to all applications that use it. Because files in this directory are shared by multiple applications, standard MS Windows shared file reference counting should be used when installing and uninstalling these files. Also, check file creation times to ensure that you never copy over any of the core files with an older version. The common shared directory for this release of the Intel Multi-point Audio SDK is: <Program Files>\Common Files\Intel\Multi-Point Audio 1.6 Note: <Program Files> is a variable location maintained by Windows system and is not always C:\Program Files     The list of core files can be found in the section below entitled Intel Multi-point Audio core files. 2)Registry Settings Registry settings required to configure Intel Multi-point Audio are unique to each application that uses the SDK. To ensure that applications configurations do not change or conflict with each other, Multi-point Audio registry subkeys and entries are placed under a registry key unique to that application. This is accomplished with the following three steps. a)The application writer determines an application identifier to be used to distinguish this application's registry entries. Because this identifier is used as portion of a registry key, it may contain forward-slash characters ("\") to delimit subkeys. We recommend that the identifier contain a company name, a product name, and a version number, i.e "MyCompany\ThisProduct\v1.0". This name can contain single but not multiple embedded spaces in the name. Ie "My Company " is okay, but "My Company" is not. b)Write your application setup software to place Intel Multi-point Audio required registry entries in the following registry location: HKEY_LOCAL_MACHINE\Software\Intel\<application id> Or. to use our example, HKEY_LOCAL_MACHINE\Software\Intel\MyCompany\ThisProduct\v1.0\. . .     Note: to editor we might want a reference to the "installation design doc" part of the document Where all the current registry entries are listed. 33 -------------------------------------------------------------------------------- c)In your application, call the MPA Init() method passing your identifier as the parameter. This will allow the Intel Multi-point Audio subsystem to find the correct configuration values for your application. The following code fragment illustrates this. //Create an instance of the MultiPointAudio control HRESULT hr = m_spMpa.CoCreateInstance(CLSID_MpaCtrl); ... < other COM related initialization > ... m_spMpa->Init(_bstr_t("MyCompany\ThisProduct\v1.0")); If you have made source code changes to Intel Multi-point Audio     Integrators that have made source code level changes to the Intel Multi-point Audio subsystem need to ensure that any changes they have made do not inadvertently affect the operation of applications using the original, unmodified Multi-point Audio SDK. Following these steps will ensure compatibility with existing and future applications using Intel Multi-point Audio. 1.Change the Class ID Global Unique Identifiers (GUIDs) for Multi-point Audio implemented COM components. Also, change Interface ID GUIDs for any interfaces that have been modified. See instructions for changing Multi-point Audio GUIDs in section <TBD>. 2.Define a new common file location for Intel Multi-point Audio core files. To ensure that this location is unlikely to be used by other Intel Multi-point Audio integrators, we recommend using your company name and an SDK version number as part of the location directory path. For example: 3.<Program Files>\Common Files\MyCompany\Multi-Point Audio 1.6.1 4.Ensure that applications using this variation of Multi-point Audio follow the same compatibility rules defined above for Multi-point Audio SDK integrators. Core files should be placed in the newly defined common directory, and all required registry entries should be unique to the application. For Runtine Compatability     If you want to ensure that your application will execute and run correctly at the same time other Multi-point Audio applications are running, follow these steps. 1.ServerPort usage—When your application hosts a conference, ensure that the ServerPort property is set to a non default value (default is 24386.) It is safest to set the ServerPort property to zero (0), which will cause a unique port ID value to be assigned. You will need to ensure that all clients of this conference are using the same ServerPort property value as the host. This may be done by sending to the other participants the actual ServerPort value read after your application receives the HostConferenceAccepted event. Applications way also reserve a port id for their exclusive use with the Internet Assigned Numbers Authority (http://www.iana.org/numbers.html#P) and use this as a fixed ServerPort value to be used on both host and client applications. 2.ConferenceListenPort usage—When your application hosts a conference, ensure that the ConferenceListenPort property is set to a non default value (default is 1720.) It is best to set the ConferenceListenPort property to zero (0), which will cause a unique port ID value to be assigned. Unlike the ServerPort property value, there is no need to pass this value from the host to clients. Multi-point Audio passes it internally. Setting the ConferenceListenPort property to the default values allows the Multi-point Audio subsystem to inter-operate with H.323 based internet phone applications. 34 -------------------------------------------------------------------------------- Intel Multi-point Audio core files: Audmsp32.dll MPA.dll Ppm.dll SM.dll api.dll arscli.dll autoreg.dll avserp32.dll callcont.dll cclock.dll confmgr.dll cstrain.dll dr.dll gki.dll h245.dll h245ws.dll icas.exe irrcm.dll isdm2.dll isreghlp.dll mallmsp.dll marsrdr.dll mixmsp.dll mpap.dll mpas.dll msm.dll netmmerr.dll ossapi.dll ossdmem.dll rci.dll refobj.dll sessnmgr.dll soedper.dll strmsp.dll vcrmsp32.dll 35 -------------------------------------------------------------------------------- Amendment Software Development and Licensing Agreement     This Amendment ("Amendment') is made effective as of April 21, 2000 ("Effective Amendment Date"), by and between Intel Corporation ("Intel") and CenterSpan Communications Corporation ("CenterSpan"), and amends that Software Development and Licensing Agreement between Intel and CenterSpan that has an effective date of August 9, 1999 ("Agreement"). Capitalized terms in this Amendment shall have the meanings attached to them in the Agreement unless otherwise specifically defined herein. Recitals     In the Agreement, Intel licensed the Intel Software to CenterSpan and in consideration Intel received Warrants to purchase 200,000 shares of CenterSpan common stock (the "Agreement Warrants").     Intel now desires to provide CenterSpan certain additional license rights to the Intel Software and CenterSpan desires to obtain such additional license rights to the Intel Software as set forth in this Amendment. In consideration of these additional license rights, the Agreement Warrants will vest immediately, and CenterSpan will issue and deliver to Intel additional new warrants to purchase 125,000 shares of CenterSpan common stock (as further defined below, the "Amendment Warrants").     NOW THEREFORE, based on the Recitals and the mutual covenants herein, the parties agree to amend the Agreement as follows: Amendment 1.New Name. All references to "Thrustmaster" in the Agreement shall be replaced with "CenterSpan". 2.Definitions. The definitions in the Agreement are either amended or added as follows: 2.1The defined term, "Active User" means an end-user that has used the Licensed Product four times within a calendar month. 2.2The definition of "Licensed Products" is hereby amended to include any software product developed by CenterSpan that incorporates the Intel Software or is Embedded within a third party product pursuant to a permitted sublicense. 2.3"Registered User" means an end-user who has to provide basic demographic information (e.g. email address) to CenterSpan, which is providing them a Licensed Product 3.Additional License Grants and Restrictions. Subject to all of the terms, conditions and restrictions contained in the Agreement, Section 4.4 of the Agreement is hereby amended to grant to CenterSpan a worldwide, non-exclusive, non-assignable and non-transferable right under Intel copyrights and trade secrets in the Intel Software to (i) sublicense Intel Software Object Code to any third party and (ii) sublicense Source Code for the Intel Launch & Connect Software Component and the Distributed Presence Component (described in Exhibit A Sections 2 and 3 of the Agreement) to any third party, but only for Embedding into sublicensee software applications that are compatible with Licensee's platform For the avoidance of doubt, CenterSpan shall have no right to disclose or sublicense Intel MultiPoint Audio Software Source Code (including but not limited to h.323 Source Code) to any third party. No other right under any Intel intellectual property may be sublicensed. 3.1Limited Exclusivity. Intel will not license the Intel Launch and Connect Software Component and the Distributed Presence Component (described in Exhibit A Sections 2 and 3 of the 1 -------------------------------------------------------------------------------- Agreement) to any third party before [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC], except as may be incorporated into any other technology, product or service offered by Intel or its majority owned subsidiaries. 3.2Extended Exclusivity. The restriction set forth in Section 3.1 will be extended beyond [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] through the term of this Agreement provided that CenterSpan meets the milestones set forth in Exhibit X to this Amendment. The restriction set forth in Section 3.1 shall terminate immediately upon any CenterSpan failure to meet any specified milestone. 3.3Other Restriction. In addition to all other license and sublicensing conditions and restrictions set forth in the Agreement, (i) no permitted sublicensee shall have the right to further sublicense or otherwise distribute the Intel Software in whole or in part, except in Object Code from as Embedded in such licensee's product (ii) all sublicensee Source Code rights shall be limited to Embedding the Intel Software Source Code into the sublicensee's products and providing maintenance and support for such products (iii) all sublicense agreements shall expressly prohibit disclosure of the Intel Software Source Code to third parties and (iv) CenterSpan shall be solely responsible for any and all actions of its sublicensees and for their compliance with the restrictions set forth in this Agreement. 3.4Neither CenterSpan nor its sublicensees shall reverse-assemble, reverse compile or otherwise reverse engineer any Intel Software provided only in Object Code form. 4.Marketing, Promotion and Technical Support. 4.1CenterSpan shall use best efforts to support, market and distribute Licensed Products as set forth in, and reported according to, Exhibit X, and meet the milestones set forth therein. 4.2IAL will use commercially reasonable efforts to refer inquiries regarding the Intel Software to CenterSpan ("Intel Marketing Referrals") 4.3Upon request, CenterSpan shall provide updates to IAL from time to time on the progress of the Intel Marketing Referrals. 4.4Intel shall use commercially reasonable efforts to promote the use of application launching capabilities that are compatible with Licensed Product. 4.5CenterSpan shall be solely responsible for supporting its sublicensees and all end-users of the Licensed Products. 5.New Warrants. In consideration of the additional license rights granted by Intel to CenterSpan herein, upon execution of this Agreement, CenterSpan shall issue and deliver to Intel 125,000 New Warrants to purchase CenterSpan common stock at a purchase price per share equal to a 15% discount of the average closing price on the NASDAQ:NM for the ten (10) business days preceding the Effective Date of this Amendment. Intel's obligations under the Agreement are expressly conditioned on CenterSpan's delivery of the New Warrants to Intel. Intel shall have the right to exercise the New Warrants upon delivery thereof to Intel or any time thereafter at Intel's discretion as set forth in the New Warrants. No breach of this Agreement shall be considered a breach of the New Warrants, but a breach of the terms of the New Warrants by CenterSpan shall be considered a material breach of this Agreement by CenterSpan. 5.1Original Warrants Accelerated Vesting. Upon execution of this Amendment, the Original Warrants shall fully vest in Intel and Intel shall have the right to exercise them at its discretion. CenterSpan shall take any and all corporate action and execute any and all appropriate documentation necessary to make this possible. 2 -------------------------------------------------------------------------------- 6.The term of the Agreement, as amended, is hereby extended until [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] years from the original Effective Date of the Agreement unless otherwise terminated. This Agreement may be extended for such additional term and under such conditions as the parties may mutually agree in a duly executed writing. 7.All terms and conditions of the Agreement remain in full force and effect and apply to this Amendment, unless specifically modified herein. Agreed:       Intel Corporation       CenterSpan Communications Corporation   -------------------------------------------------------------------------------- Signature       -------------------------------------------------------------------------------- Signature   -------------------------------------------------------------------------------- Printed Name       -------------------------------------------------------------------------------- Printed Name   -------------------------------------------------------------------------------- Title       -------------------------------------------------------------------------------- Title 3 -------------------------------------------------------------------------------- Exhibit X (Amendment to Exhibit C of the Agreement)     The parties understand the objective of this agreement is to achieve a significant number of end users of Intel Software. To that end the parties agree to the following short and long term metrics. C.2CenterSpan shall use best efforts to achieve the following milestones regarding sublicensing of the Intel Launch and Connect Software Component and Presence Software Component described in Exhibit A Sections 2 and 3.     C.2.1 For purposes of this section, Registered Users shall include any and all registered users of a sublicensee l. CenterSpan shall be credited with obtaining such Registered Users at the time a sublicense agreement is executed between CenterSpan and a third party licensee. Registered Users shall also include all Active Users of Licensed Product as provided in Section C.1. Registered Users shall include the registered users of all versions of Licensed Products, including beta and new releases.   CenterSpan shall use best efforts to achieve the milestones outlined below. Date   [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC] Signed Definitive Distribution Agreements with Game ISV's/Web Game Sites   [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]   Total Active Userbase of Socket Product       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]   Total Registered Userbase of Socket Product       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]   Sub-licensees of LAPI enabled Socket Platform       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]   Sub-licensees of LAPI component technology (this number includes sub-licensees of Socket Platform above)       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]   Total Registered Userbase of LAPI-enabled technology sub-licensees       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]                         C.3CenterSpan shall use best efforts to provide status reports to Intel reporting on the progress toward the milestones set forth above. Such reports shall be due thirty (30) days of the close of each calendar quarter. 4 -------------------------------------------------------------------------------- QUICKLINKS SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT RECITALS AGREEMENT SECTION 1. DEFINITIONS SECTION 2. THRUSTMASTER OBLIGATIONS SECTION 3. INTEL OBLIGATIONS SECTION 4. LICENSES SECTION 5. PROPRIETARY RIGHTS SECTION 6. TECHNICAL SUPPORT AND UPDATES SECTION 7. MARKETING AND PROMOTION SECTION 8. COPYRIGHTS, ATTRIBUTION, TRADEMARK SECTION 9. NO WARRANTIES; LIMITED LIABILITY SECTION 10. TERM AND TERMINATION SECTION 11. CONFIDENTIALITY AND NON-DISCLOSURE SECTION 12. NOTICES SECTION 13. INDEMNITY SECTION 14. FORCE MAJEURE SECTION 15. ASSIGNMENT, SALE OR TRANSFER SECTION 16. RELATIONSHIP OF THE PARTIES SECTION 17. MISCELLANEOUS EXHIBIT A DESCRIPTION OF SOFTWARE AND DOCUMENTATION EXHIBIT B Description of Licensed Products EXHIBIT C Milestones EXHIBIT D INTEL OPTIMIZER LOGO TRADEMARK LICENSE AGREEMENT EXHIBIT E Warrant WARRANT TO PURCHASE COMMON STOCK OF THRUSTMASTER, INC. (Subject to Adjustment) Exhibit F INTEL SOFTWARE LICENSE AGREEMENT (Final, Single User) IMPORTANT—READ BEFORE COPYING, INSTALLING OR USING. Exhibit G Thrustmaster Management of Intel Software Source Code Exhibit H Ensuring compatability between Intel Multi-point Audio derived applications Amendment Software Development and Licensing Agreement Recitals Amendment Exhibit X (Amendment to Exhibit C of the Agreement)

EX-10.62 4 bofa1062.htm 10.62 AUTO LOAN PURCHASE AND SALE AGREEMENT AUTO LOAN PURCHASE AND SALE AGREEMENT This Auto Loan Purchase and Sale Agreement ("Agreement") is made on May 16, 2000 (the "Effective Date"), by and between Bank of America, a Deleware corporation with its principal office at 10401 Deerwood Park Blvd, Jacksonville, Florida 32256 ("Correspondent") and E-LOAN, Inc., a Delaware corporation with its principal office at 5875 Arnold Road, Dublin, CA 94568 ("E-LOAN"). WHEREAS, E-LOAN maintains a website at www.eloan.com, and is engaged in the business of, among other things, the origination and sale of loans to consumers for the purchase or refinance of motor vehicles ("Loans"); WHEREAS, E-LOAN desires to provide a broad range of available financing for consumers seeking Loans; WHEREAS, E-LOAN and Correspondent desire to enter into an arrangement whereby E-LOAN will sell Loans to Correspondent based on Correspondent's Purchase Criteria; WHEREAS, Correspondent and E-LOAN are parties to a Strategic Alliance Agreement dated as of September 17, 1999 (the "Strategic Alliance"). WHEREAS, under the Strategic Alliance, it is contemplated that E-LOAN would apply for and obtain state lending licenses that would enable it to make loans directly to consumers that visit its website. E-LOAN has obtained necessary licenses in certain states and desires to sell loans made in those states to Correspondent, and desires to sell loans to Correspondent in the remaining states once E-LOAN obtains necessary licenses in those remaining states. Correspondent agrees to purchase loans that E-LOAN originates in compliance with Correspondent's Purchase Criteria. NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, E-LOAN and Correspondent hereby agree as follows: 1. Definitions. 1.1 General Definitions. For purposes of this Agreement, the following capitalized terms shall have the respective meanings set forth below: "Approved Loan Documents" shall mean the Note and Security Agreement, Dealer Draft (if any), evidence of satisfactory insurance and application for certificate of title and such other forms as may be listed from time to time on Exhibit D used by Correspondent to document Loans. "Buy Rate" shall mean the minimum Loan Rate quoted by Correspondent on its Rate Sheet from time to time with respect to Loans that Correspondent desires to purchase under this Agreement, as same is noted on the Confirmation. "Confirmation" shall mean the document substantially in the form described in Exhibit C which will list the related Purchase Price with respect to Loans being transferred to Bank from Correspondent on any particular Transfer Date. "Contract" means a loan agreement signed by all necessary Obligors on an Approved Document. "Eligible Loan" shall mean an extension of credit from E-LOAN to a consumer which is originated in E-LOAN's name in accordance with the Purchase Criteria, as same are in effect from time to time, and which meets all of the Purchase Criteria on the Transfer Date. "Loan File" means with respect to each Loan all of the documents listed on Exhibit A. "Obligor" means any borrower or Obligor signing a Loan Contract. "Origination Date" means the effective date a Loan Contract was signed by the Obligor. "Purchase Criteria" means the characteristics that Loans originated for sale to Correspondent hereunder must have in order to be considered under this Agreement, as set forth from time to time on Exhibit B. "Related Documents" shall mean the assignment, bill of sale, certificates of title and any document or instrument reasonably necessary or appropriate to be executed by E-LOAN or their respective affiliates on each Transfer Date with respect to the Loans sold to Correspondent. "Related Security" means, with respect to a Loan, the vehicle underlying and securing such Loan and all other collateral and security agreements and property purported to be subject thereto and held as security for such Loan, including the proceeds of any Specified Insurance. "Specified Insurance" means any insurance or plans sold in connection with a Loan, including credit life or credit disability insurance, hazard insurance, GAP insurance, flood insurance, involuntary unemployment insurance or any other type of insurance or plan, such as an extended service contract sold in connection with an automobile that is financed with the proceeds of a Loan. "Transfer Date" means the date on which E-LOAN delivers Loans to the Correspondent in compliance with the Purchase Criteria. 2. Sale and Delivery of Loans. 2.1 Sale and Purchase of Loans. From time to time during the Term of this Agreement, E-LOAN shall sell, assign, transfer, convey and deliver to Correspondent, and Correspondent shall purchase from E-LOAN, without recourse (except as provided herein)and on a servicing released basis, all right, title and interest in and to Loans as provided in this Agreement provided E-LOAN has met all terms and conditions herein. 2.2 Offer. From time to time during the Term of this Agreement, E-LOAN shall submit, for Correspondent's review and approval, an offer to sell one or more prospective Loans (each, an "Offer") under the terms of this Agreement. Each Offer shall be in a format acceptable to Correspondent, and shall include the items and information set forth on Exhibit A, which shall include the application relating to each offered Loan and such other information as deemed necessary by Correspondent. In determining whether to submit an Offer to Correspondent, E-LOAN shall apply Correspondent's Purchase Criteria to the Loan application, and shall only submit Offers that satisfy the Purchase Criteria. E-LOAN is not obligated to offer to sell any Loans or prospective Loans to Correspondent. Application Information in Exhibit A and Purchase Criteria in Exhibit B may be changed by the Correspondent at any time with 30-day advance written notice to E-LOAN. 2.3 Acceptance. Within two (2) of Correspondent's business days from receipt of a completed Offer (as defined in section 1.2), Correspondent shall, in its sole discretion, accept or reject such Offer, and shall inform E-LOAN of its decision. In determining whether to accept or reject an Offer, Corespondent shall apply the Purchase Criteria to each Loan offered for sale. If Correspondent accepts an Offer, Correspondent shall send to E-LOAN a Confirmation with respect to each prospective Loan to be purchased. The Confirmation shall include the information set forth on Exhibit C, and shall include a clear description of the conditions that must be met in order for Correspondent to purchase the Loan. Transmission of a Confirmation shall constitute conditional acceptance of E-LOAN's Offer, and Correspondent shall be obligated to purchase the prospective Loan, provided that all conditions set forth in the Confirmation are met, E-LOAN delivers the Required Documents as described in section 2.5 below and the Loan is funded by E-LOAN prior to expiration date set forth in the Confirmation. If E-LOAN does not fund a prospective Loan and fulfill all conditions set forth in the Confirmation by the earlier of (i) the expiration date set forth in the Confirmation, or (ii) within sixty (60) days of E-LOAN's receipt of the Confirmation, the Confirmation shall expire, and Correspondent shall have no obligation to purchase the Loan. E-LOAN agrees that it will not offer for sale to any person other than Correspondent any Loan for which a Confirmation has been issued and is outstanding. Upon expiration of a Confirmation, E-LOAN shall be free to sell or offer to sell the subject Loan to any other person. In the absence of a Confirmation issued by Correspondent with respect to a Loan, Correspondent is not obligated to purchase any Loan offered for sale by E-LOAN. 2.4 Express Confirmation. From time to time Correspondent and E-LOAN may mutually agree to grant E-LOAN the authority to submit Loans for purchase to the Correspondent without having a specific Confirmation issued according to the terms in Sections 2.2 and 2.3. Under such programs, Correspondent will provide to E-LOAN specific Express Purchase Criteria that if Correspondent reasonably deems that Purchase Criteria has been met, will constitute a Confirmation according to Section 2.3. Such Express Purchase Criteria may be changed from time to time by Correspondent, with changes in the Express Purchase Criteria effective immediately and subject to the terms of Section 7.3. 2.5 Funding and Delivery of Loans. E-LOAN will be responsible for the funding of all Loans using its own funds. E-LOAN shall use its best efforts to fulfill all conditions set forth in a Confirmation, and to fund the subject Loans prior to expiration of a Confirmation; however, E-LOAN is not obligated to sell any Loans to Correspondent, whether or not a Confirmation has been issued by Correspondent with respect to the subject Loan. Upon funding of a Loan subject to a Confirmation, E-LOAN shall immediately, but not later than five (5) business days after the Origination Date of the Loan or less than twenty (20) days prior to the first payment due date of the Loan, deliver to Correspondent, the Approved Loan Documents and items set forth on Exhibit D, together with any other items required by the Confirmation relating to the subject Loan, evidencing funding and fulfillment of all conditions of the Confirmation ("Required Documents"). The Required Documents and other items set forth in Exhibit D may be changed from time to time by Correspondent, subject to thirty days advance written notice to E-LOAN. 2.6 Payment; Transfer. With respect to each Loan sold, Correspondent shall pay E-LOAN the Purchase Price as noted in the Confirmation, calculated in the manner, and by the time limits set forth in Exhibit E. The Purchase Price shall be the principal amount of the Loan, plus such additional compensation as the parties agree. Upon receipt by E-LOAN of the portion of the Purchase Price representing the principal balance of the Loan ("Transfer Date"), the Loan, and all rights, benefits, payments, proceeds and obligations arising from or in connection with the Loan, together with any Related Security, shall vest in Correspondent. Until the Transfer Date, E-LOAN shall own and control the application and all documentation relating to a prospective Loan to be sold. All Loans sold under this Agreement shall be sold without recourse (except as provided herein), on a servicing released basis. With respect to each Loan as to which E-LOAN has not delivered to Correspondent all Required Documents or otherwise has failed to meet the Purchase Criteria or terms and conditions of the Confirmation and this Agreement prior to expiration of the Confirmation related to such Loan, Correspondent shall have no obligation to purchase the subject Loan. 3. Covenants. 3.1 Compliance with Law. Each party shall comply with all federal, state and local laws and regulations applicable to this Agreement and the respective party's obligations hereunder, including without limitation all consumer protection laws, the federal Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Truth in Lending Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act and Federal Odometer Act and each of their respective regulations and all other federal, state and local laws, regulations and rules applicable to the advertising, negotiation and consummation of the Loan and perfection of Correspondent's security interest in the Related Security financed by the Loan has been satisfied ("Applicable Law"). E-LOAN shall provide prior written notice to Correspondent of any changes to the form documents for Loans, and shall update the forms as necessary to comply with Applicable Law. Correspondent shall provide prior written notice to E-LOAN of any changes to the Purchase Criteria, and shall update the Purchase Criteria, as necessary, to comply with Applicable Law. 3.2 Post-Closing Payments. All monies received by E-LOAN after the Transfer Date to any Loan shall be promptly turned over to Correspondent. 3.3 Limited Power of Attorney. E-LOAN hereby appoints Correspondent, its agents, employees, successors and assigns, as its attorney in fact, with the full power of substitution, for the limited purpose of (1) endorsing E-LOAN's name on any checks, drafts, money orders or other forms of payment payable to E-LOAN that may come into Correspondent's possession with respect to any Loan purchased by Correspondent under this Agreement, and (2) executing any form or document necessary to effectuate the assignment of a Loan in accordance with this Agreement, or to create, perfect, assign or release a first priority security interest in a vehicle securing a Loan in favor of Correspondent. 3.4 Non-Discrimination. Correspondent's credit underwriting standards and Purchase Criteria comply with, and as such standards and Purchase Criteria may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. E-LOAN's loan origination practices comply with, and as such origination practices may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. 3.5 Record Retention. Each party shall, at its own expense, maintain data, information, records and documents relating to Loans offered for sale or sold pursuant to this Agreement, in such manner and for such time period as is required by Applicable Law. Each party shall cooperate with one another and make such Loan records available to regulatory authorities to satisfy state or federal audit requirements. 3.6 Performance Reports. Within twenty five (25) days after the end of each calendar month during the Term of this Agreement, Correspondent shall provide to E-LOAN a report showing (i) the number of Loans purchased by Correspondent during the preceding month; (ii) the principal balance of each Loan purchased by Correspondent during the preceding month; (iii) the number of Loans purchased by Correspondent since the date hereof having delinquencies of 30-59 days, 60-90 days, and over 90 days, respectively; (iv) the number of Loans purchased by Correspondent since the date hereof that have been charged off; and (v) the number of Loans purchased by Correspondent since the date hereof for which the vehicle securing the Loan has been repossessed, showing the date of each repossession. 3.7 Mutual Cooperation. During the term of this Agreement, the parties agree to cooperate with and assist each other, as reasonably requested, in carrying out the covenants, agreements, duties and responsibilities of one another under this Agreement, and shall from time to time, execute, acknowledge and deliver such additional instruments, assignments, endorsements, and documents as may reasonably be required or appropriate to facilitate the performance of this Agreement. Both parties shall work together with respect to coordinating the systems requirements for establishing and maintaining electronic connectivity, and each party shall bear its own expenses with respect thereto. 3.8 No Solicitation. From the date of this Agreement until any Loan sold to Correspondent is paid in full, but no earlier than three years after selling such Loan to Correspondent, E-LOAN agrees that it will not directly solicit the respective borrowers to apply for, or offer to such borrowers, any financial products, the proceeds of which could be used to pay off or refinance the subject Loan, including, without limitation, the solicitation or offering of any loan, line of credit, home equity loan or line of credit, or any other credit product. 3.9 Audit. (a) Correspondent's Right to Inspect. E-LOAN shall maintain accurate books and records with respect to each Loan originated by Correspondent as a result of E-LOAN's Services hereunder. E-LOAN shall permit the examination by Correspondent, including, but not limited to, Correspondent's internal auditors and any governmental agencies having jurisdiction over Correspondent, during normal business hours and upon at least seventy-two (72) hours prior written notice, of all books, accounts, correspondence and records of E-LOAN relating to any Loan or the related Vehicle. Correspondent shall be permitted at its own expense to make photostatic or other copies of such of these records as it may desire. (b) E-LOAN's Right to Inspect. Correspondent shall permit the examination by E-LOAN, including, but not limited to, E-LOAN's internal auditors and any governmental agencies having jurisdiction over E-LOAN, during normal business hours and upon at least seventy-two (72) hours prior written notice, of all books, account, correspondence and records of Correspondent relating to Origination Fees paid or payable to E-LOAN hereunder. (c) Audit; Arbitration of Invoice Disputes. Each party may schedule an audit or review with the other party for purposes of holding such party accountable with respect to compliance under this Agreement, including whether the invoices as presented and the charges paid are accurate, correct and valid and are in accordance with the provisions of this Agreement. If Correspondent has a question regarding an invoice, which cannot be resolved to its reasonable satisfaction, Correspondent shall notify E-LOAN of its dispute. To the extent the parties are unable to resolve a dispute, despite good faith face-to-face negotiations by persons with decision making responsibility, Correspondent and E-LOAN shall submit the dispute to arbitration in accordance with Section 8.12. 3.10 Insurance. (a) Requirements. E-LOAN shall, and shall require its subcontractors to, secure and maintain, at its or their own expense, throughout the entire term of this Agreement, the following insurance with companies satisfactory and acceptable to Correspondent and shall furnish to Correspondent certificates evidencing such insurance prior to commencing Services. Said certificates shall contain a provision whereby the policy and/or policies shall not be canceled or altered without at least thirty (30) calendar days prior written notice to Correspondent. (b) Worker's Compensation/Employers' Liability. Worker's Compensation Insurance which shall fully comply with the statutory requirements of all applicable state and federal laws and Employers' Liability Insurance which limit shall be $500,000 per accident for bodily injury and $500,000 per employee/aggregate for disease. E-LOAN and its underwriter shall waive subrogation against Correspondent. (c) Commercial General Liability. Commercial General Liability Insurance with a minimum combined single limit of liability of $1,000,000 per occurrence per location and $2,000,000 aggregate for bodily injury and/or death and/or property damage and/or personal injury. This shall include products/completed operations coverage and shall also include Broad Form Contractual specifically covering this Agreement. Further, Correspondent is to be added as an additional insured on this policy with respect to operations covered under this Agreement. (d) Business Automobile Liability. Business Automobile Liability Insurance covering all owned, hired and non-owned vehicles and equipment used by E-LOAN with a minimum combined single limit of liability of $1,000,000 for injury and/or death and/or property damage. (e) Excess coverage. Excess coverage with respect to (A), (B) and (C) above with a minimum combined single limit of $5,000,000. (f) Fidelity Bond. E-LOAN shall be responsible for loss to Correspondent property and customer property, directly or indirectly, and shall maintain Fidelity Bond coverage for the dishonest acts of its employees in a minimum amount of $1,000,000. Correspondent shall be named as "Loss Payee, As Their Interest May Appear," on this Fidelity Bond. 3.11 Confidentiality. (a) Definition. When used in this Agreement, the term "Confidential Information" shall mean this Agreement, all Proprietary Information (as defined below) and all data, trade secrets, business information and other information of any kind whatsoever which (a) has been disclosed to either party, or to which either party has access, in connection with the negotiation and performance of this Agreement, and (b) relates to (i) the other party, (ii) in the case of E-LOAN, the Correspondent Affiliates and their customers, or (iii) third party vendors or licensors which have made confidential or proprietary information available to Correspondent or a Correspondent Affiliate. (b) Proprietary Information. When used in this Agreement, the term "Proprietary Information" shall mean all work performed under this Agreement and all work product resulting from such work, including, without limitation, all data, designs, software, programs, card decks, tapes, ideas, concepts, techniques, inventions, proprietary rights, modifications and enhancements, together with all applicable rights to patents, copyrights, trademarks and tradesecrets and dealer pricing relating to Buy Rates and any application information relating to an Applicant or any Correspondent customer list. For purposes of this Agreement, an Applicant shall be deemed to be a Correspondent customer. (c) Non-Disclosure. Each of the parties on behalf of itself and its employees, officers, directors, affiliates and agents, hereby agrees that Confidential Information will not be disclosed or made available to any third party, agent or employee for any reason whatsoever, other than with respect to: (a) its employees on a "need to know" basis; (b) subcontractors and other third parties specifically permitted under this Agreement, on a "need to know" basis, provided that all such parties are subject to a confidentiality agreement which shall be no less restrictive than the provisions of this Section ; (c) independent contractors, agents, and consultants hired by Correspondent, provided that Correspondent uses reasonable efforts to cause such parties to maintain the confidentiality of E-LOAN's Confidential Information; and (d) as required by law or as otherwise permitted by this Agreement, either during the term of this Agreement or after the termination of this Agreement, provided that, prior to any disclosure of either party's Confidential Information as required by law, the party subject to the requirement shall (i) notify the other party of all, if any, actual or threatened legal compulsion of disclosure, and any actual legal obligation of disclosure immediately upon becoming so obligated, and (ii) cooperate with the other party's reasonable, lawful efforts to resist, limit or delay disclosure. (d) Exceptions. Nothing in this Section shall prohibit or limit either party's use of information or data (a) that can be demonstrated to have been previously known to it, other than through its relationship with the other party, without a confidentiality restriction on the use of such information, (b) independently developed by it, as established by written evidence, (c) rightfully acquired by it from a third party with full legal right to disclose such information, (d) disclosed without similar restrictions by the party that disclosed such Confidential Information pursuant to this Agreement to a third party, (e) approved for disclosure by the affected party pursuant to this Agreement, or (f) which becomes part of the public domain through no breach of this Agreement. (e) Return of Confidential Information. Upon the termination of this Agreement, or at any time upon the request of the other party, each party shall return all Confidential Information in the possession of such party or in the possession of a third party (over which such party has or may exercise control). (f) Injunctive Relief. In the event of any breach of the obligations under this Section, each party acknowledges that the other party would have no adequate remedy at law, since the harm caused by such a breach would not be easily measured and compensated for in damages, and that in addition to such other remedies as may be available to the other party, the other party may obtain injunctive relief including, but not limited to, specific performance. (g) Publicity. All media releases, public announcements and public disclosures by either party, or their employees or agents, relating to this Agreement or the name of Correspondent, any Correspondent Affiliate or E-LOAN, including, without limitation, promotional or marketing material, but not including any announcement intended solely for internal distribution by the releasing party or any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of the releasing party, shall be coordinated with and approved by the other party prior to the release thereof. (h) Survival. The provisions of this Section shall survive the term or termination of this Agreement for any reason. 3.12 Security. (a) Definition. E-LOAN understands that Correspondent and Correspondent Affiliates operate under various laws and federal regulatory agencies that are unique to the security sensitive Correspondent industry. As such, persons engaged by E-LOAN to provide services under this Agreement are held to a higher standard of conduct and scrutiny than in other industries or business enterprises. E-LOAN understands and acknowledges that its employee(s) ("Employee(s)") shall possess appropriate character, disposition and honesty conducive to the environment where services are provided under this Agreement. E-LOAN shall, to the extent permitted by law, exercise reasonable and prudent efforts to comply with the Security provisions of this Agreement. (b) Access. E-LOAN shall not knowingly permit an Employee(s) to have access to the premises, records or data, or to engage in the conduct of the Correspondent affairs of Correspondent or Correspondent Affiliates when such Employee(s): (a) has been convicted of a crime or has agreed to or entered into a pretrial diversion or similar program in connection with (i) a dishonest act or a breach of trust, as stipulated under Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. 1829(a); and/or (ii) a felony; (b) uses illegal drugs. (c) Compliance. Upon written request from Correspondent, E-LOAN shall provide evidence of E-LOAN's actions to comply with the above provisions for its Employee(s). (d) Notification. Correspondent shall notify E-LOAN of any act of dishonesty or breach of trust committed against Correspondent or Correspondent Affiliates which may involve an Employee(s) and E-LOAN shall notify Correspondent if it becomes aware of any such offense. Following such notice, at the request of Correspondent and to the extent permitted by law, E-LOAN shall cooperate with investigations conducted by or on behalf of Correspondent or Correspondent Affiliates. Such cooperation may include access to E-LOAN's Employee(s) for personal interviews related to such investigations. In addition, E-LOAN shall conduct its own investigations into the activities of said Employee(s), which may include polygraph examinations when permitted by law and not specifically prohibited by existing collective bargaining (Union) agreements or state statutes, with the results of such investigations and all files and records related thereto being made available to Correspondent. (e) Internal Controls. E-LOAN shall cooperate with the internal operating controls and security processes of Correspondent and Correspondent Affiliates where products and/or services are provided under this Agreement. (f) Privacy. E-LOAN shall take security measures to protect confidential credit data on Correspondent Loan Applicants so that their information may not be accessed over the Internet or via a telecommunications line on an unauthorized basis or by a person other than the Correspondent. 4. Representations and Warranties of the Parties. As of the date of this Agreement, and throughout the Term, each party hereby represents and warrants to the other party that: 4.1 Due Organization and Good Standing. Each party is a corporation, duly organized, validly existing, and is qualified and authorized to transact business in, and is in good standing under the laws of, the jurisdiction of its organization and each jurisdiction in which it performs or will perform its obligations under this Agreement, or is otherwise doing business or is otherwise exempt under applicable Law from such qualification. 4.2 Authority and Capacity. Each party has the power, authority and capacity to execute, deliver, and perform its obligations under this Agreement. Each party's execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 4.3 Consent; Litigation. No consent or approval of any other party or any court or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. There is no pending claim, cause of action, governmental action or litigation that, if determined adversely, would affect the party's ability to perform its obligations hereunder. This Agreement will not result in a default under any other agreement to which the party is bound. 4.4 Licenses. All necessary qualifications and licenses required by applicable law to conduct business as contemplated by this Agreement in all states where Loans are purchased and sold hereunder have been obtained, and will be maintained in good standing. 4.5 Strategic Alliance Agreement. This Agreement supplements the Strategic Alliance Agreement between Correspondent and E-LOAN, which shall remain in full force and effect. In the event of a conflict between the terms of the Strategic Alliance Agreement and the terms hereof, the terms of this Agreement shall control in the resolution of such conflict, it being the parties' intent that the terms of this Agreement will take precedent over similar terms in the Strategic Alliance Agreement, or any of the amendments thereto. The parties acknowledge and agree that Section 1.19 of the Strategic Alliance Agreement shall not be deemed to conflict with this Agreement. 5. Additional Representations and Warranties of E-LOAN. As of each and every date E-LOAN sells and delivers a Loan to Correspondent under this Agreement, E-LOAN hereby represents and warrants to Correspondent with respect to each such Loan that: 5.1 Valid Loans. Each Loan is bona fide, valid, genuine and legally enforceable according to its terms and is duly and properly executed by the parties shown as borrowers who were to the best of E-LOAN's knowledge competent and had full legal capacity to enter into such Loan at the time they executed the same. To the best of E-LOAN's knowledge, (1) there are no claims or defenses with respect to any Loan; (2) no oral or written agreement exists or will exist whereby any of the terms of any Loan has been varied in any way; (3) the information provided to Correspondent in connection with each Loan is complete, true and correct; and (4) none of the borrowers, guarantors or sureties on the Loans are deceased, and none of such persons are the subject of any bankruptcy or other legal proceedings between E-LOAN and such persons. 5.2 Loans Comply with Law. The form of each Loan and the transactions contemplated by the Loan comply with, and have been entered into in compliance with, all Applicable Law, and all required disclosures and notices have been given in compliance with all Applicable Law. Any applicable period during which the borrower may rescind the Loan has expired, and all Loan proceeds have been fully disbursed. 5.3 No Default. All payments required under each Loan have been made up to the Transfer Date. There is no default, breach, violation or event of acceleration existing under the terms of each Loan nor has any event occurred which, upon the giving of notice or the lapse of time, or both, would constitute a default, breach, violation or event of acceleration under the Loan up to the Transfer Date. 5.4 Title and Insurance. For each Loan sold to Correspondent, the certificate of title to each vehicle securing a loan shall list Correspondent or its designated Affiliate as the first and only lienholder on the certificate of title application or registration and on the required physical damage insurance policies and loss payable clauses relating to the vehicle securing the Loan. For purposes of this Agreement, "Affiliate" means any person or entity which directly, or indirectly through one or more intermediaries, owns or controls, is owned or controlled by, or is under common control or ownership with, E-LOAN or Correspondent, respectively, or their respective ultimate parent. If a certificate of title showing Correspondent as the secured party is not received within one hundred twenty (120) days following the effective date of the Loan, Correspondent will notify E-LOAN in writing of such situation and E-LOAN shall promptly take all steps necessary and as appropriate to obtain a certificate of title bearing Correspondent's name as the secured party, in no event later than ninety (90) days following receipt of Correspondent's written request. Failure by E-LOAN to fulfill the terms of this Section shall subject said Loan to Repurchase under Section 6.3 of this Agreement. 5.5 Origination of Loans. Except as disclosed in writing to Correspondent and accepted by Correspondent prior to the Closing Date, each Loan is an Eligible Loan and has been originated in accordance with the Purchase Criteria and the terms and conditions of the applicable Confirmation, and, thus, this Agreement, including all Schedules and Exhibits. 5.6 Status of Loan. The information that appears on E-LOAN's accounting and all other pertinent records pertaining to any Loan accurately reflect the true status of each Loan. 5.7 Ownership of Loans. Except with respect to the liens of E-LOAN's warehouse lenders, which shall be released in full in or prior to the related Transfer Date, (a) E-LOAN is the sole owner of each Loan and has good and marketable title thereto, and has the right to assign, sell and transfer the Loan to Correspondent free and clear of any encumbrance, lien, pledge, charge, claim or security interest, and (b) Seller has not sold, assigned or otherwise transferred any right or interest in or to the Loan and has not pledged the Loan as collateral for any debt or other purpose. . 5.8 Sale Treatment. The sale of each Loan shall be reflected on E-LOAN's balance sheet and other financial statements as a sale of assets by E-LOAN, and E-LOAN shall not take any action or omit to take any action which would cause the transfer of the Loans to Correspondent to be treated as anything other than a sale to Correspondent of all of E-LOAN's right, title and interest in and to each Loan. 5.9 Insurance. Each vehicle securing a Loan is insured against loss under a policy issued by an insurer reasonably acceptable to Correspondent and qualified to do business in the state where the vehicle is located, in a form such that it may be endorsed to Correspondent as loss payee. To the best of E-LOAN's knowledge, there are no facts or circumstances that could provide a basis for revocation of, or a defense to any claims made under, any insurance policy covering a vehicle. 5.10 Fraud. No Loan, or the obligations of any borrower, guarantor or surety with respect to any Loan, has been obtained by fraud or fraudulent representations. It is acknowledged, that E-LOAN shall be deemed in compliance with this Section 5.10 warranty to the extent it has complied with fraud detection processing procedures specified in Exhibits B and D as may be modified by Correspondent from time to time. 5.11 Each Loan has been evidenced by Approved Loan Documents. 6. Indemnification & Remedies. 6.1 Indemnification. Each party (in such capacity, referred to as "Indemnitor") shall indemnify and hold the other party and its respective shareholders, directors, officers, employees, representatives, agents, servants, successors, and assigns (collectively "Indemnitee") harmless from and shall reimburse Indemnitee for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) incurred by Indemnitee arising out of or resulting from any breach of any warranty, representation covenant or obligation of Indemnitor under this Agreement. 6.2 Indemnification Procedures. After either party obtains knowledge of any claim, action, suit or proceeding (collectively a "Claim") for which it believes is entitled to indemnification under this Agreement, it shall promptly notify the other party of such Claim in writing within ten (10) days after such knowledge. Each party shall cooperate with the other in every reasonable manner (at the Indemnitor's sole expense) to facilitate the defense of any Claim subject to indemnification hereunder. Indemnitee's failure to promptly notify Indemnitor of a Claim shall not relieve the Indemnitor from any liability under this Section to the extent that Indemnitor is not materially adversely affected by such delay. With respect to each such notice, the Indemnitor shall, at the Indemnitee's option, immediately take all action necessary to minimize any risk or loss to the Indemnitee, including retaining counsel satisfactory to the Indemnitee and take such other actions as are necessary to defend the Indemnitee or to discharge the indemnity obligations under this Section. If the Indemnitor does not timely and adequately conduct such defense, the Indemnitee may, at its option and at Indemnitor's expense, conduct such defense, contest, litigate or settle the Claim using counsel of its own choice without prejudice to its right of indemnification under this Section. The Indemnitor shall pay on demand any liability incurred by the Indemnitee under this Section. The Indemnitor shall not settle any claim in which the Indemnitee is named without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee shall have the right to be represented by counsel at its own expense in any such contest, defense, litigation or settlement conducted by the Indemnitor. 6.3 Repurchase. The purchase and sale of Loans under this Agreement shall be without recourse to E-LOAN, except for the representations, warranties, covenants and agreements set forth in this Agreement. Notwithstanding the foregoing, in the event there is a material breach by E-LOAN of any covenant, representation, warranty or agreement under this Agreement which remains uncured for ninety (90) days and involves, relates to, or affects any Loan sold to Correspondent under this Agreement, E-LOAN shall immediately repurchase the affected Loan from Correspondent for the outstanding balance of principal and accrued but unpaid interest on such Loan plus the full amount of any compensation paid to E-LOAN for that Loan. Upon discovery of a suspected breach, Correspondent shall provide E-LOAN with written notice specifying the breach. In the event of such repurchase, Correspondent shall assign the affected Loan to E-LOAN without recourse and without representation or warranties, expressed or implied. 6.4 Survival of Remedies. This Section shall survive termination of the Agreement. 7. Term and Termination. 7.1 Term. Unless this Agreement is terminated earlier as provided below, this Agreement shall commence upon execution of this Agreement , and shall automatically renew for successive thirty (30) day term periods, unless canceled as provided below. The initial term, together with any renewal terms, shall be referred to herein as the "Term." 7.2 Termination. Notwithstanding the foregoing, this Agreement may be terminated as follows: (i) without cause by either party after expiration of the Initial Term, upon not less than thirty (30) days prior written notice to the other party; or (ii) by either party immediately upon written notice to the other party (a) if the other party breaches any warranty, representation, covenant or obligation under this Agreement and fails to cure such breach within thirty (30) calendar days of receiving written notice of the breach from the non-breaching party; (b) if a party has reasonable cause to believe that the other party will not be able to perform its obligations under this Agreement; (c) if there occurs a change of (25%) or more of the ownership of the other party; (d) if a material adverse change occurs in the financial condition of the other party; or (e) if the other party is subject to a dissolution, receivership, liquidation, insolvency, conservatorship, consolidation, reorganization, sale of substantially all of its assets, cessation of business, voluntary or involuntary bankruptcy. 7.3 Effect of Termination; Survival. The termination of this Agreement shall not affect the rights and obligations of the parties with respect to Loans for which Confirmations have previously been issued ("Pipeline Loans"), or transactions and occurrences that take place prior to the effective date of termination, and Correspondent shall purchase Pipeline Loans as provided in Section 2.3 if all conditions set forth in the Confirmation and this Agreement are met. 8. Miscellaneous. 8.1 Public Announcement. The timing and content of any advertisements, announcements, press releases or other promotional activity relating to this Agreement, and the use of each other's name or trademarks shall be subject to the prior approval of both parties. 8.2 Assignment. Neither party may assign this Agreement without the prior written consent of the other party. 8.3 No Agency Relationship. The relationship between E-LOAN and Correspondent shall not be construed as a joint venture, partnership or principal-agent relationship, and under no circumstances shall any of the employees of one party be deemed to be employees of the other party for any purpose. This Agreement shall not be construed as authority for either party to act for the other in any agency or any other capacity, except as expressly set forth in this Agreement. 8.4 Third Party Beneficiaries. This Agreement is not intended and shall not be construed to create any rights or benefits upon any person not a party to this Agreement. 8.5 Costs and Expenses. Unless specifically provided for elsewhere in this Agreement, each party will bear its own costs and expenses, including legal fees, accounting fees and taxes incurred in connection with the negotiation and performance of this Agreement. 8.6 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) three business days after being deposited in the U.S. mail, first class, postage prepaid, (ii) upon transmission, if sent by facsimile transmission, or (iii) upon delivery, if served personally or sent by any generally recognized overnight delivery service, to the following addresses: (a) If to E-LOAN, to: E-LOAN, Inc. 5875 Arnold Road Dublin, CA 94568 Attn: Curtis Kuboyama Facsimile no. (925) 803-3507 with a copy to Edward A. Giedgowd, E-LOAN's Counsel at the same address. (b) If to Correspondent, to: Bank of America Consumer Finance Group 10401 Deerwood Park Blvd. Jacksonville, Florida 32256 Attn: President Facsimile no. 904-457-5489 8.7 Entire Agreement. This Agreement, including any exhibits or other documents attached hereto or referenced herein, each of which is hereby incorporated into this Agreement and made an integral part hereof, constitutes the entire agreement between the parties relating to the subject matter hereof and there are no representations, warranties or commitments except as set forth herein. This Agreement supersedes all prior understandings, negotiations and discussions, written or oral, of the parties relating to the transactions contemplated by this Agreement. 8.8 Modification. This Agreement may not be changed orally but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought 8.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8.10 Provisions Severable. If any provision of this Agreement shall be or become wholly or partially invalid, illegal or unenforceable, such provision shall be enforced to the extent that its legal and valid and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, legal representatives and permitted assigns . 8.11 Waivers; Cumulative Remedies. No failure or delay by a party to insist upon the strict performance of any term or condition under this Agreement or to exercise any right or remedy available under this Agreement at law or in equity, shall imply or otherwise constitute a waiver of such right or remedy, and no single or partial exercise of any right or remedy by any party will preclude exercise of any other right or remedy. All rights and remedies provided in this Agreement are cumulative and not alternative; and are in addition to all other available remedies at law or in equity. 8.12 Arbitration. (a) Binding Arbitration. Any controversy or claim between or among the parties hereto shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc./Endispute, Inc. ("J.A.M.S./Endispute"), and if J.A.M.S./Endispute is unable or legally precluded from administering the arbitration, then the American Arbitration Association ("AAA") will serve. (b) Judgments. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Agreement may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this Agreement applies in any court having jurisdiction over such action in the states set forth in Section 8.9. (c) Procedures. Upon receipt of demand for arbitration from either Bank or E-LOAN, J.A.M.S./Endispute or AAA as applicable shall use its best efforts to appoint an arbitrator and notify Bank and E-LOAN of such appointment within fifteen (15) calendar days and further to commence arbitration within ninety (90) calendar days. Any Bank or E-LOAN demand for arbitration shall include detail sufficient to establish the nature of the dispute and shall be delivered to the other party concurrent with delivery to J.A.M.S./Endispute or AAA. (d) Other Remedies. Nothing in this Section shall limit the right of either E-LOAN or Bank to obtain from a court provisional or ancillary remedies such as, but not limited to, injunctive relief, or the appointment of a receiver, before, during or after the pendency of any arbitration proceeding brought pursuant to this Agreement. 8.13 Counterparts. This Agreement may be executed in two or more counterparts, each of which together shall be deemed an original, but all of which shall constitute one and the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the Effective Date written above. Bank of America   By: Title: Date: May 16, 2000     E-LOAN, INC. By:/s/Joe Kennedy Title: President Date: May 16, 2000   By:/s/Frank Siskowski Title: Chief Financial Officer Date: May 16, 2000   Exhibit A: Documents to be Submitted by E-Loan with Offers to sell a Loan Information required for E-LOAN to submit a completed Offer to Correspondent is listed below. This information is to be sent to Correspondent via facsimile to Correspondent's Global Fax service. Fax Loan Information to GlobalFax * A fax for all loans to be submitted for booking should be sent to GlobalFax for data entry * Information on the GlobalFax should include: a. Buyer's (and co-buyer's, if applicable) completed credit application b. Amount of loan and term requested, including cash down and rebates, if any. c. Detailed vehicle description including mileage and adds on used vehicles and MSRP of any new vehicles. d. Bureau score and bureau used   Exhibit B: Purchase Criteria [*]   Part B-2: Purchase Criteria Provisions and Exception Tolerance Levels [*].         Part B-3: Express Purchase Criteria ("Fast Lane" Program) [*]       Part B-4: Fraud Detection and Investigation The following steps must be taken on "Express" Loans, to mitigate the risk of fraud: 1. Credit Bureau Warnings / Indicators: Additional verification must occur for all applications in which there is either a credit bureau warning or alerts regarding fraud (Safescan, Hawk Alert, Trans Alert, FACS+, etc.). These services will highlight several items that may include: * Deceased Social Security number. (Date of Birth and Date of Death are frequently noted in with this entry in the bureau) * Address is a mail receiving service. * Address is a prison * Address is a hotel/motel. * Address is a business. * High-risk address (this address has been known to have been used in fraudulent activity previously). * The year the Social Security number was issued. * Social Security number is an invalid number, non-issued number, or an out-of-range number. 2. Application Data: Compare the information given on the credit application with that on the credit bureau (s) for all approved or conditioned applications. Look for variances in the two sets of information. Some examples of what to look for might be (but not limited to): * Name * Current Address * Social Security number * Date of Birth * Employment Data 3. Credit Bureau Tools: Be aware of several social security number tools that the credit bureaus provide that help you identify fraudulent applicants. These tools might include D-TEC by Equifax and TRACE by TransUnion. Whenever you see multiple names in a credit bureau or multiple social security numbers in a credit bureau, using these products will help you identify the frauds by detailing out the information associated with the names and social security numbers. Any applicant that has multiple names and/or multiple social security numbers showing in the credit bureau (s) that cannot be reasonably justified, his/her social security number must be run through one of these products to confirm identity. 4. Duplicate Applications: Watch for duplicate applications in your credit buying system. If you receive a second application from the same customer, compare the data from the original application and credit bureau to the new application and credit bureau, noting the differences for investigation. 5. Duplicate E-Mail Addresses: Watch for duplicate email addresses that may be used to communicate back with the customer. Approved or conditioned credit applications that have the same email address must be fully investigated to ensure that fraud is not being attempted.   6. Consumer Statements: Watch for consumer statements in the credit bureaus indicating the consumers have been a victim of fraud. * Verify that the applicant is the legitimate consumer and not the perpetrator of fraud. * Some consumers will place a statement at the end of their credit bureau requesting that any potential creditor call them and verify that they have in fact applied for credit. This must be done in every instance. 7. Dealer Endorsement: At time of funding, always verify the dealer's endorsement on the back of the draft. Ensure that the endorsement matches the selling dealer. 8. Investigation of the above should include: Call Directory Assistance and verify the residence number and address or the place of employment and address. (Never use telephone numbers provided on application as source of verification.) Call the employer and verify employment. Pay attention to how the telephone is answered, i.e., does it sound like a business or did someone answer "Hello"? If applicant is renting, verify residence with the landlord if possible. The landlord can be determined by reviewing the inquiries in the bureau and noting the "---RA----" member codes and then decoding them through the bureau service or by submitting customers address on internet sites that will map the address and reveal nearby businesses including the apartment complex where the applicant indicated he/she lives. If insurance information is available, contact the insurance agent and verify coverage. While on the telephone with the agent, attempt to verify applicants home address, employer, social security number, etc. If unable to get confirmation of the residence address and/or employment information, condition the deal for that information (i.e., copy of rental agreement, copy of utility bill, copy of recent paystub, etc.) 9. Documentation: All fraud investigation and verification must be documented, with a copy of E-Loan records provided to Bank upon request.         Exhibit C: Loan Confirmation Terms & Information   Faxback Notification All Loan Confirmations will be faxed to a specific number at ELOAN conveying the credit decision. Depending on the decision, the following information will be communicated:   For Approvals: Date and Time of the credit decision Application number Decisioning Lender Contact Information Applicant name (and Co-Applicant if applicable) Approved Amount Maximum Loan to Value % Maximum Payment Maximum Term Stipulations, which may include but not be limited to specifically required documents, such as tax lien information, proof of income, proof of employment, proof of address, individual credit bureau trade line issues, etc. For Conditional Approvals: Date and Time of credit decision Application number Decisioning Lender Contact information Applicant Name (and Co-Applicant if applicable) Approved Amount Maximum Loan to Value % Maximum Payment Maximum Term Stipulations, which may include but not be limited to specifically required documents, such as tax lien information, proof of income, proof of employment, proof of address, individual credit bureau trade line issues, etc. Up to 4 ECOA reasons for not approving the application as submitted For Declinations: Date and Time of credit decision Application number Decisioning Lender contact information Applicant Name (and Co-Applicant if applicable) Up to 4 ECOA reasons for not approving the application as submitted         Exhibit D: Loan Documents Following is a list of documents that are required, and critical verification procedures which must take place to assure those documents are properly completed.         [*] Exhibit E: Purchase Price Purchase Price Calculation Purchase Price of the Loans shall equal the Principal Balance less any payments due at the time of sale plus any Compensation owed by Correspondent to E-LOAN. Calculation and payment of Compensation shall be according to this Exhibit E as shown below. Compensation (a) As compensation for its performance of the Services on behalf of Correspondent, E-LOAN will receive a fee ("Origination Fee") for each Loan booked by Correspondent as a result of E-LOAN's Services hereunder. Said Origination Fee shall be an amount equal to the excess of the Loan Rate over the Buy Rate and shall be divided into a portion for the account of E-LOAN, subject to the Correspondent's right of offset set forth in the Strategic Alliance Agreement and a portion for the Correspondent, which Correspondent may use as it deems fit in its sole discretion. For the purposes of this Section, the "Buy Rate" for any Loan shall be [*]. E-LOAN's portion of the Origination Fee for any Loan will be calculated and paid to E-LOAN by Correspondent by the fifteenth (15th) day of the month following the month in which such Loan is booked; subject, however, to Correspondent's right to net out chargebacks which have not been cured, as set forth in paragraph (e) below. E-LOAN shall be required to reimburse Correspondent for E-LOAN's portion of any Origination Fee in the event that the Loan either prepays or is in default during the first three (3) months following the closing of the Loan. (b) The Origination Fee shall be shared between the Correspondent and E-LOAN with [*]% to E-LOAN and [*]% to the Correspondent. (c) E-LOAN will reimburse Correspondent for E-LOAN's portion of the Origination Fee paid on a Loan if the Loan is paid in full or is in default prior to the borrower making the first three (3) payments on the Loan. (d) E-LOAN compensation for originating loans for Correspondent will be paid monthly. The amount paid will be the net of: (1) Origination Fees earned for the previous month, (2) less rebates for payoffs / defaults by the 3rd payment, (3) less other amounts due Correspondent under the terms of this Agreement. (e) E-LOAN acknowledges and agrees that Correspondent may, at its option, net out the amount of any Loss, as defined in Article VIII of the Strategic Alliance Agreement, or any Repurchases according to section 5.3 of this Agreement from any Origination Fee that Correspondent may owe to E-LOAN.

EXHIBIT 10.19 INKTOMI CORPORATION 1998 NONSTATUTORY STOCK OPTION PLAN (Amended March 29, 2000, May 15, 2000 and September 12, 2000)         1.  Purposes of the Plan. The purposes of this Nonstatutory Stock Option Plan are: to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants, and to promote the success of the Company’s business.         Options granted under the Plan will be Nonstatutory Stock Options.         2.  Definitions. As used herein, the following definitions shall apply:               (a)  “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.               (b)  “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.               (c)  “Board” means the Board of Directors of the Company.               (d)  “Cause” means (i) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as a Service Provider and intended to result in substantial personal enrichment of the Optionee, (ii) the conviction of a felony, (iii) a willful act by the Optionee that constitutes gross misconduct and that is injurious to the Company, (iv) for a period of not less than thirty (30) days following delivery to the Optionee of a written demand for performance from the Company that describes the basis for the Company’s belief that the Optionee has not substantially performed his duties, continued violations by the Optionee of the Optionee’s obligations to the Company that are demonstrably willful and deliberate on the Optionee’s part or (v) as otherwise provided in the Option Agreement.               (e)  “Change of Control” shall mean the occurrence of any of the following:                      (i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities entitled to vote generally in the election of directors;                      (ii)  Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);                      (iii)  The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or entity that controls such surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, such surviving entity or the entity that controls such surviving entity outstanding immediately after such merger or consolidation; or                      (iv)  The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets. 1 --------------------------------------------------------------------------------               (f)  “Code” means the Internal Revenue Code of 1986, as amended.               (g)  “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.               (h)  “Common Stock” means the Common Stock of the Company.               (i)  “Company” means Inktomi Corporation, a Delaware corporation.               (j)  “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.               (k)  “Director” means a member of the Board.               (l)  “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.               (m)  “Employee” means any person, excluding Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.               (n)  “Exchange Act” means the Securities Exchange Act of 1934, as amended.               (o)  “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:                      (i)  If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;                      (ii)  If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;                      (iii)  In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.               (p)  “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement.               (q)  “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.               (r)  “Option” means a nonstatutory stock option granted pursuant to the Plan, that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.               (s)  “Option Agreement” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.               (t)  “Option Exchange Program” means a program whereby outstanding options are surrendered in exchange for options with a lower exercise price.               (u)  “Optioned Stock” means the Common Stock subject to an Option.               (v)  “Optionee” means the holder of an outstanding Option granted under the Plan. 2 --------------------------------------------------------------------------------               (w)  “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.               (x)  “Plan” means this 1998 Nonstatutory Stock Option Plan.               (y)  “Service Provider” means an Employee, excluding an Officer or Director.               (z)  “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.                      (aa)  “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.         3.  Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 6,400,000 Shares, plus an annual increase to be added on January 1 (beginning January 1, 2001) of each year equal to the lesser of (i) the number of Shares needed to restore the maximum aggregate number of Shares which may be optioned and sold under the Plan to 6,400,000 Shares or (ii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock.         If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).         4.  Administration of the Plan.               (a)  Administration. The Plan shall be administered by (i) the Board or (ii) a Committee, which committee shall be constituted to satisfy Applicable Laws.               (b)  Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:                      (i)  to determine the Fair Market Value of the Common Stock;                      (ii)  to select the Service Providers to whom Options may be granted hereunder;                      (iii)  to determine whether and to what extent Options are granted hereunder;                      (iv)  to determine the number of shares of Common Stock to be covered by each Option granted hereunder;                      (v)  to approve forms of agreement for use under the Plan;                      (vi)  to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;                      (vii)  to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted;                      (viii)  to institute an Option Exchange Program;                      (ix)  to construe and interpret the terms of the Plan and awards granted pursuant to the Plan ; 3 --------------------------------------------------------------------------------                      (x)  to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;                      (xi)  to modify or amend each Option (subject to Section 14(b) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;                      (xii)  to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator;                      (xiii)  to determine the terms and restrictions applicable to Options;                      (xiv)  to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and                      (xv)  to make all other determinations deemed necessary or advisable for administering the Plan.               (c)  Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options.         5.  Eligibility. Options may be granted to Service Providers; provided, however, that notwithstanding anything to the contrary contained in the Plan, Options may not be granted to Officers and Directors.         6.  Limitation. Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.         7.  Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years, unless sooner terminated under Section 14 of the Plan.         8.  Term of Option. The term of each Option shall be stated in the Option Agreement         9.  Option Exercise Price and Consideration.               (a)  Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator.               (b)  Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised.               (c)  Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of:                      (i)  cash;                      (ii)  check;                      (iii)  promissory note;                      (iv)  other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; 4 --------------------------------------------------------------------------------                      (v)  consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;                      (vi)  a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;                      (vii)  such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or                      (viii)  any combination of the foregoing methods of payment.         10.  Exercise of Option.               (a)  Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share.               An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of t he Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.               Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.               (b)  Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option, but only within such period of time as is specified in the Option Agreement, and only to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. Notwithstanding the foregoing, if the Company or any successor thereto terminates the Optionee’s employment without Cause within twelve months following a Change of Control, the Optionee’s Options and restricted stock acquired upon exercise of Options, shall become 100% vested and exercisable; provided, however, that no such acceleration shall occur in the event that it would preclude accounting for any business combination of the Company involving a Change of Control as a “pooling of interests.”               (c)  Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.               (d)  Death of Optionee. If an Optionee dies while a Service Provider (a) solely with respect to any option grants awarded on or after September 12, 2000, the Option shall become one-hundred percent (100%) 5 -------------------------------------------------------------------------------- vested and (b) the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. The Option may be exercised by the executor or the administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent and distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.               (e)  Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.         11.  Transferability of Stock Options. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate. Notwithstanding the above and solely with respect to option grants awarded on or after September 12, 2000, during his or her lifetime, an Optionee may transfer, including by means of sale, all or part of an Option to a member of the Optionee’s Immediate Family or to a trust, LLC or partnership for the benefit of any one or more members of such Optionee’s immediate family. “Immediate Family” as used herein means the spouse, lineal descendants, father, mother, brothers and sisters of the Optionee. In such case, the transferee shall receive and hold the Option subject to the provisions of this Section, and there shall be no further assignment or transfer of the Option. The terms of Options granted hereunder shall be binding upon the transferees, purchasers, executors, administrators, heirs, successors and assigns of the Optionee.         12.  Adjustments Upon Changes in Capitalization, Dissolution or Change in Control.               (a)  Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.               (b)  Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consum mation of such proposed action.               (c)  Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, each outstanding Option shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the 6 -------------------------------------------------------------------------------- Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the Change in Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock, immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in connection with the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in connection with the Change in Control is not solely common stock of the su c cessor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in connection with the Change in Control.               Notwithstanding any other provisions of the Plan or any Option Agreement or other related agreement, in the event that any payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Option Agreement, other related agreement or other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person) (all such payments and benefits being hereinafter called “Total Payments”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Option Agreement, or other related agreement) shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Optionee would be subject in respect of such unreduced Total Payments).               Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Optionee and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.         13.  Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.         14.  Amendment and Termination of the Plan.               (a)  Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.               (b)  Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to options granted under the Plan prior to the date of such termination. 7 --------------------------------------------------------------------------------         15.  Conditions Upon Issuance of Shares.               (a)  Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.               (b)  Investment Representations. As a condition to the exercise of an Option the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.         16.  Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.         17.  Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 8 -------------------------------------------------------------------------------- INKTOMI CORPORATION 1998 NONSTATUTORY STOCK OPTION PLAN STOCK OPTION AGREEMENT         This Stock Option Agreement (“Agreement”) is made and entered into as of the date of grant set forth below (the “Date of Grant”) by and between Inktomi Corporation, a Delaware corporation (the “Company”), and the participant named below (“Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 1998 Nonstatutory Stock Option Plan (the “Plan”). Participant:       Social Security Number:       Address:       Total Option Shares:       Exercise Price Per Share:       Date of Grant:       First Vesting Date:       Expiration Date:       Type of Stock Option:   Nonstatutory Stock Option           1.  Grant of Option. The Company hereby grants to Participant an option (the “Option”) to purchase the total number of shares of Common Stock of the Company set forth above (the “Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Agreement and the Plan. If designated as an Incentive Stock Option above, the Option is intended to qualify as an “incentive stock option” (“ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).         2.  Exercise Period.               2.1  Exercise Period of Option. This Option is exercisable immediately, in whole or in part, conditioned upon Participant entering into a Restricted Stock Purchase Agreement substantially in the form attached hereto as Exhibit B-1 (the “Restricted Stock Purchase Agreement”) with respect to any unvested Option Shares. The Shares subject to this Option shall vest and/or be released from the Company’s repurchase option, as set forth in the Restricted Stock Purchase Agreement, according to the following schedule:        , provided however that (a) Shares subject to this Option shall vest and/or be released from the Company’s repurchase option based on Participant’s continued employment with or services to the Company and (b) vested Shares shall not be subject to the Company’s repurchase option.               2.2  Expiration. The Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date.         3.  Termination.               3.1  Termination for Any Reason Except Death or Disability. If Participant is Terminated for any reason, except death or Disability, the Option, to the extent (and only to the extent) that it would have been exercisable by Participant on the date of Termination, may be exercised by Participant no later than three (3) months after the date of Termination, but in any event no later than the Expiration Date.               3.2  Termination Because of Death or Disability. If Participant is Terminated because of death or Disability of Participant, the Option, to the extent that it is exercisable by Participant on the date of Termination, may be exercised by Participant (or Participant’s legal representative) no later than twelve (12) months after the date of Termination, but in any event no later than the Expiration Date.               3.3  No Obligation to Employ. Participant acknowledges and agrees that the vesting of Shares is earned only by continuing consultancy or employment at the will of the Company (not through the act of being hired, being granted this Option or acquiring Shares hereunder). Participant further acknowledges and agrees that nothing in the Plan or this Agreement (or any prior or future amendment thereto or restatement thereof) shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Parent, 9 -------------------------------------------------------------------------------- Subsidiary or Affiliate of the Company, or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.         4.  Manner of Exercise.               4.1  Stock Option Exercise Agreement. To exercise this Option, Participant (or in the case of exercise after Participant’ s death, Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company (a) an executed stock option exercise agreement substantially in the form attached hereto as Exhibit A (the “Exercise Agreement”), and (b) if Participant is purchasing any unvested Shares, an executed Restricted Stock Purchase Agreement. If someone other than Participant exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.               4.2  Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed from time to time. The Option may not be exercised as to fewer than 100 Shares unless it is exercised as to all Shares as to which the Option is then exercisable.               4.3  Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:                      (a)  by cancellation of indebtedness of the Company to the Participant;                      (b)  at the discretion of the Administrator, by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Participant in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;                      (c)  at the discretion of the Administrator, by tender of a full recourse promissory note having such terms as may be approved by the Administrator and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code provided, however, Participants who are not employees of the Company shall not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares.                      (d)  by waiver of compensation due or accrued to Participant for services rendered;                      (e)  provided that a public market for the Company’s stock exists, (1) through a “ same day sale” commitment from Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company, or (2) through a “margin” commitment from Participant and an NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereb y the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or                      (f)  by any combination of the foregoing.               4.4  Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Participant must pay or provide for any applicable federal or state withholding obligations of the Company. If the Administrator permits, Participant may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Participant by deducting the Shares retained from the Shares issuable upon exercise.               4.5  Issuance of Shares. Provided that the Exercise Agreement, Restricted Stock Purchase Agreement (if applicable) and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Participant, Participant’s authorized assignee, or 10 -------------------------------------------------------------------------------- Participant’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto (subject to the escrow provisions applicable to the Restricted Stock Purchase Agreement) .         5.  Nontransferability of Option. The Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Participant.         6.  Tax Consequences. Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.               6.1  Exercising the Option. The Optionee may incur regular federal income tax liability upon exercise of an NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.               6.2  Disposition of Shares. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.               6.3  Section 83(b) Election for Unvested Shares Purchased Pursuant to Nonqualified Stock Options. With respect to the exercise of a nonqualified stock option for unvested Shares, an election may be filed by the Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase. This will result in a recognition of taxable income to the Participant on the date of exercise, measured by the excess, if any, of the Fair Market Value of the Shares, at the time the Option is exercised over the purchase price for the Shares. Absent such an election, taxable income will be measure d and recognized by the Participant at the time or times on which the Company’s repurchase option lapses. Participant is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit B-5 for reference.         PARTICIPANT ACKNOWLEDGES THAT IT IS OPTIONEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.         8.  Privilege of Stock Ownership. Participant shall not have any of the rights of a shareholder with respect to any Shares until Participant exercises the Option and pays the Exercise Price.         9.  Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or the Company to the Administrator for review. The resolution of such a dispute by the Administrator shall be final and binding on the Company and Participant.         10.  Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. This Agreement may be modified, waived or amended only in writing signed by both parties hereto. This Agreement may only be amended, modified or waived in writing signed by both parties hereto.         12.  Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after 11 -------------------------------------------------------------------------------- deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by fax or telecopier.         13.  Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.         14.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.         15.  Acceptance. Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all the terms and conditions of the Plan and this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares and that Participant should consult a tax adviser prior to such exercise or disposition.         IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized representative and Participant has executed this Agreement as of the Date of Grant. INKTOMI CORPORATION     PARTICIPANT By:    By:  --------------------------------------------------------------------------------     --------------------------------------------------------------------------------       (Signature)     Jerry Kennelly, CFO       -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (Please print name)     (Please print name)         --------------------------------------------------------------------------------     (Please print title)           12 -------------------------------------------------------------------------------- EXHIBIT A INKTOMI CORPORATION 1998 NONSTATUTORY STOCK OPTION PLAN STOCK OPTION EXERCISE AGREEMENT         This Exercise Agreement is made and entered into as of ___________________, 19__ (the “Effective Date”) by and between Inktomi Corporation, a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 1998 Nonstatutory Stock Option Plan (the “Plan”). Participant:       Social Security Number:       Address:       Total Shares Exercised:       Exercise Price Per Share:       Total Purchase Price:               1.  Exercise of Option.               1.1  Exercise. Pursuant to exercise of that certain option (“Option”) granted to Purchaser under the Plan and subject to the terms and conditions of this Agreement, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the total number of shares set forth above (“Shares”) of the Company’s Common Stock at a purchase price per share set forth above for a total purchase price set forth above (the “Purchase Price”). As used in this Agreement, the term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all securities received (a) in replacement of the Shares, (b) as a result of stock dividends or stock splits with respect to the Shares, and (c) all securities received in replacement of the Shares in a merger, recapitalization, re organization or similar corporate transaction.               1.2  Title to Shares. The exact spelling of the name(s) under which Purchaser will take title to the Shares is:                                                                                                                                                                                                                                                                                                      . Purchaser desires to take title to the Shares as follows:         [  ]  Individual, as separate property         [  ]  Husband and wife, as community property         [  ]  Joint Tenants         [  ]  Alone or with spouse as trustee(s) of the following trust (including date):                                                                                                                                                                                                         .         [  ]  Other; please specify:                                                                                                                           .               1.3  Payment. Purchaser hereby delivers payment of the Purchase Price in the manner permitted in Purchaser’s Stock Option Agreement as follows (check and complete as appropriate):         [  ]  in cash in the amount of $                                  receipt of which is acknowledged by the Company;         [  ]  by cancellation of indebtedness of the Company to Purchaser in the amount of $                             ;         [  ]  at the discretion of the Administrator, by delivery of fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Purchaser for at least six (6) months prior to the date hereof which have been paid for within the meaning of SEC Rule 144, if purchased by use of a promissory note, such note has been fully paid with respect to such vested shares), or obtained by Purchaser in the open public market, and owned 1 -------------------------------------------------------------------------------- free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $                                    per share;         [  ]  at the discretion of the Administrator, by tender of a Full Recourse Promissory Note in the principal amount of $                                 secured by a Pledge Agreement of even date herewith;         [  ]  by the waiver hereby of compensation due or accrued for services rendered in the amount of $                                                    .         2.  Delivery.               2.1  Deliveries by Purchaser. Purchaser hereby delivers to the Company (a) this Exercise Agreement, and (b) a Restricted Stock Purchase Agreement (together with all required ancillary agreements and documents pursuant thereto) in the form of Exhibit B to Purchaser’s Stock Option Agreement (the “Restricted Stock Purchase Agreement”), if applicable.               2.2  Deliveries by the Company. Upon its receipt of the Purchase Price and all the documents to be executed and delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed stock certificate evidencing the Shares in the name of Purchaser, to be placed in escrow as provided under the Restricted Stock Purchase Agreement and/or payment in full to the Company of all sums due under a Note (both as applicable).         3.  Representations and Warranties of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan, the Stock Option Agreement, this Exercise Agreement, the Restricted Stock Purchase Agreement and all documents required in connection with the Restricted Stock Purchase Agreement (all as applicable), and agrees to abide by all terms and conditions set forth in such agreements and documents         4.  Rights as Shareholder. Subject to the terms and conditions of this Exercise Agreement and the Restricted Stock Purchase Agreement, Purchaser will have all of the rights of a shareholder of the Company with respect to the Shares from and after the date that Purchaser delivers payment of the Purchase Price until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercises its Right of First Refusal and/or its repurchase right under the Restricted Stock Purchase Agreement (“Repurchase Right”). Upon an exercise of the Right of First Refusal and/or Repurchase Right, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, except the right to receive payment for the Shares so purchased in accordance with the provisions of this Exercise Agreement and/or the Restricted Stock Purchase Agreement, and Purchaser will prompt ly surrender the stock certificate(s) evidencing the Shares so purchased to the Company for transfer or cancellation.         5.  Tax Matters. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of Purchaser’s investment or the transactions contemplated by this Agreement.         6.  Compliance with Laws and Regulations. The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and Purchaser with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.         7.  Successors and Assigns. The Company may assign any of its rights under this Agreement, including its rights to repurchase Shares under the Right of First Refusal. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.         8.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such 2 -------------------------------------------------------------------------------- provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.         9.  Notices. Any notice required to be given or delivered to the Company shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Purchaser shall be in writing and addressed to Purchaser at the address indicated above or to such other address as Purchaser may designate in writing from time to time to the Company. All notices shall be deemed effectively given upon personal delivery, three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested), one (1) business day after its deposit with any return receipt express courier (prepaid), or one (1) business day after transmission by fax or telecopier.         10.  Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.         11.  Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. All references herein to Sections will refer to Sections of this Agreement.         12.  Entire Agreement. The Plan, the Stock Option Agreement, this Exercise Agreement, and the Restricted Stock Purchase Agreement, together with all exhibits to all such documents, constitute the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. This Agreement may only be amended, modified or waived in writing signed by both parties hereto. INKTOMI CORPORATION     PARTICIPANT By:    By:  --------------------------------------------------------------------------------     --------------------------------------------------------------------------------       (Signature)           -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (Please print name and title)     (Please print name) 3 -------------------------------------------------------------------------------- EXHIBIT B-1 1998 NONSTATUTORY STOCK OPTION PLAN RESTRICTED STOCK PURCHASE AGREEMENT         THIS AGREEMENT is made between                                        (the “Purchaser”) and Inktomi Corporation (the “Company”) as of                                   , 199  . Recitals         A.  Pursuant to the exercise of the stock option granted to Purchaser under the Company’s 1998 Nonstatutory Stock Option Plan (the “Plan”) and pursuant to the Stock Option Agreement (the “Option Agreement”) by and between the Company and Purchaser with respect to such grant, which Option Agreement is hereby incorporated by reference, Purchaser has elected by executing an Exercise Agreement (the “Exercise Agreement ”) to purchase shares which have not become vested under the vesting schedule set forth in the Option Agreement (“Unvested Shares”). The Unvested Shares and the shares subject to the Option Agreement which have become vested are sometimes collectively referred to herein as the “Shares.”         B.  As required by the Option Agreement, as a condition to Purchaser’s election to exercise the option, Purchaser must execute this Restricted Stock Purchase Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option. Agreement         1.  Repurchase Option.               (a)  Repurchase Option. If Purchaser’s employment or consulting relationship with the Company is terminated for any reason, including for cause, death, and disability, the Company shall have the right and option to purchase from Purchaser, or Purchaser’s personal representative, as the case may be, all or any portion of the Purchaser’s then Unvested Shares as of the date of such termination at the price paid by the Purchaser for such Shares (the “Repurchase Option”).               (b)  Exercise. Upon the occurrence of a termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be), within ninety (90) days of the termination, a notice in writing indicating the Company’s intention to exercise the Repurchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s office. At the closing, the holder of the certificates for the then Unvested Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor.               (c)  Termination. If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.         2.  Transferability of the Shares; Escrow.               (a)  Transfer. Purchaser hereby authorizes and directs the secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.               (b)  Escrow. To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the secretary, or any other person designated by the Company as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the secretary of the Company, or such other person designated by the Company, the share certificates representing the initial Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B-2. The Unvested Shares and stock assignment shall be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of the Company and Purch aser attached as Exhibit B-3 hereto, until the Company exercises its Repurchase Option as provided in 1 -------------------------------------------------------------------------------- Section 1, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit B-4. Upon vesting of the initial Unvested Shares, the escrow agent shall promptly deliver to the Purchaser (upon request) the certificate or certificates representing such Shares in the escrow agent’s possession belonging to the Purchaser, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.               (c)  No Liability. The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.               (d)  Restrictions on Transfer. Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.         3.  Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.         4.  Legends. The share certificate evidencing the Shares shall be endorsed with the following legend (in addition to any other required legends):         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.         5.  Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.         6.  Notices. Notices required hereunder shall be given in person or by registered mail to the address of Purchaser shown on the records of the Company, and to the Company at its principal executive offices.         7.  Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.         8.  Section 83(b) Elections.               (a)  Election for Unvested Shares Purchased Pursuant to Nonqualified Stock Options. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of a nonqualified stock option for Unvested Shares, that unless an election is filed by the Purchaser with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to the Purchaser, measured by the excess, if any, of the fair market value of the Shares, at the time the Company’s Repurchase Option lapses over the purchase price for the Shares. Purcha ser represents that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in connection with the purchase of the Shares or the filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit B-5 for reference.         PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.         9.  Tax Matters. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is 2 -------------------------------------------------------------------------------- relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of Purchaser’s investment or the transactions contemplated by this Agreement.         10.  Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.         11.  Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. All references herein to Sections will refer to Sections of this Agreement.         12.  Entire Agreement. The Plan, the Stock Option Agreement, the Exercise Agreement, and this Restricted Stock Purchase Agreement, together with all exhibits to all such documents, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. This Agreement may only be amended, modified or waived in writing signed by both parties hereto.         13.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.         14.  Interpretations. Any dispute regarding the interpretation of this Agreement shall be submitted by Purchaser or the Company to the Administrator (as defined in the Plan) for review. The resolution of such a dispute by the Administrator shall be final and binding on the Company and Participant.         IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above. INKTOMI CORPORATION     PURCHASER By:    By:  --------------------------------------------------------------------------------     --------------------------------------------------------------------------------       (Signature)           -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (Please print name and title)     (Please print name) 3 -------------------------------------------------------------------------------- EXHIBIT B-2 ASSIGNMENT SEPARATE FROM CERTIFICATE         FOR VALUE RECEIVED I,                                                       , hereby sell, assign and transfer unto                      (                            ) shares of the Common Stock of Inktomi Corporation standing in my name of the books of said corporation represented by Certificate No.             herewith and do hereby irrevocably constitute and appoint                                                                                                        to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.         This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Inktomi Corporation and the undersigned dated                   , 19            . Dated:                             , 19         Signature:       --------------------------------------------------------------------------------     INSTRUCTIONS:    Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Repurchase Option as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. 4 -------------------------------------------------------------------------------- EXHIBIT B-3 JOINT ESCROW INSTRUCTIONS                           , 19   Corporate Secretary Inktomi Corporation 1900 South Norfolk Street, Suite 310 San Mateo, CA 94403 Dear                             :         As Escrow Agent for both Inktomi Corporation (the “Company”), and the undersigned purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following instructions:         1.  In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.         2.  At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s repurchase option.         3.  Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder of the Company while the stock is held by you.         4.  Upon written request of the Purchaser, but no more than once per calendar year, unless the Company’s repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company’s repurchase option. Within 120 days after cessation of Purchaser’s continuous employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company’s repurchase option.         5.  If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.         6.  Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.         7.  You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while 1 -------------------------------------------------------------------------------- acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.         8.  You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.         9.  You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.         10.  You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.         11.  You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.         12.  Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.         13.  If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.         14.  It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.         15.  Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto. COMPANY:   Inktomi Corporation       1900 South Norfolk Street, Suite 310       San Mateo, CA 94403       Attention: Secretary           PURCHASER:                               ESCROW AGENT:   Corporate Secretary       Inktomi Corporation       1900 South Norfolk Street, Suite 310       San Mateo, CA 94403           16.  By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.         17.  This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. 2 --------------------------------------------------------------------------------         18.  These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of California. INKTOMI CORPORATION     PURCHASER By:     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------       (Signature)           -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (Please print name)     (Please print name)         --------------------------------------------------------------------------------     (Please print title)           ESCROW AGENT   By:   --------------------------------------------------------------------------------    (Signature)           -------------------------------------------------------------------------------- (Please print name)   3 -------------------------------------------------------------------------------- EXHIBIT B-4 CONSENT OF SPOUSE         I,                                          , spouse of                              , have read and approve the foregoing Stock Option Agreement, Stock Option Exercise Agreement, Restricted Stock Purchase Agreement and Escrow Agreement (collectively the “Agreements”). In consideration of granting of the right to my spouse to purchase shares of Inktomi Corporation, as set forth in the Agreements, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreements and agree to be bound by the provisions of the Agreements ins ofar as I may have any rights in said Agreements or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreements. Dated:                                   , 19                --------------------------------------------------------------------------------     (Signature)     --------------------------------------------------------------------------------     (Please print name) 1 -------------------------------------------------------------------------------- EXHIBIT B-5 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986         The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:         1.  The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME:   TAXPAYER:   SPOUSE:   ADDRESS:           IDENTIFICATION NO.:   TAXPAYER:   SPOUSE:   TAXABLE YEAR:                   2.  The property with respect to which the election is made is described as follows:                      shares (the “Shares”) of the Common Stock of Inktomi Corporation (the “Company”).         3.  The date on which the property was transferred is:                                        , 19     .         4.  The property is subject to the following restrictions:         The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.         5.  The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $                                                   .         6.  The amount (if any) paid for such property is: $                                                              .         The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.         The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.     Dated:                         , 19               --------------------------------------------------------------------------------     Taxpayer         The undersigned spouse of taxpayer joins in this election.     Dated:                         , 19               --------------------------------------------------------------------------------     Spouse of Taxpayer 1

   EXHIBIT 10.4a AMENDMENT OF TRIBUNE COMPANY BONUS DEFFERAL PLAN RESOLVED, that the Governance and Compensation Committee of the Board of Directors of the Company deems it advisable to delegate to the Tribune Company Employee Benefits Committee certain authority under the Tribune Company Bonus Deferral Plan (the “Plan”) related to deferral election practices and eligibility and to amend the terms of the Plan to effect this delegation of authority as follows: By deleting Section 2 of the Plan in its entirety and, in lieu thereof, replacing that Section with the following: "Section 2   Participation Subject to the conditions and limitations of the Plan, each employee of an Employer on or after the Effective Date shall become a “Participant” under this Plan as of the first day as of which such employee: (a)   is a participant in the Tribune Company Management Incentive Plan, or any successor plan designated by the Committee, and (b)   has an annualized rate of Compensation (as defined in the SIP) as determined from time to time by the Tribune Company Employee Benefits Committee.” By deleting the lead-in clause of Section 3.1 of the Plan in its entirety and, in lieu thereof, replacing that clause with the following: “3.1. Election of Deferral; Automatic Deferral; Settlement Date. Subject to the following provisions of this subsection 3.1 and the provisions of subsection 3.2 below, within a period specified from time to time by the Tribune Company Employee Benefits Committee, a Participant may make an irrevocable written election (on a form prescribed by the Tribune Company Employee Benefits Committee) to defer receipt of all or a specified portion (in whole multiples of 5%) of the Qualifying Bonus earned for a Fiscal Year that begins after the Effective Date, regardless of the year in which that Qualifying Bonus is normally or actually paid. Notwithstanding the foregoing provisions of this subsection 3.1:" FURTHER RESOLVED, that the Secretary or Assistant Secretary of the Company is hereby authorized and empowered to take all steps necessary to effect the foregoing resolution, including to execute and file or deliver such documents as may be required by law or as may be deemed necessary or proper in connection with the matters set forth in these resolutions. *       *        *             I, Mark W. Hianik, Assistant Secretary for Tribune Company (the “Company”), hereby certify that the foregoing is a correct copy of resolutions duly adopted by the Governance and Compensation Committee of the Board of Directors of the Company on July 18, 2000.     /s/  Mark W. Hianik       Mark W. Hianik

FIFTH AMENDMENT TO CNG NONEMPLOYEE DIRECTORS' FEE PLAN The CNG Nonemployee Directors' Fee Plan, as amended and restated effective October 1, 1996, and as subsequently amended by the First, Second, Third and Fourth Amendments thereto (the "Plan"), is hereby further amended as follows immediately prior to the effective date of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co. : 1. By adding a new paragraph at the end of paragraph 1 of the Plan as follows: "Following the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999 (the "Merger Agreement"), by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co. (the "Merger"), the Plan shall continue for the benefit of the members of the advisory board (the "Advisory Board") established pursuant to the Merger Agreement to provide advice to the boards of directors of Oak Merger Co. and the Company following the consummation of the Merger." 2. By deleting the text of paragraph 2 of the Plan and inserting in lieu thereof the following: "As used in the Plan and in any election form under the Plan, the term "Director" means (i) prior to the consummation of the Merger, any person who was elected to the Board of Directors of the Company and who is not a full-time employee of the Company or any of its affiliates and (ii) from and after the consummation of the Merger, any person who is a member of the Advisory Board and is not a full-time employee of the Company or any of its affiliates." 3. By deleting the words "of the Company" each place they appear in subparagraph (a) and subparagraph (e) of paragraph 3 of the Plan. 4. By deleting the phrase "CNG Common Stock" or "CTG Common Stock" wherever each appears in the Plan and inserting in lieu thereof the phrase "Common Stock". 5. By deleting the phrase "deemed dividends" where it appears in subparagraph (e) of Section 3 of the Plan and inserting in lieu thereof the phrase "deemed dividends or other cash payments made in respect thereof". 6. By adding a new subparagraph (f) after subparagraph (e) of paragraph 3 as follows: (f) As used in the Plan, the term "Common Stock" means (i) prior to the consummation of the Merger, the common stock of CTG Resources, Inc. and (ii) on and after the date of the consummation of the Merger, the common stock of Energy East Corporation or its successor or successors." 7. By deleting the phrase "Board of Directors of CTG Resources or any successor thereto ("CTG") or by the Board of Directors of CTG "where it appears in subparagraph (d) of paragraph 4 of the Plan and inserting in lieu thereof the phrase "Board of Directors of Energy East Corporation or any successor thereto ("EEC") or by the Board of Directors of EEC". 8. By adding the phrase "or to be appointed to or retained as a member of the Advisory Board" at the end of the sentence constituting subparagraph (b) of paragraph 5 of the Plan. 9. Except as hereinabove modified and amended, the Plan, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, Connecticut Natural Gas Corporation hereby executes this Fifth Amendment as of the 25th day of April, 2000. Witness: CONNECTICUT NATURAL GAS CORPORATION Jeffrey A. Hall      8/10/00 S/ Jean S. McCarthy                                                        

Exhibit 10(j) Contract No. 113419   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 4 DATED May 4, 2000 TO AGREEMENT DATED January 15, 1998 (Agreement)   1. [ ] Exhibit A dated May 4, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated May 4, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [X] Exhibits A and B dated May 4, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated May 4, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [X] Revise Agreement MDQ: [ ] Increase [X] Decrease In Section 2. of Agreement substitute 9,000 MMBTU for 90,000 MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [ ] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [ ] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 4 becomes effective April 16, 2001. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Executive Vice President     EXHIBIT A DATED: May 4, 2000 EFFECTIVE DATE: April 16, 2001   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 9,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: May 4, 2000 EFFECTIVE DATE: April 16, 2001   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 900001 09 4,500 INTERCONNECT WITH NORTH           SHORE GAS COMPANY LOCATED IN           SEC. 12-T44N-R103, LAKE COUNTY,           ILLINOIS                                   2. PGLC/NGPL OAKTON STREET COOK COOK IL 904174 09 4,500 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY'S ON TRANSPORTER'S           HOWARD STREET LINE IN SEC. 26-           T41N-R13E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED May 4, 2000 EFFECTIVE DATE: April 16, 2001   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED May 4, 2000 EFFECTIVE DATE: April 16, 2001   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 27   0   F   0 28   27   F   9,000 30   28   F   4,500 39   40   F   4,500 40   28   F   4,500

MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE (4200 BOHANNON DRIVE) BASIC LEASE INFORMATION Effective Date:   August 18 , 1998   Landlord:   MENLO OAKS PARTNERS, L.P., a Delaware limited partnership   Landlord’s Address:   4400 Bohannon Drive Suite 260 Menlo Park, CA 94025 Attn: Mr. J. Marty Brill, Jr. Phone: (650) 329-9030 Fax: (640) 329-0129   Tenant:   E*TRADE GROUP, INC., a Delaware corporation   Tenant’s Address:     Before Commencement Date:                        2400 Geng Road Palo Alto, CA 94303 Attn: Vice President of Corporate Services Phone: (650) 842-2500 Fax: (650) 842-2552   After Commencement Date:   4500 Bohannon Drive Menlo Park, CA 94025 Attn: Vice President of Corporate Services   Premises:   Approximately forty-six thousand two hundred fifty-five (46,255) rentable square feet of space in the Building, as more particularly shown on Exhibit A attached hereto.   Building:   That certain office building located within the Project, commonly known as “4200 Bohannon Drive,” consisting of approximately forty-six thousand two hundred fifty-five (46,255) rentable square feet of space.   Lot:   That certain real property located within the Project on which the Building is located, as more particularly described in Exhibit B, attached hereto.   Phase:   A portion of the Project, consisting of the Lot, all of the improvements located thereon and all appurtenances thereto. The Phase includes approximately ninety-two thousand eight hundred sixty-nine (92,869) rentable square feet of space in two (2) buildings located thereon (including the Building).                                                                                      Project:   That certain business office park located in Menlo Park, California, comprised of three (3) separate phases and seven (7) office buildings and including approximately three hundred seventy-four thousand one hundred thirty-nine (374,139) rentable square feet of space. The Project is commonly known as “Menlo Oaks Corporate Center.” --------------------------------------------------------------------------------                                                                                             Term:   Ten (10) years   Commencement Date:   The earlier of (i) the date on which Tenant commences its business operations in the Premises or (ii) November 15, 1998.   Base Rent (Initial):   One Hundred Forty-Five Thousand Seven Hundred Three and 25/100 Dollars ($145,703.25) per month, subject to adjustment pursuant to Section 4.2   Security Deposit:   One Hundred Ninety-Eight Thousand Five Hundred Seventy-Eight and 96/100 Dollars ($198,578.96)   Tenant’s Building Percentage Share:        One hundred percent (100%)   Tenant’s Phase Percentage Share:   Forty-nine and 807/1000ths percent (49.807%)   Tenant’s Project Percentage Share:   Twelve and 46/100 percent (12.46%)   Default Percentage:   One hundred twenty-five percent (125%)   Permitted Use:   For general office purposes, software research and development, data processing and incidental uses thereto and no other use whatsoever.   Business Hours:   Twenty-four (24) hours a day; seven (7) days a week   Non-Exclusive Parking:   Forty-nine and 807/1000ths percent (49.807%) of the available parking spaces in the Phase. The Phase includes approximately 414 parking spaces. Tenant Improvements:     Base Allowance:   Two Hundred Thirty-One Thousand Two Hundred Seventy-Five Dollars ($231,275.00)   Additional Allowance:   Four Hundred Sixty-Two Thousand Five Hundred Fifty Dollars ($462,550.00)   Adjustment for Overage:   Monthly Base Rent shall be increased One and One-Half Cents ($0.015) for each Dollar of Additional Allowance provided by Landlord.   Brokers:     Landlord’s Broker:   None   Tenant’s Broker:   Tory Corporate Real Estate Advisors, Inc. (dba The Staubach Company)   Exhibits:   Exhibit A—Diagram of Premises Exhibit B—Legal Description of Lot Exhibit C—Work Letter Exhibit D—Commencement Date Memorandum Exhibit E—Rules and Regulations Exhibit F—4400 Bohannon Expansion Option Space Exhibit G—Landlord’s Sign Criteria -------------------------------------------------------------------------------- MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE         THIS MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE (this “Lease”), dated as of this 18th day of August, 1998 (the “Effective Date”), is entered into by and between MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), and E*Trade Group, Inc., a Delaware corporation (“Tenant”), on the terms and conditions set forth below. 1.  DEFINITIONS. The following terms shall have the meanings set forth below:         1.1.  Building. The term “Building” shall have the meaning set forth in the Basic Lease Information.         1.2.  Building Common Areas. The Areas and facilities within the Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the Building).         1.3.  Commencement Date. The term “Commencement Date” shall have the meaning set forth in Section 3.         1.4.  Common Areas. The term “Common Areas” shall mean the Building Common Areas, the Phase Common Areas and the Project Common Areas.         1.5.  Lot. The term “Lot” shall mean the land upon which the Building is located, as more particularly described in Exhibit B, attached hereto.         1.6.  Phase. The term “Phase” have the meaning set forth in the Basic Lease Information.         1.7.  Phase Common Areas. The areas and facilities within the Phase provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Phase (e.g., uncovered and unreserved parking areas, walkways and accessways).         1.8.  Premises. The term “Premises” shall have the meaning set forth in the Basic Lease Information.         1.9.  Project. The term “Project” shall have the meaning set forth in the Basic Lease Information.         1.10.  Project Common Areas. The term “Project Common Areas” shall mean the areas and facilities within the Project provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Project (e.g., walkways, traffic aisles, accessways, utilities and communications conduits and facilities).         1.11.  Rentable Area. The term “Rentable Area” shall mean the rentable area of the Premises, Building, Phase and Project as reasonably determined by Landlord. The parties agree that for all purposes under this Lease, the Rentable Area of the Premises, Building, Phase and Project shall be deemed to be the number of rentable square feet identified in the Basic Lease Information.         1.12.  Tenant’s Building Percentage Share. The term “Tenant’s Building Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Building is changed, then Tenant’s Building Percentage Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Building.         1.13.  Tenant’s Phase Percentage Share. The term “Tenant’s Phase Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Phase is changed, then Tenant’s Phase Percentage Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Phase.         1.14.  Tenant’s Project Percentage Share. The term “Tenant’s Project Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Project is changed, then Tenant’s Percentage Project Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Project.         1.15.  Term. The term “Term” shall have the meaning described in Section 3. -------------------------------------------------------------------------------- 2.  PREMISES.         2.1.  Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, together with the right in common to use the Common Areas, for the Term.         2.2.  Condition Upon Delivery. Tenant acknowledges that it has had an opportunity to thoroughly inspect the Premises and, subject to Landlord’s obligations under Section 8.1, Tenant accepts the Premises in its existing “as is” condition, with all faults and defects and without any representation or warranty of any kind, express or implied.         2.3.  Reserved Rights. Landlord reserves the right to do the following from time to time:               (a)  Changes. To install, use, maintain, repair, replace and relocate pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities for service to other parts of the Building, Phase or Project above the ceiling surfaces, below the floor surfaces and within the walls of the Premises and in the central core areas of the Building and in the Building Common Areas, and to install, use, maintain, repair, replace and relocate any pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities servicing the Premises, which are located either in the Premises or elsewhere outside of the Premises;               (b)  Boundary Changes. To change the boundary lines of the Lot or the Project;               (c)  Facility Changes. To alter or relocate the Common Areas or any facility within the Project;               (d)  Parking. To designate and/or redesignate specific parking spaces in the Phase or the Project for the exclusive or non-exclusive use of specific tenants in the Phase or the Project;               (e)  Services. To install, use, maintain, repair, replace, restore or relocate public or private facilities for communications and utilities on or under the Building, Phase and/or Project; and               (f)  Other. To perform such other acts and make such other changes in, to or with respect to the Common Areas, Building, Phase and/or Project as Landlord may reasonably deem appropriate.         2.4.  Work Letter. Landlord and Tenant shall each perform the work required to be performed by it as described in the Work Letter attached hereto as Exhibit C. Landlord and Tenant shall each perform such work in accordance with the terms and conditions contained therein. 3.  TERM         3.1.  Commencement of Term. The term of this Lease (the “Term”) shall be for the period of time specified in the Basic Lease Information unless sooner terminated as hereinafter provided. The Term shall commence on the “Commencement Date” and shall continue in full force and effect for the period specified as the Term or until this Lease is terminated as otherwise provided herein.         3.2.  Commencement Date Memorandum. Following the date on which Landlord delivers possession of the Premises to Tenant or the Commencement Date, Landlord may prepare and deliver to Tenant a commencement date memorandum (the “Commencement Date Memorandum”) in the form of Exhibit D, attached hereto, subject to such changes in the form as may be required to insure the accuracy thereof. The Commencement Date Memorandum shall certify the date on which Landlord delivered possession of the Premises to Tenant and the dates upon which the Term commences and expires. Tenant’s failure to execute and deliver to Landlord the Commencement Date Memorandum within five (5) days after Tenant’s receipt of the Commencement Date Memorandum shall be conclusive upon Tenant as to the matters set forth in the Commencement Date Memorandum. 4.  RENT         4.1.  Base Rent. The monthly base rent (“Base Rent”) shall be the amount set forth in the Basic Lease Information, subject to adjustment pursuant to Section 4.2. Tenant shall pay the Base Rent to Landlord in advance upon the first day of each calendar month of the Term, at Landlord’s address or at such other place designated by Landlord in a notice to Tenant, without any prior demand therefor and without any deduction, abatement or setoff whatsoever. If the Term shall commence or end on a day other than the first day of a calendar month, then Tenant -------------------------------------------------------------------------------- shall pay, on the Commencement Date and first day of the last calendar month, a pro rata portion of the Base Rent, prorated on a per diem basis, with respect to the portions of the fractional calendar month included in the Term. Concurrently with executing this Lease, Tenant shall pay to Landlord the Base Rent due for the first full calendar month during the Term along with the Security Deposit as provided in Section 4.5 below.         4.2.  Adjustment to Base Rent. The Base Rent shall be adjusted as provided in the Rider attached hereto and incorporated herein by reference.         4.3.  Additional Rent. All charges required to be paid by Tenant hereunder, including payments for insurance, Impositions, Operating Expenses and any other amounts payable hereunder, shall be considered additional rent (“Additional Rent”) for the purposes of this Lease, and Tenant shall pay Additional Rent to Landlord upon written demand by Landlord or otherwise as provided in this Lease. The term “ Rent” shall mean Base Rent and Additional Rent.         4.4.  Late Payment. If any installment of Rent is not paid, Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of the amount of such delinquent payment of Rent in addition to the installment of Rent then owing, regardless of whether or not a notice of default or notice of termination has been given by Landlord. This provision shall not relieve Tenant from payment of Rent at the time and in the manner herein specified.         4.5.  Interest. In addition to the imposition of a late payment charge pursuant to Section 4.3 above, any Rent that is not paid due shall bear interest from the date due until the date paid at the rate (the “Interest Rate”) that is the lesser of twelve percent (12%) per annum or the maximum rate permitted by law. Landlord’s acceptance of any interest payments on any past due Rent shall not constitute a waiver by Landlord of Tenant’s default with respect to the amount of Rent past due or prevent Landlord from exercising any of the rights and remedies available to Landlord under this Lease or at law.         4.6.  Security Deposit. Upon executing this Lease, Tenant shall deliver to Landlord cash (the “Security Deposit”) in the amount specified as the Security Deposit in the Basic Lease Information. The Security Deposit shall secure the performance of all of Tenant’s obligations under this Lease, including Tenant’s obligation to pay Rent and other monetary amounts, to maintain the Premises and repair damages thereto, and to surrender the Premises to Landlord upon termination of this Lease in the condition required pursuant to Section 8 below, Landlord may use and commingle the Security Deposit with other funds of Landlord. If Tenant fails to perform Tenant’s obligations hereunder, Landlord may, but without any obligation to do so, apply all or any portion of the Security Deposit towards fulfillment of Tenant’s unperformed obligations. If Landlord does so apply all or any portion of the Security D eposit, Tenant, upon written demand by Landlord, shall immediately pay to Landlord a sufficient amount in cash to restore the Security Deposit to the full original amount. Tenant’s failure to pay to Landlord a sufficient amount in cash to restore the Security Deposit to its original amount within five (5) days after receipt of such demand shall constitute an Event of Default. Tenant shall not be entitled to interest on the Security Deposit. Within thirty (30) days after the expiration or earlier termination of this Lease, if Tenant has then performed all of Tenant’s obligations hereunder, Landlord shall return the Security Deposit to Tenant. If Landlord sells or otherwise transfers Landlord’s rights or interest under this Lease, Landlord deliver the Security Deposit to the transferee, whereupon Landlord shall be released from any further liability to Tenant with respect to the Security Deposit. 5.  IMPOSITIONS         5.1.  Tenants Obligations. Tenant shall pay to Landlord, as Additional Rent, Tenant’s Phase Percentage Share of Impositions for the Phase during each year of the Term (prorated for any partial calendar year during the Term).         5.2.  Definition of Impositions. The term “Impositions” shall include all transit charges, housing fund assessments, real estate taxes and all other taxes relating to the Premises, Building, Lot and Phase of every kind and nature whatsoever, including any supplemental real estate taxes attributable to any period during the Term; all taxes which may be levied in lieu of real estate taxes; and all assessments, assessment bonds, levies, fees, penalties (if a result of Tenant’s delinquency) and other governmental charges (including, but not limited to, charges for parking, traffic and any storm drainage/flood control facilities, studies and improvements, water and sewer service studies and improvements, and fire services studies and improvements); and all amounts necessary to be expended because of governmental orders, whether general or special, ordinary or extraordinary, unforeseen as well as foreseen, of any kind and nature for public improvements, services, benefits or any other purpose, which are assessed, based upon the -------------------------------------------------------------------------------- use or occupancy of the Premises, Building, Lot and/or Phase, or levied, confirmed, imposed or become a lien upon the Premises, Building, Lot and/or Phase, or become payable during the Term, and which are attributable to any period within the Term.         5.3.  Limitation. Nothing contained in this Lease shall require Tenant to pay any franchise, estate, inheritance, succession or transfer tax of Landlord, or any income, profits or revenue tax or charge upon the net income of Landlord from all sources; provided, however, that if at any time during the Term under the laws of the United States Government or the State of California, or any political subdivision thereof, a tax or excise on rent, or any other tax however described, is levied or assessed by any such political body against Landlord on account of Rent, or any portion thereof, Tenant shall pay one hundred percent (100%) of any said tax or excise as Additional Rent.         5.4.  Installment Election. In the case of any Impositions which may be evidenced by improvement or other bonds or which may be paid in annual or other periodic installments, Landlord shall elect to cause such bonds to be issued or such assessment to be paid in installments over the maximum period permitted by law.         5.5.  Estimate of Tenant’s Share of Impositions. Prior to the commencement of each calendar year during the Term, or as soon thereafter as reasonably practicable, Landlord shall notify Tenant in writing of Landlord’s estimate of the amount of Impositions which will be payable by Tenant for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year, Tenant shall pay to Landlord in advance, one-twelfth (1/12th) of the estimated amount; provided, however, if Landlord fails to notify Tenant of the estimated amount of Tenant’s share of Impositions for the ensuing calendar year prior to the end of the current calendar year, Tenant shall be required to continue to pay to Landlord each month in advance Tenant’s estimated share of Impositions on the basis of the amount due for the immediately prior month until ten (10) days after Landlord notifies Tenant of the estimat ed amount of Tenant’s share of Impositions for the ensuing calendar year. If at any time it appears to Landlord that Tenant’s share of Impositions payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord’s revised estimate for the year, and subsequent payments by Tenant for the year shall be based on the revised estimate.         5.6.  Annual Adjustment. Within one hundred twenty (120) days after the close of each calendar year during the Term, or as soon after the one hundred twenty (120) day period as reasonably practicable, Landlord shall deliver to Tenant a statement of the adjustment to the Impositions for the prior calendar year. If, on the basis of the statement, Tenant owes an amount that is less than the estimated payments for the prior calendar year previously made by Tenant, Landlord shall apply the excess to the next payment of Impositions due. If, on the basis of the statement, Tenant owes an amount that is more than the amount of the estimated payments made by Tenant for the prior calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of the statement. The year end statement shall be binding upon Tenant unless Tenant notifies Landlord in writing of any objection thereto within thirty (30) da ys after Tenant’s receipt of the year end statement. In addition, if, after the end of any calendar year or any annual adjustment of Impositions for a calendar year, any Impositions are assessed or levied against the Premises, Building or Phase that are attributable to any period within the Term (e.g., supplemental taxes or escaped taxes), Landlord shall notify Tenant of its share of such additional Impositions and Tenant shall pay such amount to Landlord within ten (10) days after Landlord’s written request therefor.         5.7.  Personal Property Taxes. Tenant shall pay or cause to be paid, not less than ten (10) days prior to delinquency, any and all taxes and assessments levied upon all of Tenant’s trade fixtures, inventories and other personal property in, on or about the Premises. When possible, Tenant shall cause Tenant’s personal property to be assessed and billed separately from the real or personal property of Landlord.         5.8.  Taxes on Tenant Improvements. Notwithstanding any other provision hereof, Tenant shall pay to Landlord the full amount of any increase in Impositions during the Term resulting from any and all alterations and tenant improvements of any kind whatsoever placed in, on or about or made to the Premises, Building, Phase or Project for the benefit of, at the request of, or by Tenant. 6.  INSURANCE         6.1.  Landlord. Landlord shall maintain “Special Form” property insurance (or its equivalent if “Special Form” property insurance is not available) including vandalism and malicious mischief coverage for the full replacement cost of the Building (but excluding any equipment, fixtures, alterations, improvements, additions or personal property of Tenant or any alterations, additions or improvements made by or at the request of Tenant to the -------------------------------------------------------------------------------- Premises, other than those tenant improvements owned by Landlord). Such property insurance shall include endorsements for sprinkler leakage, inflation, building ordinance coverage and such other endorsements as selected by Landlord, together with rental value insurance against loss of Rent for a period of twelve (12) months commencing on the date of loss. Landlord may also carry such other insurance as Landlord may deem prudent or advisable, including, without limitation, liability insurance and hazardous materials, earthquake/volcanic action, flood and/or surface water, boiler and machinery comprehensive coverages in such amounts, with such deductibles and upon such terms as Landlord shall determine. Upon Tenant’s written request, Landlord shall deliver to Tenant certificates evidencing the coverage required under this Section 6.1. Landlord, either directly or through its agent, may maintain any of the insurance required to be maintained by Landlord pursuant to this Section 6.1 under on e or more “blanket policies”, insuring other parties and/or other locations, so long as the amounts and coverages required under this Section 6.1 are not diminished as a result thereof.         6.2.  Tenant. Tenant shall, at Tenant’s expense, obtain and keep in force at all times the following insurance:               (a)  Commercial General Liability Insurance (Occurrence Form). A policy of commercial general liability insurance (occurrence form) having a combined single limit of not less than, providing coverage for, among other things, blanket contractual liability, premises, products/completed operations and personal and advertising injury coverage;               (b)  Automobile Liability Insurance. Comprehensive automobile liability insurance having a combined single limit of not less than Five Million Dollars ($5,000,000.00) per occurrence, and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired, borrowed or non-owned automobiles;               (c)  Workers’ Compensation and Employer’s Liability Insurance. Workers’ compensation insurance having limits not less than those required by state statute and federal statute, if applicable, and covering all persons employed by Tenant in the conduct of its operations on the Premises (including the all states endorsement and, if applicable, the volunteers endorsement), together with employer’s liability insurance coverage in the amount of at least Five Million Dollars ($5,000,000.00);               (d)  Property Insurance. “Special Form” property insurance (or its equivalent if “Special Form” property insurance is not available), including vandalism and malicious mischief, boiler and machinery comprehensive form, if applicable, and endorsement for earthquake sprinkler damage, each covering damage to or loss of Tenant’s personal property, fixtures and equipment, including electronic data processing equipment (“EDP Equipment”), media and extra expense, and all alterations, additions and improvements made by or at the request of Tenant to the Premises other than those tenant improvements owned by Landlord. EDP Equipment, media and extra expense shall be covered for perils insured against in the so-called “EDP Form”. If the property of Tenant’s invitees is to be kept in the Premises, warehouser’s legal liability or bailee customers insur ance for the full replacement cost of such property;               (e)  Business Insurance. Business insurance in an amount not less than the annual Base Rent and Additional Rent payable by Tenant hereunder for the then current calendar year, and               (f)  Additional Insurance. Any such other insurance as Landlord or Landlord’s lender may reasonably require.         6.3.  General.               (a)  Insurance Companies. Insurance required to be maintained by Tenant shall be written by companies licensed to do business in California and having a “General Policyholders Rating” of at least A:X or better (or such higher rating as may be required by a lender having a lien on the Lot) as set forth in the most current issue of “Best’s Insurance Guide” or “Best’s Key Rating Guide.”               (b)  Increased Coverage. Landlord, upon written notice to Tenant, may require Tenant to increase the amount of any insurance coverage maintained by Tenant under this Section 6 to the amount of insurance coverage that landlords of similar buildings located in Menlo Park and Palo Alto customarily require tenants to maintain. --------------------------------------------------------------------------------               (c)  Certificates of Insurance. Tenant shall deliver to Landlord certificates of insurance with the additional insured endorsement and the primary insurance endorsement(s) attached for all insurance required to be maintained by Tenant, no later than seven (7) days prior to the Commencement Date or such earlier date that Tenant takes possession of the Premises. Tenant shall, at least thirty (30) days prior to expiration of the policy, furnish Landlord with certificates of renewal or “binders” thereof. Each certificate shall expressly provide that such policies shall not be cancelable or otherwise subject to modification except after thirty (30) days’ prior written notice to the parties named as additional insureds in this Lease. If Tenant fails to maintain any insurance required in this Lease, Tenant shall be liable for all losses and cost resulting from said failure.               (d)  Additional Insureds. Landlord, any property management company of Landlord for the Premises and any designated by Landlord shall be named as additional insurers under all of the policies required to be maintained by Tenant under this Section 6. The policies required to be maintained by Tenant under this Section 6 shall provide for severability of interest.               (e)  Primary Coverage. All insurance to be maintained by Tenant shall be primary, without right of contribution from Landlord’s insurance. Any umbrella liability policy or excess liability policy (which shall be in “following form”) shall provide that if the underlying aggregate is exhausted, the excess coverage will drop down as primary insurance. The limits of insurance maintained by Tenant shall not limit Tenant’s liability under this Lease.               (f)  Waiver of Subrogation. Landlord and Tenant waive any right to recover against the other for damages covered by insurance or which would have been covered by insurance had the applicable party maintained the insurance required to be maintained by that party under the terms of this Lease. This provision is intended to waive fully, and for the benefit of Landlord or Tenant, as applicable, any rights and/or claims which might give rise to a right of subrogation in favor of any insurance carrier. The coverages obtained by Landlord and Tenant pursuant to this Lease shall include, without limitation, waiver of subrogation endorsements.         6.4.  Tenant’s Indemnity. Tenant shall indemnify, protect and defend by counsel reasonably satisfactory to Landlord and hold harmless Landlord and Landlord’ s officers, directors, shareholders, employees, partners, members, lenders and successors and assigns (collectively, the “Indemnified Parties” and each, an “Indemnified Party”) from and against any and all claims, demands, causes of action, judgments, losses, costs, liabilities, damages (including punitive and consequential damages) and expenses, including attorneys’ fees and costs (collectively, “Claims”) arising from any cause whatsoever in the Premises, including Claims caused in whole or in part by the act, omission or negligence of the Indemnified Party (but excluding Claims caused by an Indemnified Party’s willful or criminal misconduct). In addition, Tenant shall further indemnify, protect and defend by counsel r easonably satisfactory to Landlord and hold harmless the Indemnified Parties from and against any and all Claims arising from (i) Tenant’s use or occupancy of the Premises, the conduct of Tenant’s business or any activity, work or things done, permitted or suffered by Tenant in or about the Premises, (ii) any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, and/or (iii) any acts, omissions or negligence of Tenant or any of Tenant’s agents, contractors, employees or invitees. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property in, upon or about the Premises arising from any cause; and Tenant hereby waives all claims in respect thereof against Landlord. The provisions of this Section 6.4 shall survive the expiration or earlier termination of this Lease.         6.5.  Exemption of Landlord from Liability. Neither Landlord nor any other Indemnified Party shall be liable to Tenant for any injury to Tenant’s business or loss of income therefrom, loss or damage to property, or injury or death to any persons, including any loss, damage or injury attributable in whole or in part to the act, omission or negligence of any Indemnified Party (but excluding any loss, damage or injury to the extent caused by the willful or criminal misconduct of such Indemnified Party, whether such loss, damage or injury is caused by fire, steam, electricity, gas, water or rain, or from the breakage, leakage or other defects of sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, and whether said loss, damage or injury results from conditions arising upon the Premises, or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant, As a material part of Landlord’s consideration in exchange for entering into this Lease, Tenant assumes all risk of such loss, damage and injury. -------------------------------------------------------------------------------- 7.  OPERATING EXPENSES         7.1.  Operating Expenses. Tenant shall pay to Landlord, as Additional Rent during each year of the Term (prorated or any partial calendar year during the Term), (i) Tenant’s Building Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Building, (ii) Phase Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Phase and (iii) Tenant’s Project Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Project, each as determined by Landlord. Landlord shall not collect any Operating Expense from Tenant more than once.         7.2.  Definition of Operating Expenses. The term “Operating Expenses” shall include all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, operation, repair and/or maintenance of the Building, Phase and/or Project, the surrounding property, and the supporting facilities, including, without limitation, (i) premiums for insurance maintained by Landlord pursuant to this Lease and all costs incidental thereto, (ii) wages, salaries and related expenses and benefits of all employees engaged in operation, maintenance and security of the Building, Phase and/or Project; (iii) costs for all supplies, materials and rental equipment used in the operation of the Building, Phase and/or Project; (iv) all maintenance, janitorial, security and service costs; (v) all management fees; (vi) legal and accounting expenses, including t he cost of audits; (vii) costs for repairs, replacements, uninsured damage or deductibles on property insurance, and general maintenance of the Building, Phase and Project, including service areas, elevators, mechanical rooms, exterior surfaces and all component parts thereof (but excluding any repairs or replacements paid for out of insurance proceeds or by other parties and alterations attributable solely to tenants of the Building other than Tenant); (viii) the cost of any capital improvements made to the Building, Phase or Project, amortized over such reasonable period as Landlord shall determine, together with interest upon the unamortized balance at the or such other higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing the capital improvements; (ix)all charges for heat, water, gas, electricity, sewer, air conditioning, emergency telephone service, trash removal and other utilities used or supplied to the Building, Phase and/or Project (and not separately meter ed and billed to individual tenants); and (x) all business license, permit and inspection fees.         7.3.  Prorated Expenses. Any Operating Expenses attributable to a period which falls only partially within the Term shall be prorated between Landlord and Tenant so that Tenant shall pay only that proportion thereof attributable to the period that falls within the Term.         7.4.  Payment at End of Term. Any amount payable by Tenant which would not otherwise be due until after the termination of this Lease, shall, if the exact amount is uncertain at the time that this Lease terminates, be paid by Tenant to Landlord upon such termination in an amount to be estimated by Landlord with an adjustment to be made once the exact amount is known.         7.5.  Estimates of Tenant’s Share of Operating Expense. Prior to the commencement of each calendar year during the Term, or as soon thereafter as is reasonably practicable, Landlord shall notify Tenant in writing of Landlord’s estimate of the amount of Operating Expenses which will be payable by Tenant for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year Tenant shall pay to Landlord, in advance, one-twelfth (1/12) of the estimated amount; provided however, if Landlord fails to notify Tenant of the estimated amount of Tenant’s share of Operating Expenses for the ensuing calendar year prior to the end of the current calendar year, Tenant shall be required to continue to pay to Landlord each month in advance Tenant’s estimated share of Operating Expenses on the basis of the amount due for the immediately prior month until ten (10) days after Landlord not ifies Tenant of the estimated amount of Tenant’s share of Operating Expenses for the ensuing calendar year. If at any time it appears to Landlord that Tenant’s share of Operating Expenses payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord’s revised estimate for the calendar year, and subsequent payments by Tenant for the calendar year shall be based on the revised estimate.         7.6.  Annual Adjustment. Within one hundred twenty (120) days after the close of each calendar year during the Term, or as soon after the one hundred twenty (120) day period as practicable, Landlord shall deliver to Tenant a statement of the adjustment to the Operating Expenses for the prior calendar year. If, on the basis of the statement, Tenant owes an amount that is less than the estimated payments for the prior calendar year previously made by Tenant, Landlord shall apply the excess to the next payment of Operating Expenses due. If, on the basis of the statement, Tenant owes an amount that is more than the amount of estimated payments made by the Tenant for -------------------------------------------------------------------------------- the prior calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of the statement. The year end statement shall be binding upon Tenant unless Tenant notifies Landlord in writing of any objection thereto within ninety (90) days after Tenant’s receipt of the year end statement. In addition, if, after the end of any calendar year or any annual adjustment of Operating Expenses for a calendar year, Operating Expenses are incurred or billed to Landlord that are attributable to any period within the Term (e.g., sewer district flow fees), Landlord shall notify Tenant of its share of such additional Operating Expenses and Tenant shall pay such amount to Landlord within ten (10) days after Landlord’s written request therefor.         7.7.  Less Than Full Occupancy. In the event the Building, Phase or Project are not fully occupied during any year of the Term, an adjustment shall be made in computing Operating Expenses for such year so that the same shall be computed for such year as though the Building, Phase and Project had been fully occupied during such year.         7.8.  Special Services.               (a) Utilities. In the event Landlord provides additional utilities, heating, air conditioning, trash removal and/or cleaning services to Tenant beyond such standard services related to the operation and management similar business office parks located in Menlo Park/Palo Alto areas, or at times other than during Business Hours (as defined in the Basic Lease Information), Tenant shall pay Landlord’s reasonable charge for such special services as Additional Rent. Any cleaning of lunchrooms, cafeterias, conference rooms, etc., shall be on a special services basis (except with respect to the removal of trash from trash receptacles or cleaning incidental to normal cleaning).                (b) Meters. Landlord shall have the right, at Tenant’s sole cost and expense, to install separate metering for electricity, water or gas to the Premises or to separately charge Tenant for any quantity of such utilities consumed by Tenant beyond the amounts customarily consumed by tenants in the Project as reasonably determined by Landlord. Landlord may also charge Tenant for costs of sanitary sewer or trash removal occasioned by Tenant’s excessive consumption of such services. All such charges shall be reasonably determined by Landlord and promptly paid by Tenant to Landlord as Additional Rent. 8.  REPAIRS AND MAINTENANCE         8.1.  Landlord Repairs and Maintenance. Landlord shall maintain those portions of the Building, Lot, Phase and Project that are owned by Landlord and not leased to tenants in the Project or required to be maintained by any tenants in the Project consistent with the standards applied by landlords of similar Class A business office parks located in the Menlo Park and Palo Alto areas.         8.2.  Tenant Repairs and Maintenance. Tenant, at Tenant’s sole cost and expense, shall at all times during the Term keep, maintain and preserve the Premises and all parts, components, systems, fixtures, hardware and finishes of and in the Premises in a first class, clean, safe and sanitary order, condition and repair, excepting only insured casualty to the extent of the insurance proceeds received by Landlord. Tenant shall comply with all applicable manufacturer’s specifications and recommendations and best industry practices in connection with cleaning, protecting, servicing, maintaining and repairing the Premises and all of the parts, components, systems, fixtures, hardware and finishes in the Premises in order to preserve and achieve the maximum aesthetic and economically serviceable life of the Premises and the improvements contained therein. All repairs, replacements and restorations made by Tenant shall be performed promptly as required, in a good and workmanlike manner, employing materials of equal or better quality, serviceability and utility to those items or parts being replaced, with surface finishes (including color, texture and general appearance) comparable and compatible with adjacent surfaces, to the reasonable satisfaction of Landlord and in compliance with all applicable federal, state or local laws, ordinances, regulations and orders and the requirements of any insurer of the Building. Tenant shall, at Tenant’s own expense, immediately replace all glass in the Premises that may be broken during the Term with glass at least equal to the specification and quality of the glass being replaced. Upon expiration of the Term, Tenant shall surrender the Premises to Landlord in the same condition as received, reasonable wear and tear, damage by fire or other insured casualty to the extent of insurance proceeds received by Landlord excepted. The term “reasonable wear and tear” as used herein shall mean wear and tear which manifests itself solely through normal intensity of use and passage of time consistent with the employment of commercially prudent measures to protect finishes and components from damage and excessive wear, the application of regular and appropriate preventative maintenance practices and procedures, routine cleaning and servicing, waxing, polishing, adjusting, repair, refurbishment and replacement at a standard of appearance and utility and as often as appropriate for Class A corporate and professional office occupancies in the Palo Alto/Menlo Park office market. The term “reasonable wear and tear” -------------------------------------------------------------------------------- would thus encompass the natural fading of painted surfaces, fabric and materials over time, and carpet wear caused by normal foot traffic. The term “reasonable wear and tear” shall not include any damage or deterioration that could have been prevented by Tenant’s employment of ordinary prudence, care and diligence in the occupancy and use of the Premises and the performance of all of its obligations under this Lease. Items not considered reasonable wear and tear hereunder include the following for which Tenant shall bear the obligation for repair and restoration (except to the extent caused by the gross negligence or willful misconduct of Landlord or its employees or agents), (i) excessively soiled, stained, worn or marked surfaces or finishes; (ii) damage, including holes in building surfaces (e.g., cabinets, doors, walls, ceilings and floors) caused by the installation or removal of Tenant’s trade fixtures, furnishings, decorations, equipment, alterations, utility inst a llations, security systems, communications systems (including cabling, wiring and conduits), displays and signs; (iii) damage to any component, fixture, hardware, system or component part thereof within the Premises, and any such damage to the Building, Phase or Project, caused by Tenant or its agents, contractors or employees, and not fully recovered by Landlord from insurance proceeds. Tenant shall not commit or allow any waste or damage to be committed on any portion of the Premises, Building, Phase or Project.         8.3.  Failure to Maintain, Repair or Restore. The timely performance by Tenant of Tenant’s duties to maintain, repair and restore the Premises is essential to the preservation of Landlord’s property value and the security interests of Landlord’s mortgagee. If, upon expiration of the Term, Tenant has failed to fully perform its obligations under this Section 8 or Sections 9 or 11.2, Landlord shall have the right, but not the obligation, to perform any obligation of Tenant (notice to Tenant) as provided in Section 19.16 hereof, and Tenant shall reimburse Landlord for all costs incurred by Landlord related thereto (including overtime or premium time labor charges as determined by Landlord in its sole discretion). Tenant shall pay to Landlord all costs, fees and penalties owing, due, paid or payable by Landlord to any lender or mortgagee as a result of Tenant’s failure to perform its obligations under this Section 8 or Sections 9 or 11.2, and any fees, penalties, loss, costs, expenses or liabilities whether paid or accrued by Landlord as a result of Landlord’s failure to timely deliver all or a portion of the Premises for occupancy by one or more successor or replacement tenants to the extent such failure is due to Tenant’s failure to perform hereunder. In addition, if Tenant fails to fully perform its obligations pursuant to this Section 13 or Sections 9 or 11.2 by the end of the Term, then for each day required by Landlord to perform such obligations (or each day that would reasonably be required by Landlord to perform such obligations if Landlord elected to do so), Tenant shall pay to Landlord as liquidated damages an amount equal to one thirtieth (1/30th) of the product of (i) the Default Percentage (as stated in the Basic Lease Information) and (ii) the monthly Rent due under this Lease during the last month of the Term (hereinafter referred to as the “ Liquidated Damages Amount”). The Liquidated Damages Amount is intended to compensated Landlord for any loss of rent incurred by Landlord during the period of time required by Landlord to perform Tenant’s unperformed obligations under this Section 8 and Sections 9 and 11.2 (or that would reasonably be required by Landlord to perform such obligations had Landlord elected to do so). Landlord and Tenant agree that Landlord’s actual damages for loss of rents or opportunity as a result of Tenant’s failure to complete its obligations pursuant to this Section 8 and Sections 9 and 11.2 would be difficult or impossible to determine because, inter alia, where a tenant has failed to perform such obligations, it is difficult for a landlord effectively to market that tenant’s premises to prospective tenants, and the Liquidated Damages Amount is the best estimate of the amount of damages Landlord would suffer in the nature of loss of rent or opportunity for any such failure by Tenant. Nothing contained in this paragraph shall l imit Landlord’s other remedies pursuant to this Lease or by law with respect to losses other than loss of rent or opportunity, or waive or affect any of Tenant’s indemnity obligations under this Lease and Landlord’s rights to enforce those indemnity obligations. The payment of the Liquidated Damages Amount as liquidated damages is not intended as a forfeiture or penalty within the meaning of California Civil Code Section 3275 or 3369, but is intended to constitute liquidated damages to Landlord pursuant to California Civil Code Section 1671.         8.4.  Inspection of Premises. Landlord and Landlord’s agents, at all reasonable times, may enter the Premises to perform any construction related to the Premises, Building or Phase, to inspect, clean or repair the same, to inspect the performance by Tenant of the terms and conditions contained in this Lease, to affix reasonable signs and displays, to show the Premises to prospective purchasers, tenants and lenders, to post notices of non-responsibility and similar notices, and for all other purposes as Landlord shall reasonably deem necessary.         8.5.  Liens. Tenant shall promptly pay and discharge all claims for work or labor done, supplies furnished or services rendered on behalf of Tenant and shall keep the Premises, Building, Phase and Project free and clear of all mechanic’s and materialmen’s liens in connection therewith. Landlord shall have the right to post or keep posted on the Premises, or in the immediate vicinity thereof, any notices of nonresponsibility for any construction, alteration or repair of the Premises by Tenant. If any such lien is filed, Landlord may, but shall not be required to, -------------------------------------------------------------------------------- take such action or pay such amount as may be necessary to remove such lien; and, Tenant shall pay to Landlord as Additional Rent any such amounts expended by Landlord within five (5) days after Tenant receives Landlord’s written request for payment. 9.  FIXTURES, PERSONAL PROPERTY AND ALTERATIONS         9.1.  Fixtures and Personal Property. Tenant, at Tenant’s sole cost and expense, may install any necessary trade fixtures, equipment and furniture in the Premises, provided that such items are installed and are removable without affecting the structural integrity, character or utility of the Building. Landlord reserves the right to approve or disapprove of any curtains, draperies, shades, paint or other interior improvements that are visible from outside the Premises on wholly aesthetic grounds. Such improvements or replacement items must be submitted for Landlord’s written approval prior to installation, or Landlord may remove or replace such items at Tenant’s sole cost and expense. The trade fixtures, equipment and furniture shall remain Tenant’s property and shall be removed by Tenant prior to the expiration of this Lease. If Tenant fails to remove Tenant’s trade fixtures, equipment and furnitu re prior to the termination of this Lease, Landlord may keep and use the foregoing items or remove and dispose any or all of those items at Tenant’s expense, and cause Tenant’s trade fixtures, equipment and furniture to be stored or sold in accordance with applicable law. Prior to expiration of the Term or earlier termination of this Lease, Tenant shall repair, at Tenant’s sole cost and expense, all damage caused to the Building or Premises as a result of the installation, operation, use or removal of Tenant’s trade fixtures, equipment, furniture, or unauthorized improvements and replacements, and restore the Building and the Premises to their condition at the commencement of the Term.         9.2.  Alterations. Tenant shall deliver to Landlord full and complete plans and specifications of all such alterations, additions or improvements, and no such work shall be commenced by Tenant until Landlord has given its written approval thereof. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any applicable laws, ordinances, etc. Further, Tenant shall indemnify and hold harmless Landlord from any loss, cost or expense, including attorneys’ fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Tenant’s alterations, additions or improvements to the Premises. All other alterations, additions and improvements shall remain the property of Tenant until termination of this Lease, at which time they shall be and become the property of Landlord. All altera tions, additions, improvements, repairs and restoration by Tenant hereinafter required or permitted shall be done in a good and workmanlike manner, incorporating materials of quality equal to or better than those replaced, with finishes comparable to and compatible with adjacent finishes within the Premises and the Building and in compliance with all applicable laws, ordinances, bylaws, regulations and orders of any federal, state, county, municipal or other public authority and of the insurers of the Building. In addition, all of Tenant’s alterations, additions and improvements shall be constructed in such a manner so as to (i) not unreasonably disturb or otherwise interfere with the use and occupancy of any other tenant of the Building, Phase or Project, (ii) protect by appropriate means and measures all components of the Premises, Building, Phase and Project from soiling or damage associated with Tenant’s work, and (iii) not impose any additional expense or delay upon Landlord in the constructio n of improvements to, or maintenance or operation of, the Building, Phase and/or Project. Tenant shall, reimburse Landlord for reviewing and approving or disapproving plans and specifications for any alterations proposed by Tenant. Tenant shall require that any contractors used by Tenant carry a commercial liability insurance policy covering bodily injury in the amounts of Two Million Dollars ($2,000,000.00) per person and Two Million Dollars ($2,000,000.00) per occurrence, and covering property damage in the amount of Two Million Dollars ($2,000,000.00). Landlord may increase the amount of insurance coverage required pursuant to this Section to reflect inflation, industry cost and recovery experience over time. Landlord may require proof of such insurance prior to commencement of any work on the Premises. 10.  USE AND COMPLIANCE WITH LAWS         10.1.  General Use and Compliance with Laws. Tenant shall only use the Premises for the Permitted Use (as set forth in the Basic Lease Information) and for no other use whatsoever without the prior written consent of Landlord. Tenant, at Tenant’s sole cost and expense, shall comply with all of the requirements of any recorded covenants, conditions and restrictions, and any requirements of municipal, county, state, federal and other applicable governmental authorities, now in force, or which may hereafter be in force, pertaining to the Premises, Building, Phase, and/or Project, including any occupancy permit for the Premises, and secure any necessary permits therefor. Tenant, in Tenant’s use and occupancy of the Premises, shall not subject the Premises to any use which would tend -------------------------------------------------------------------------------- to damage any portion thereof, nor overload the common facilities of the Building, Phase or Project to the detriment of other tenants’ enjoyment thereof.         10.2.  Signs. Tenant shall not install any sign in or on the Premises, Building, Phase or Project without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion. Any sign placed by or erected by Landlord for the benefit of Tenant in or on the Premises, Building, Phase or Project shall be installed at Tenant’s sole cost and expense and, except in the interior of the Premises, shall contain only Tenant’s name, or the name of any affiliate of Tenant actually occupying the Premises, and no advertising matter. No such sign shall be erected until Tenant has obtained Landlord’s prior written approval of the location, material, size, design and content thereof and all necessary governmental and other permit and approvals therefor. Landlord shall have the right, in Landlord’s sole and absolute discretion, to object to any sign proposed by Tenant. Ten ant shall remove all of Tenant’s signs prior to the expiration of the Term or earlier termination of this Lease and shall return the Premises, Building, Phase and Project to their condition existing immediately prior to the placement or erection of said sign or signs. If Tenant places or installs any monument or exterior signs in or on the Building, Phase and/or Project, and at any time thereafter Tenant less than fifty percent (50%) of the original Rentable Area of the Premises (as a result of Tenant having assigned its interest in this Lease, Tenant shall immediately remove all such signs and restore the area of the Building, Phase and/or Project where Tenant’s signs were previously located to their condition prior to Tenant’s installation or placement of such signs.         10.3.  Parking Access. In addition to the general obligation of Tenant to comply with laws and without limitation thereof, Landlord shall not be liable to Tenant nor shall this Lease be affected if any parking privileges appurtenant to the Premises are impaired by reason of any moratorium, initiative, referendum, statute, regulation or other governmental decree or action which could in any manner prevent or limit the parking rights of Tenant hereunder. Any governmental charges or surcharges or other monetary obligations imposed relative to parking rights with respect to the Premises, Building, Phase or Project shall be considered as Impositions and shall be payable by Tenant under the provisions of Section 5. Tenant is allocated the use of a percentage of the parking spaces contained in the Phase on a non-exclusive basis as provided in the Basic Lease Information. Tenant shall not permit any on street parking, unauthorize d parking upon private property, or parking in excess of Tenant’s allocation by Tenant’s employees, agents or invitees.         10.4.  Floor Load. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor is designed to carry. 11.  HAZARDOUS MATERIALS.         11.1.  Definitions.               (a) Hazardous Materials. The term “Hazardous Materials” shall mean any substance that: (A) now or in the future is regulated or governed by, requires investigation or remediation under, or is defined as a hazardous waste, hazardous substance, pollutant or contaminant under any governmental statute, code, ordinance, regulation, rule or order, and any amendment thereto, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., or (B) is toxic, explosive, corrosive, flammable, radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon and urea formaldehyde foam insulation.               (b) Environmental Requirements. The term “Environmental Requirements” shall mean all present and future federal, state and local laws, ordinances, orders, permits, licenses, approvals, authorizations and other requirements of any kind applicable to Hazardous Materials.               (c) Environmental Losses. The term “Environmental Losses” shall mean all costs and expenses, damages, including foreseeable and unforeseeable consequential damages, fines and penalties incurred in connection with any violation of and compliance with Environmental Requirements, and all losses of any kind attributable to the diminution of value, loss of use or adverse effect on the marketability or use of any portion of the Premises, Building, Phase or Project.         11.2.  Tenant’s Covenants. Tenant shall not use, install, handle, generate, store, dispose, discharge, release, abate or transport any Hazardous Materials on or about the Premises, Building, Phase or Project without Landlord’s prior written consent, which consent may be granted, denied or conditioned upon compliance with -------------------------------------------------------------------------------- Landlord’s requirements, all in Landlord’s sole and absolute discretion. Notwithstanding the foregoing, Tenant may use and store at the Premises normal quantities of those Hazardous Materials customarily used in the conduct of general office activities, such as copier fluids and cleaning supplies (“Permitted Hazardous Materials”) without Landlord’s prior written consent, provided that Tenant’s use, storage and disposal of all Hazardous Materials shall at all times comply with all Environmental Requirements. At the expiration or termination of this Lease, Tenant shall promptly remove from the Premises, Building, Phase and Project all Hazardous Materials used, installed, handled, generated, stored, disposed, discharged, released, abated or transported by Tenant on or under the Premises, Building, Phase or Project. Tenant shall keep Landlord fully and promptly informed of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, a batement or transportation of any Hazardous Materials other than Permitted Hazardous Materials. Tenant shall be responsible and liable for compliance with all of the provisions of this Section 11 by Tenant’s agents, employees, contractors, licensees, assignees, sublessees, transferees, representatives, guests, customers, invitees and visitors, and all of Tenant’s obligations under this Section 11 (including its indemnification obligations under Section 11.5 below) shall survive the expiration or termination of this Lease.         11.3.  Compliance. Tenant shall, at Tenant’s sole cost and expense, promptly take all actions required by any governmental agency or entity in connection with or as a result of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transportation of any Hazardous Materials on or about the Premises, Building, Phase or Project, including inspecting and testing, performing all cleanup, removal and remediation work required with respect to those Hazardous Materials, complying with all closure requirements and post-closure monitoring, and filing all required reports or plans. All of the foregoing work shall be performed in a good, safe and workmanlike manner by consultants qualified and licensed to undertake such work and in a manner that will not unreasonably interfere with any other tenants’ quiet enjoyment of the Building, Phase and/or Project or Landlord’s use, operation, leasing and sale of the Project or any portion thereof. Tenant shall deliver to Landlord, prior to delivery to any governmental agency, or promptly after receipt from any governmental agency, copies of all permits, manifests, closure or remedial action plans, notices and all other documents relating to Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any of Hazardous Materials on or about the Premises, Building, Phase or Project. If any lien attaches to the Premises, Building, Phase or Project in connection with or as a result of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials, and Tenant does not cause the same to be released, by payment, bonding or otherwise, within ten (10) days after the attachment thereof, Landlord shall have the right, but not the obligation, to cause the lien to be released and any sums expended by Landlo rd in connection therewith shall be payable by Tenant on demand.         11.4.  Landlord’s Rights. Landlord shall have the right, but not the obligation, to enter the Premises upon forty-eight (48) hours, prior written notice to Tenant, except in instances in which Landlord, in its reasonable discretion, deems an emergency or a breach by Tenant of the terms and conditions of this Section 11 to exist in which no prior notice shall be required, (i) to confirm Tenant’s compliance with the provisions of this Section 11, and (ii) to perform Tenant’s obligations under this Section 11 if Tenant has failed to do so or commence to do so within five (5) days after written notice to Tenant. Landlord shall also have the right to engage qualified Hazardous Materials consultants to inspect the Premises, Building, Phase and/or Project and review Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials, inclu ding review of all permits, reports, plans and other documents, the costs of which shall be reimbursed by Tenant to Landlord on demand. Tenant shall pay to Landlord on demand the all costs incurred by Landlord in performing Tenant’s obligations under this Section 11. Landlord shall not be responsible for any interference caused by Landlord’s entry on the Premises.         11.5.  Tenant’s Indemnification. Tenant agrees to indemnify, protect and defend with counsel acceptable to Landlord and hold harmless Landlord, its partners or members, and its or their partners, members, directors, officers, shareholders, employees and agents from all Environmental Losses and all other claims, actions, losses, damages, liabilities, costs and expenses of every kind, including attorneys’, experts’ and consultants’ fees and costs, that are incurred at any time and arising from or in connection with Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials at or about the Premises, Building, Phase and Project, or Tenant’s failure to comply in full with all Environmental Requirements with respect to the Premises, Building, Phase and Project. -------------------------------------------------------------------------------- 12.  DAMAGE AND DESTRUCTION         12.1.  Obligation to Rebuild.         12.2.  Right to Terminate. Landlord shall have the option to terminate this Lease if the Premises or the Building is destroyed or damaged by fire or other casualty, regardless of whether the casualty is insured against under this Lease, if Landlord reasonably determines that (i) there are insufficient insurance proceeds to pay all of the costs of the repair or restoration or (ii) the repair or restoration of the              cannot be completed within              days after the date of the casualty. If Landlord elects to exercise the right to terminate this Lease as a result of a casualty, Landlord shall exercise the right by giving Tenant written notice of its election to terminate this Lease within forty-five (45) days after the date of the casualty, in which event this Lease shall terminate fifteen ( 15) days after the date of the notice.         12.3.  Limited Obligation to Repair. Landlord’s obligation, should Landlord elect or be obligated to repair or rebuild, shall be limited to the shell of the Building and any tenant improvements owned by Landlord. Tenant, at its sole cost and expense, shall replace or fully repair all trade fixtures and equipment owned by Tenant in the Premises and all improvements, additions and alterations constructed by or at the request of Tenant in the Premises (other than any tenant improvements owned by Landlord) and existing at the time of the damage or destruction.         12.4.  Abatement of Rent. In the event of any damage or destruction to the Premises that is not caused by Tenant’s negligence or the negligence of Tenant’s agents, employees or invitees, the Base Rent shall be temporarily abated proportionately to the degree the Premises are rendered untenantable as a result of the damage or destruction, but only to the extent of any proceeds received by Landlord from rental abatement insurance. Such abatement shall commence on the date of the damage or destruction and continue through the period required by Landlord to substantially complete the repair and restoration of the Premises or until such time as the Premises are tenantable for the operation of Tenant’s business, whichever is earlier. Except for the rent abatement provided above, Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the Premises, damage to Tenant’s p ersonal property or any inconvenience occasioned by any damage, repair or restoration.         12.5.  Damage Near End of Term and Extensive Damage. In addition to              right to terminate this Lease under Section 12.2, shall have the right to terminate this Lease upon thirty (30) days’ prior written notice to              if the Premises or Building is substantially destroyed or damaged during the last twelve (12) months of the Term.              in writing of its election to terminate this Lease under this Section 12.5, if at all, within forty-five (45) days after Landlord determines that the Premises or Building has been substantially destroyed. If              to terminate this Lease, the repair of the Premises or Building shall be governed by Sections 12.1 and 12. 3.         12.6.  Insurance Proceeds. If this Lease is terminated, Landlord may keep all the insurance proceeds resulting from the damage, except for those proceeds that specifically insured Tenant’s personal property and trade fixtures (if any).         12.7.  Waiver. With respect to any destruction which Landlord is obligated to repair or elects to repair under the terms of this Section 12, Tenant waives all of its rights to terminate this Lease pursuant to rights presently or hereafter accorded by law to tenants, including the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code. 13.  EMINENT DOMAIN         13.1.  Total Consideration. If the whole of the Premises is acquired or condemned by eminent domain, inversely condemned or sold in lieu of condemnation, for any public or quasi-public use or purpose (“Condemned”), then this Lease shall terminate as of the date of title vesting in such proceeding, and Rent shall be adjusted as of the date of such termination. Tenant shall immediately notify Landlord of any such occurrence.         13.2.  Partial Condemnation. If any portion of the Premises is Condemned, and such partial condemnation renders the Premises unusable for the business of Tenant, as reasonably determined by Landlord, or if a substantial portion of the Building is Condemned, as reasonably determined by Landlord, then this Lease shall terminate as of the date of title vesting in such proceeding and Rent shall be adjusted as of the date of termination. If such condemnation is not sufficiently extensive to render the Premises unusable for the business of Tenant, as reasonably determined by, then Landlord shall promptly restore the Premises to a condition comparable to its -------------------------------------------------------------------------------- condition immediately prior to such condemnation less the portion thereof lost in such condemnation, and this Lease shall continue in full force and effect, except that after the date of title vesting the Base Rent shall be proportionately reduced as reasonably determined by Landlord. Notwithstanding the foregoing, in restoring the Premises to their original condition, Landlord shall not be required to expend an amount greater than the product of (i) Tenant’s Building Percentage Share and (ii) the total amount of any condemnation proceeds for the Building received by Landlord. If any parking areas are Condemned, Landlord has the option, but not the obligation, to supply Tenant with other parking areas.         13.3.  Landlord’s Award. If the Premises are wholly or partially Condemned, then, subject to the provision of Section 13.4 below, Landlord shall be entitled to the entire award paid in connection with such condemnation, and Tenant waives any right or claim to any part thereof from Landlord or the condemning authority.         13.4.  Tenant’s Award. Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant’s own right on account of any and all costs which Tenant might incur in moving Tenant’s merchandise, furniture, fixtures, leasehold improvements and equipment to a new location.         13.5.  Temporary Condemnation. If the whole or any part of the Premises shall be Condemned for any temporary public or quasi-public use or purpose, this Lease shall remain in effect and Tenant shall be entitled to receive for itself such portion or portions of any award made for such use with respect to the period of the taking which is within the Term. If a temporary condemnation remains in force at the expiration or earlier termination of this Lease, Tenant shall pay to Landlord an amount equal to the reasonable cost of performing any obligations required of Tenant by this Lease with respect to the surrender of the Premises, including, without limitation, repairs and maintenance, and upon such payment Tenant shall be excused from any such obligations. If a temporary condemnation is for an established period which extends beyond the Term and such temporary condemnation               renders the Premises unusable for the business of Tenant, as reasonably determined by             this Lease shall terminate as of the date of occupancy by the condemning authority, and the damages shall be as provided in Sections 13.3 and 13.4 and Rent shall be adjusted as of the date of occupancy.         13.6.  Notice and Execution. Landlord shall notify Tenant in writing immediately upon service of process in connection with any condemnation or potential condemnation. Tenant shall immediately execute and deliver to Landlord all instruments that may be required to effectuate the provisions of this Section 13. 14.  DEFAULT         14.1.  Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” on the part of Tenant with or without notice from Landlord:               (a)  Abandonment. Tenant’s abandonment of the Premises;               (b)  Payment. Tenant’s failure to pay any installment of Base Rent, Additional Rent or other sums due and payable hereunder by the date such payment is due;               (c)  Performance. Tenant’s failure to perform any of Tenant’s covenants, agreements or obligations under this Lease (other than a failure to pay Rent or other sums), which default has not been cured within thirty (30) days after written notice thereof from Landlord;               (d)  Assignment. A general assignment by Tenant for the benefit of its creditors;               (e)  Bankruptcy. The commencement of a case or proceeding by Tenant or any of Tenant’s creditors seeking the rehabilitation, liquidation or reorganization of Tenant under any law relating to bankruptcy, insolvency or other relief of debtors;               (f)  Receivership. The appointment of a receiver or other custodian to take possession of all or substantially all of Tenant’s assets or this leasehold;               (g)  Insolvency, Dissolution, Etc. Tenant shall become insolvent or unable to pay its debts, or shall fail generally to pay its debts as they become due; or any court shall enter a decree or order directing the winding up or liquidation of Tenant or of all or substantially all of its assets; or Tenant shall take any action toward the dissolution or winding up of its affairs or the cessation or suspension of its use of the Premises; --------------------------------------------------------------------------------               (h)  Attachment. The attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or this leasehold;               (i)  Failure to Comply. Tenant’s failure to comply with the provisions contained in Sections 16.1 and 16.3; and               An Event of Default shall constitute a default by Tenant under this Lease. In addition, any notice required to be given by Landlord under this Lease shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Civil Code of Procedure. Tenant shall pay to Landlord the amount of Two Hundred Fifty Dollars ($250.00) for each notice of default given to Tenant under this Lease, which amount is the amount the parties reasonably estimate will compensate Landlord for the cost of giving such notice of default.         14.2.  Landlord’s Remedies. Upon an Event of Default, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law, equity, statute or otherwise provided in this Lease, to which Landlord may resort cumulatively or in the alternative:               (a)  Continue Lease. Landlord may continue this Lease in full force and effect, and this Lease shall continue in full force and effect so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have the right to collect Rent when due. In such event, Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations), or any successor statute.               (b)  Terminate Lease. Landlord may terminate Tenant’s right to possession of the Premises at any time by giving written notice to that effect. Upon termination of this Lease, Landlord shall have the right, at Tenant’s sole cost and expense, to remove all of Tenant’s personal property from the Premises and store Tenant’s personal property on Tenant’s behalf. Landlord shall have the right to recover from Tenant: (1) the worth at the time of award of unpaid Rent and other sums due and payable which had been earned at the time of termination; plus (2) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable which would have been payable after termination until the time of award exceeds the amount of the Rent loss that Tenant proves could have been reasonably avoided; plus (3) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable for the balance of the Term after the time of award exceeds the amount of the Rent loss that Tenant proves could be reasonably avoided; plus (4) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which, in the ordinary course of things, would be likely to result therefrom.               (c)  Definition. The “worth at the time of award” of the amounts referred to in Subsections 14.2(b)(1), (2) and (3) is defined in California Civil Code Section 1951.2.               (e)  Cumulative. Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease, or now or hereafter existing at law or in equity or by statute or otherwise, shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise.               (f)  No Waiver. Landlord’s failure to insist upon the strict performance of any term hereof or to exercise any right or remedy upon a default by Tenant under this Lease shall not constitute a waiver of any such term or default. In addition, Landlord’s acceptance of Rent shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent accepted, regardless of Landlord’s knowledge of such preceding breach at the time Landlord accepts such Rent. Efforts by Landlord to mitigate the damages caused by Tenant’s breach of this Lease shall not be construed to be a waiver of Landlord’s right to recover damages under this Section 14. Nothing in this Section 14 affects the right of Landlord to indemnification by Tenant in accordance with the terms of this Lease for any liability arising prior to the termination of this Lease for personal injuries or property damage. 15.  ASSIGNMENT AND SUBLETTING         15.1.  Assignment and Subletting; Prohibition. Tenant shall not assign, mortgage, pledge or otherwise transfer this Lease, in whole or in part (each hereinafter referred to as an “assignment”), nor sublet or permit -------------------------------------------------------------------------------- occupancy by any party other than Tenant of all or any part of the Premises (each hereinafter referred to as a “sublet” or “subletting”), without the prior written consent of Landlord in each instance, which consent shall not be unreasonably withheld. No assignment or subletting by Tenant shall relieve Tenant of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder. Any purported assignment or subletting contrary to the provisions of this Lease without Landlord’s prior written consent shall be void. The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for obtaining Landlord’s consent to any subsequent assignment or subletting. Landlord may consent to any subsequent assignment or subletting, or any amendment to or modification of this Lease with the assignees of Tenant, without notifying Tenant or any successor of Tenant, and without obtaining its or thei r consent thereto, and such action shall not relieve Tenant or any successor of Tenant of any liability under this Lease. As Additional Rent hereunder, Tenant shall reimburse Landlord for all reasonable legal fees and other expenses incurred by Landlord in connection with any request by Tenant for consent to an assignment or subletting.         15.2.  Information to be Furnished. If Tenant desires at any time to assign its interest in this Lease or sublet the Premises, Tenant shall first notify Landlord of its desire to do so and shall submit in writing to Landlord: (i) the name of the proposed assignee or subtenant; (ii) the nature of the proposed assignee’s or subtenant’s business to be conducted in the Premises; (iii) the terms and provisions of the proposed assignment or sublease, including the date upon which the assignment shall be effective or the commencement date of the sublease (hereinafter referred to as the “Transfer Effective Date”) and a copy of the proposed form of assignment or sublease; and (iv) such financial information, including financial statements, and other information as Landlord may reasonably request concerning the proposed assignee or subtenant.         15.3.  Landlord’s Election. At any time within          days after Landlord’s receipt of the information specified in Section 15.2, Landlord may, by written notice to Tenant, elect to (i) terminate this Lease as to the space in the Premises that Tenant proposes to sublet; (ii) terminate this Lease as to entire Premises (available only if Tenant proposes to assign all of its interest in this Lease), (iii) consent to the proposed assignment or subletting by Tenant; or (iv) withhold its consent to the proposed assignment or subletting by Tenant.         15.4.  Termination. If Landlord elects to terminate this Lease with respect to all or a portion of the Premises pursuant to Section 15.3(i) or (ii) above, this Lease shall terminate effective as of the Transfer Effective Date.         15.5.  Withholding Consent. Without limiting other situations in which it may be reasonable for Landlord to withhold its consent to any proposed assignment or sublease, Landlord and Tenant agree that it shall be reasonable for Landlord to withhold its consent in any one (1) or more of the following situations: (1) in Landlord’s reasonable judgment, the proposed subtenant or assignee or the proposed use of the Premises would detract from the status of the Building as a first-class office building, generate vehicle or foot traffic, parking or occupancy density materially in excess of the amount customary for the Building or the Project or result in a materially greater use of the elevator, janitorial, security or other Building services (e.g., HVAC, trash disposal and sanitary sewer flows) than is customary for the Project; (2) in Landlord’s reasonable judgment, the creditworthiness of the proposed subtenant or as signee does not meet the credit standards applied by Landlord in considering other tenants for the lease of space in the Project on comparable terms, or Tenant has failed to provide Landlord with reasonable proof of the creditworthiness of the proposed subtenant or assignee; (4) the proposed assignee or subtenant is a governmental entity, agency or department or the United States Post Office; or (5) the proposed subtenant or assignee is a then existing or prospective tenant of the Project. If Landlord fails to elect either of the alternatives within the           day period referenced in Section 15.3, it shall be deemed that Landlord has refused its consent to the proposed assignment or sublease.         15.6.  Bonus Rental. If, in connection with any assignment or sublease, Tenant receives rent or other consideration, either initially or over the term of the assignment or sublease, in excess of the Rent called for hereunder, or in case of the sublease of a portion of the Premises, in excess of such Rent fairly allocable to such portion, Tenant shall pay to Landlord, as Additional Rent hereunder, fifty percent (50%) of the excess of each such payment of Rent or other consideration received by Tenant promptly after Tenant’s receipt of such Rent or other consideration. To the extent that a subtenant or assignee pays costs or expenses normally paid by a landlord in connection with a lease of commercial office property located in Menlo Park or Palo Alto, or a sublandlord in connection with a sublease of office space in Menlo Park or Palo Alto, or the subtenant purchases goods or services from sublandlord or an affiliate of sublandlord for an amount in excess of the fair market value for such goods or -------------------------------------------------------------------------------- services, such costs incurred or amounts expended shall be deemed to be “other consideration” for purposes of calculating excess Rent due to Landlord hereunder.         15.7.  Scope. The prohibition against assigning or subletting contained in this Section 15 shall be construed to include a prohibition against any assignment or subletting by operation of law. If this Lease is assigned, or if the underlying beneficial interest of Tenant is transferred, or if the Premises or any part thereof is sublet or occupied by anybody other than Tenant, Landlord may collect rent from the assignee, subtenant or occupant and apply the net amount collected to the Rent due herein and apportion any excess rent so collected in accordance with the terms of Section 15.6, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of the provisions regarding assignment and subletting, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance, by Tenant of covenants on the part of Tenant herein contained. No assignment or su bletting shall affect the continuing primary liability of Tenant (which, following assignment, shall be joint and several with the assignee), and Tenant shall not be released from performing any of the terms, covenants and conditions of this Lease.         15.8.  Executed Counterparts. No sublease or assignment shall be valid, nor shall any subtenant or assignee take possession of the Premises, until a fully executed counterpart of the sublease or assignment has been delivered to Landlord and Landlord, Tenant and the applicable assignee or subtenant have entered into a consent to assignment or sublease in a form acceptable to Landlord.         15.9.  Transfer of a Majority Interest. If Tenant is a non-publicly traded corporation, the transfer (as a consequence of a single transaction or any number of separate transactions) of fifty percent (50%) or more or of a controlling interest or the beneficial ownership interest of the voting stock of Tenant issued and outstanding as of the Effective Date shall constitute an assignment hereunder for which Landlord’s prior written consent is required. If Tenant is a partnership, limited liability company, trust or an unincorporated association, the transfer of a controlling or majority interest therein shall constitute an assignment hereunder for which Landlord’s prior written consent is required.         15.10.  Indemnity. If Landlord reasonably withholds its consent to any proposed assignment or sublease, Tenant shall indemnify, protect, defend and hold harmless Landlord against and from any and all loss, liability, damages, costs and expenses (including attorneys’ fees and disbursements) resulting from any claims that may be made against Landlord by the proposed assignee or sublessee or by any brokers or any persons claiming a commission or similar compensation in connection with the proposed assignment or sublease. Notwithstanding any contrary provision of law, including, without limitation, California Civil Code Section 1995.310, the provisions of which Tenant hereby waives, Tenant shall have no right to terminate this Lease, in the event Landlord is determined to have unreasonably withheld or delayed its consent to a proposed sublease or assignment.         15.11.  Waiver. Notwithstanding any assignment or sublease, or any indulgences, waivers or extensions of time granted by Landlord to any assignee or sublessee, or failure by Landlord to take action against any assignee or sublessee, Tenant waives notice of any default of any assignee or sublessee and agrees that Landlord may, at its option, proceed against Tenant without having taken action against or joined such assignee or subleases, except that Tenant shall have the benefit of any indulgences, waivers and extensions of time granted to any such assignee or sublessee.         15.12.  Release. Whenever Landlord conveys its interest in the Phase and/or Building, Landlord shall be automatically released from the further performance of covenants on the part of Landlord herein contained, and from any and all further liability, obligations, costs and expenses, demands, causes of action, claims or judgments arising from or growing out of, or connected with this Lease after the effective date of said release. The effective date of Tenant’s release shall be the date the assignee executes an assumption agreement pursuant to which the assignee expressly agrees to assume all of Landlord’s obligations, duties, responsibilities and liabilities with respect to this Lease. If requested, Tenant shall execute a form of release and such other documentation as may be required to further effect the provisions of this Section 15. 16.  ESTOPPEL, ATTORNMENT AND SUBORDINATION         16.1.  Estoppel. Within ten (10) days after Landlord’s written request, Tenant shall execute and deliver to Landlord, in recordable form, a certificate to Landlord and any existing or proposed mortgagee or purchaser certifying, among other things, (i) that this Lease is unmodified and in full force and effect or, if modified, stating the nature of the modification and certifying that this Lease, as so modified, is in full force and effect, (ii) the date to -------------------------------------------------------------------------------- which the Rent and other charges have been paid in advance, if any; (iii) that to Tenant’s knowledge, there are no uncured defaults on the part of Landlord or Tenant under this Lease, or if there are uncured defaults on the part of Landlord or Tenant, stating the nature of the uncured defaults; (iv) that Tenant has no right to purchase, option or right of first refusal to purchase all or any portion of the Building, Phase or Project; and (v) any other statement or provision reasonably requested by Landlord or any existing or proposed mortgagee or prospective purchaser. Any such certificate may be relied upon by Landlord and any mortgagee, beneficiary, ground or underlying lessor, purchaser or prospective purchaser or mortgagee of the Project, Phase and/or Building or any interest therein. Tenant’s failure to timely deliver said statement shall be conclusive upon Tenant that: (i) this Lease is in full force and effect, without modification except as may be represented by Landlord; (i i) there are no uncured defaults in Landlord’s performance and Tenant has no right of offset, counterclaim or deduction against Rent hereunder; (iii) Tenant has no right to purchase, option or right of first refusal to purchase all or any portion of the Building, Phase or Project, and (iv) no more than one month’s Base Rent has been paid in advance. In addition, Tenant hereby irrevocably appoints Landlord as its agent and attorney-in-fact to execute, acknowledge and deliver any such certificate in the name of and on behalf of Tenant if Tenant fails to execute, acknowledge and deliver any such certificate within ten (10) days after Landlord’s written request therefor.         16.2.  Attornment. In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage or deed of trust made by Landlord or its successors or assigns that encumbers the Phase or the Building, or any part thereof, or in the event of a termination of any ground lease, if any, Tenant, if so requested, shall attorn to the purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of foreclosure and recognize such purchaser as Landlord under this Lease.         16.3.  Subordination. This Lease is subject and subordinate to all ground and underlying leases, mortgages and deeds of trust which now or may hereafter encumber the Phase, Building or Premises, and to all renewals, modifications, consolidations, replacements and extensions thereof. Within ten (10) days after Landlord’s written request therefor, Tenant shall execute any and all documents required by Landlord, the lessor under any ground or underlying lease (“Lessor”), or the holder or holders of any mortgage or deed of trust (“Holder”), in order to make this Lease subordinate to the lien of any lease, mortgage or deed of trust, as the case may be. In addition, if Lessor or Holder desires to make this Lease prior and superior to the ground lease, mortgage or deed of trust, then, within seven (7) days after Landlord’s written request, Tenant shall execute, have acknowledged and deliver to Landl ord any and all documents or instruments, in the form presented to Tenant, which Landlord, Lessor or Holder deems necessary or desirable to make this Lease prior and superior to the lease, mortgage or deed of trust. 17.  NOTICES. All notices required to be given hereunder shall be in writing and given by United States registered or certified mail, postage prepaid, return receipt requested; personal delivery; electronic mail (e.g., facsimile); or any commercial overnight courier service (e.g., FedEx); and sent to the appropriate address indicated in the Basic Lease Information or at such other place or places as either Landlord or Tenant may, from time to time, respectively, designate in a written notice given to the other. Notices that are sent by electronic mail shall be deemed to have been given upon receipt. Notices which are mailed shall be deemed to have been given when seventy-two (72) hours have elapsed after the notice was deposited in the United States mail, registered or certified, postage prepaid, addressed to the party to be served. Notices that are sent by commercial overnight courier shall be deemed to have been given on the next business day after the notice was del ivered to the commercial overnight courier. 18.  SUCCESSORS BOUND. This Lease and each of the covenants and conditions contained herein shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, successors, legal representatives and assigns, subject to the provisions hereof. Whenever in this Lease a reference is made to Landlord, such reference shall be deemed to refer to the person in whom the interest of Landlord shall be vested, and Landlord shall have no obligation hereunder as to any claim arising after the transfer of its interest in the Premises. Any successor or assignee of Tenant who accepts an assignment or the benefit of this Lease and enters into possession or enjoyment hereunder shall thereby assume and agree to perform and be bound by the covenants and conditions contained in this Lease. Nothing contained herein shall be deemed in any manner to give a right of assignment to Tenant without the written consent of Landlord. 19.  MISCELLANEOUS         19.1.  Waiver. No waiver of any default or breach of any covenant by either party hereunder shall be implied from any omission by either party to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and said -------------------------------------------------------------------------------- waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term or condition contained herein by either party shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by either party to or of any act by the other party shall not be deemed to waive or render unnecessary a party’s consent or approval to or of any subsequent similar acts.         19.2.  Easements. Landlord reserves the right to grant easements on the Phase and dedicate for public and private use portions thereof without Tenant’s consent; provided, however, that no such grant or dedication shall materially interfere with Tenant’s use of the Premises. From time to time, and upon Landlord’s demand, Tenant shall execute, acknowledge and deliver to Landlord, in accordance with Landlord’s instructions, any and all documents, instruments, maps or plats necessary to effectuate Tenant’s covenants hereunder.         19.4.  Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this Lease.         19.5.  Limitation of Landlord’s Liability. The obligations of Landlord under this Lease do not constitute personal obligations of the individual partners, members, directors, officers or shareholders of Landlord, and Tenant shall look solely to the real estate that           and to no other assets of Landlord for satisfaction of any liability in respect of this Lease and will not seek recourse against the individual partners, members, directors, officers or shareholders of Landlord or any of their personal assets for such satisfaction.         19.6.  Time. Time is of the essence of every provision hereof.         19.7.  Attorneys’ Fees. In any action or proceeding which Landlord or Tenant brings against the other party in order to enforce its respective rights hereunder or by reason of the other party failing to comply with all of its obligations hereunder, whether for declaratory or other relief, the unsuccessful party therein agrees to pay all costs incurred by the prevailing party therein, including reasonable attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be made a part of the judgment in said action. A party shall be deemed to have prevailed in any action (without limiting the definition of prevailing party) if such action is dismissed upon the payment by the other party of the amounts allegedly due or the performance of obligations which were allegedly not performed, or if such party obtains substantially the relief sought by such party in the action, regardless or whether such action is prosecuted to judgment.         19.8.  Captions and Section Numbers. The captions, section numbers and table of contents appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent or such sections or sections of this Lease nor in any way affect this Lease.         19.9.  Severability. If any term, covenant, condition or provision of this Lease, or the application thereof to any person or circumstance, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions or provisions of this Lease, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated.         19.10.  Applicable Law. This Lease, and the rights and obligations of the parties hereto, shall be construed and enforced in accordance with the laws of the State of California.         19.11.  Submission of Lease. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of or option for leasing the Premises. This document shall become effective and binding only upon execution and delivery hereof by Landlord and Tenant. No act or omission of any employee or agent of Landlord or of Landlord’s broker or agent shall alter, change or modify any of the provisions in this Lease.         19.12.  Holding Over. Should Tenant, or any of its successors in interest, hold over in the Premises, or any part thereof, after the expiration of the Term unless otherwise agreed to in writing, such holding over shall constitute and be construed as tenancy from month-to-month only, at a monthly rent equal to the greater of (i) the Base Rent owed during the final year of the Term, as the same may have been extended, together with the Additional Rent due under this Lease, or (ii) fair market rent for the Premises, as reasonably determined by Landlord. The inclusion of the preceding sentence shall not be construed as Landlord’s permission for Tenant to -------------------------------------------------------------------------------- hold over. In addition, Tenant shall indemnify, protect, defend and hold harmless Landlord for all losses, expenses and damages, including any consequential damages incurred by Landlord, as a result of Tenant failing to surrender the Premises to Landlord and vacate the Premises by the end of the Term.         19.13.  Rules and Regulations. At all times during the Term, Tenant shall comply with the rules and regulations for the Building, Phase and Project set forth in Exhibit D, attached hereto, and all amendments as Landlord may reasonably adopt.         19.14.  No Nuisance. Tenant shall conduct its business and control its agents, employees, invitees and visitors in such a manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant in the Building, Phase or Project, or Landlord in its operation of the Building, Phase and Project.         19.15.  Broker. Tenant warrants that it has had no dealings with any real estate broker or agent other than the broker(s) referenced in the Basic Lease Information (“Broker”) in connection with the negotiation of this Lease, and that it knows of no other real estate broker or agent who is entitled to any commission or finder’s fee in connection with this Lease. Tenant agrees to indemnify, protect, defend and hold harmless Landlord from and against any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation, attorneys’ fees and costs) with respect to any leasing commission or equivalent compensation alleged to be owing on account of Tenant’s dealings with any real estate broker or agent other than Broker.         19.16.  Landlord’s Right to Perform. Upon Tenant’s failure to perform any obligation of Tenant hereunder, including without limitation, payment of Tenant’s insurance premiums, charges of contractors who have supplied materials or labor to the Premises, etc., Landlord shall have the right to perform such obligation of Tenant on behalf of Tenant and/or to make payment on behalf of Tenant to such parties. Tenant shall reimburse Landlord for the reasonable cost of Landlord’s performing such obligation on Tenant’s behalf, including reimbursement of any amounts that may be expended by Landlord, plus interest at the Interest Rate.         19.17.  Nonliability. Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall the rental herein reserved be abated by reason of, (i) the interruption of use of the Premises as a result of the installation of any equipment in connection with the use, operation or maintenance of the Premises, Building, Phase and/or Project, (ii) any failure to furnish or delay in furnishing any services required to be provided by Landlord when such failure or delay is caused by accident or any condition beyond the reasonable control of Landlord or by the making of necessary repairs or improvements to the Premises, Building, Phase or Project, or (iii) the limitation, curtailment, rationing or restriction on use of water or electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises, Building, Phase or Project. Landlord shall use reasonable efforts to remedy any interruption in the furnishing of such services.         19.18.  Financial Statements. Within ten (10) days after Landlord’s written request, Tenant shall deliver to Landlord Tenant’s most current quarterly and annual financial statements audited by Tenant’s certified public accountant or, if audited financial statements are not available, Tenant shall deliver to Landlord, Tenant’s financial statements certified to be true and correct by Tenant’s chief financial officer. Tenant’s annual financial statements shall not be dated more than twelve (12) months prior to the date of Landlord’s request.         19.19.  Entire Agreement. This Lease sets forth all covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises, Building, Phase and Project, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between Landlord and Tenant other than as are herein set forth. Except as otherwise provided in this Lease, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by Landlord and Tenant.         19.20.  Addendum. The Addendum attached hereto is incorporated herein by reference. If no Addendum, state “none” in the following space:                              . --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above-written. “Landlord”      “Tenant”           MENLO OAKS PARTNERS L.P., Delaware limited partnership      E*TRADE GROUP, INC. a Delaware corporation                By: AM Limited Partners, a California        limited partnership, its General Partner             By:   /s/ Len Purkis             Name:  Len Purkis Its:  EVP & COO                By: Amarok Menlo, Inc., a California        corporation, its General Partner             By:   /s/ Kathy Levinson             Name:  Kathy Levinson Its:  President & COO        By:   /s/ J. Marty Brill, Jr.             Name:  J. Marty Brill, Jr. Its:  President ADDENDUM TO MENLO OAKS CORPORATE CENTER LEASE (4200 Bohannon Drive)         THIS ADDENDUM TO MENLO OAKS CORPORATE CENTER LEASE (this “Addendum”) is entered into by and between Menlo Oaks Partners, L.P., a Delaware limited partnership (“Landlord” ), and E*TRADE GROUP, INC., a Delaware corporation (“Tenant”). This Addendum is made a part of that certain Menlo Oaks Corporate Center Lease (the “Lease”), entered into between Landlord and Tenant concurrently herewith, pursuant to which Landlord leases to Tenant that certain building commonly known as 4200 Bohannon Drive, located in Menlo Park, California. Capitalized terms used herein and not defined herein shall have the meanings set forth in the Lease. Section 1.3:         On page 1, line 2, in place of the deleted language, insert “the Basic Lease Information”. -------------------------------------------------------------------------------- Section 2.3(d):         On page 2, line 2, after the word “Project”, insert “; provided, however, Landlord shall not designate any parking spaces in the area located between the Building and the 4500 Bohannon Building (defined herein) for the exclusive use of any tenant in the Project other than Tenant so long as Tenant occupies at least ninety percent (90%) of the rentable square feet in the Building and the 4500 Bohannon Building.” Section 2.3:         At the end of this Section, insert “Landlord shall use commercially reasonable efforts in exercising its rights under this Section 2.3 so as not to materially impair Tenant’s access to or use of the Premises.” Section 2.5:         At the end of Section 2.4, insert the following Section:         “2.5   Parking. Tenant shall have the right to use up to forty-nine and 807/1000ths percent (49.807%) of the available parking spaces in the Phase on a non-exclusive basis. The Phase includes approximately four hundred fourteen (414) parking spaces. At Tenant’s written request, Landlord shall designate up to six (6) of the parking spaces allocated for Tenant’s use and located near the Building as “ visitor parking”. Section 3.3:         At the end of Section 3.2, insert the following Section:         “3.3   Delivery of Possession. Landlord shall deliver possession of the Premises to Tenant within one (1) business day after the Effective Date, in a broom clean condition with all building systems in working order and the roof in water-tight condition.” Section 4.4:         On page 3, line 1, in place of the deleted language, insert “within three (3) business days after Tenant’s receipt of written notice from Landlord that such installment of Rent is past due”. Section 4.5:         On page 3, line 2, in place of the deleted word, insert “within three (3) business days after Tenant’s receipt of written notice from Landlord that such installment of Rent is past”. Section 4.6:         On page 4, line 3, in place of the deleted word, insert “will”.         On page 4, line 4, after the word “transferee”, insert “or the transferee will assume in writing Landlord’s obligation to return the Security Deposit to Tenant in accordance with the terms of this Lease.” Section 5.6:         At the end of this Section, insert “Landlord shall furnish Tenant with copies of tax bills for the prior calendar year within ten (10) days after Tenant’s written request.” Section 6.1:         On page 5, line 9, after the word “action”, insert “covering the Building, the Tenant Improvements and all other improvements made by Tenant to the Premises (if available at commercially reasonable rates)”. Section 6.2(a):         On page 5, line 2, in place of the deleted language, insert “Five Million Dollars ($5,000,000.00) per occurrence and Ten Million Dollars ($10,000,000.00) aggregate”.         On page 5, line 5, after the word “coverage”, add a period and insert “Tenant may satisfy the insurance requirement pursuant to this Section 6.2 (a) in combination with an umbrella policy.” -------------------------------------------------------------------------------- Section 6.2(b):         On page 5, line 1, before the word “Comprehensive”, insert “Solely with respect to the Project”.         On page 5, line 4, after the word “automobiles”, add a period and insert “Tenant may satisfy the insurance requirement pursuant to this Section 6.2(b) in combination with an umbrella policy”. Section 6.2 (c):         On page 5, line 5, after the amount “($5,000,000)”, insert “in the state of California. Tenant may satisfy the insurance requirement with respect to the employer’s liability insurance in combination with an umbrella policy”. Section 6.2 (d):         On page 6, line 6, in place of the deleted language, add a period and insert “Tenant shall maintain full replacement cost property insurance with respect to all of the alterations, improvements and additions made by Tenant in the Premises or the Building (including the Tenant Improvement Work). Tenant’s property insurance with respect to such alterations, improvements and additions shall provide that all claims made thereunder shall be adjusted by Landlord and all proceeds payable thereunder shall be paid to Landlord. Tenant shall maintain, at a minimum, actual value insurance with respect to the EDP Equipment.” Section 6.2(e):         On page 6, line 1, in place of the first deletion, insert “Interruption”.         On page 6, line 1, in place of the second deletion, insert “interruption”. Section 6.3 (d):         On page 6, line 2, in place of the deleted language, insert “mortgagee, ground lessee, partner, agent or affiliate of Landlord”.         On page 6, line 3, after the word “Section 6”, insert “, except workers’ compensation insurance and business interruption insurance”. Section 6.3 (f):         On page 7, line 1, after the word “The”, insert “property insurance”. Section 6.4:         On page 7, line 2, in place of the deleted word, insert “property manager”.         On page 7, line 8, after the word “misconduct”, insert “or Environmental Losses (defined in Section 11.1) not covered by Sections 11.3 and 11.5 of this Lease”.         On page 7, line 15, after the word “cause”, insert “excluding any loss, damage or injury to the extent caused by the willful or criminal misconduct of any Indemnified Party”. Section 6.5:         On page 7, line 8, in place of the deleted language, insert “or Building”. Section 7.2:         On page 7, line 8, after the word “fees”, insert “(not to exceed in any year three percent (3%) of the annual Base Rent due for such year)”.         On page 8, line 1, in place of the deleted language, insert “rate equal to the Prime Rate plus one percent (1%) (with the term “Prime Rate” defined as the reference rate (or its equivalent) announced publicly in San Francisco, California, from time to time by Wells Fargo Bank, N.A. or, if Wells Fargo Bank, N.A. ceased to exist, the largest bank, in terms of assets, headquartered in California)”. --------------------------------------------------------------------------------         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Lease, Operating Expenses chargeable to Tenant shall not include the following:         1.  The cost of any capital repairs, replacements and/or improvements made to the structural portions of the Building or the Phase, including the structural walls of the Building, the Building foundation and the structural portions of the roof (but excluding the roof membrane);”         2.  The cost of providing any service direct to and paid directly by any other tenant of the Project (excluding such tenant’s share of Operating Expenses);         3.  The cost of any items for which Landlord is reimbursed by insurance proceeds, condemnation awards, a tenant of the Project or otherwise (excluding any payment by a tenant of that tenant’s share of Operating Expenses), to the extent so reimbursed;         4.  Any real estate brokerage commission or other costs incurred in procuring tenants, or any fee in lieu of commission;         5.  Payments of principal or interest on mortgages or ground lease payments (if any);         6.  Costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Building, Phase or Project, or any law, code, regulation, ordinance or the like (except to the extent attributable to Tenant’s acts or omissions);         7.  Landlord’s general corporate overhead and general and administrative expenses;         8.  Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord (other than in the parking facility for the Phase or the Project); and         9.  Costs incurred to (i) comply with laws relating to the removal of any Hazardous Material (as that term is defined in Section 11) of such nature that a federal, state or municipal governmental authority, if it then had knowledge of the presence of such Hazardous Material, in the state and under the conditions that the Hazardous Material then existed in or on the Building, Phase or Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto, and (ii) remove, remedy, contain or treat any Hazardous Material which is brought onto the Building, Phase or Project after the date hereof by Landlord or any other tenant of the Project, and which is of such a nature, at that time, that a federal, state or municipal governmental authority, if it then had knowledge of the presence of such Hazardous Material, in the state and under the conditions that it then existed in or o n the Building, Phase or Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto.” Section 7.8 (a):         At the end of this Section, insert “Tenant shall arrange and provide for its own janitorial services in the Building.” Section 7.8 (b):         At the end of this Section, insert “Landlord represents to Tenant that the Building is separately metered for electricity, gas and water.” Section 7.9:         At the end of Section 7.8, add the following Section:         7.9   Tenant’s Audit Rights. Tenant shall have ninety (90) days after Tenant receives the year end statement of the adjustment to the Operating Expenses for the prior calendar year to notify Landlord in writing of Tenant’s desire to conduct, at Tenant’s sole cost and expense, an audit of Landlord’s books and records relating to the prior calendar year. Any such audit must be conducted by Tenant or its agent during regular business hours at the offices of Landlord or the offices of Landlord’s designated agent and must be completed within one hundred fifty (150) days after Tenant receives the applicable year end statement. The person or entity performing the audit or review of Landlord’s books and records on Tenant’s behalf or at Tenant’s request may not be compensated for the audit or review on a contingency fee basis. If Landlord objects to the findings of Tenant’s audit, Landlord and Tenant shall attempt to resolve their disagreement concerning the amount of Tenant’s proportionate share of -------------------------------------------------------------------------------- Operating Expenses within the next thirty (30) days. If Landlord and Tenant are unable to agree upon the amount of Tenant’s proportionate share of Operating Expenses (after Tenant has completed its audit), the parties shall submit the matter to binding arbitration before a single neutral arbitrator having experience in real estate valuation, property management or accounting or, alternatively, the arbitrator may be a retired judge or justice of a California Superior Court or Court of Appeal. The matter shall be decided by arbitration in accordance with the applicable arbitration statutes and the then existing Commercial Arbitration Rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other party. Within thirty (30) days after the other party’s receipt of written notice of demand for arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, either party may request the American Arbitration Association to appoint the arbitrator in accordance with its Commercial Arbitration Rules. The provisions of California Code of Civil Procedure Section 1283.05 or its successor section(s) are incorporated in and made a part of this Lease with respect to any arbitration requested in accordance with the provisions contained in this Section. Depositions may be taken and discovery may be obtained in any arbitration proceeding requested pursuant to this Section in accordance with the provisions of California Code of Civil Procedure Section 1283.05 or its successor section(s). Arbitration hearing(s) shall be conducted in Santa Clara County California. Any relevant evidence, including hearsay, shall be admitted by the arbitrator if it is the sort of evidence upon which responsible persons are accustomed to rely in the conduct of serious affairs, regardless of the admiss ibility of such evidence in a court of law; however, the arbitrator shall apply California law relating to privileges and work product. In rendering his or her award, the arbitrator shall set forth the reasons for his or her decision. The fees and expenses of the arbitrator shall be paid in the manner allocated by the arbitrator. This agreement to arbitrate any dispute concerning the findings of Tenant’s audit shall be specifically enforceable under the prevailing arbitration law. Judgment on the award rendered by the arbitration may be entered in any court having jurisdiction thereof. If, subsequent to Tenant’s audit, the parties determine that Landlord has overstated Tenant’s percentage share of the Operating Expenses by more than five percent (5%) during the applicable calendar year, Landlord shall reimburse Tenant for the reasonable cost of the audit.” Section 8.1:         At the end of this Section, insert “Specifically, Landlord shall maintain the structural portions of the Building, including the structural elements of the walls, floor slabs and roof; the heating, ventilating and air conditioning system in the Building (the “Building HVAC”); the elevator; the plumbing and electrical systems in the Common Areas (with Tenant maintaining the plumbing and electrical systems in the Premises); the Common Area parking lots in the Phase; the exterior of the Building, including the exterior glass; and the foundation. If the existing Building HVAC breaks or malfunctions during the Term, then, to the extent it is commercially reasonable to do so, Landlord shall repair the existing Building HVAC as opposed to replacing the existing Building HVAC. Landlord shall notify Tenant in writing prior to replacing the existing Building HVAC. Landlord shall be responsible for ensuring that the Building HVAC and the ele vators are in working order on January 1, 2000.” Section 8.2:         On page 9, line 4, after the word “Landlord”, insert “and those items or components of the Building that Landlord is obligated to repair pursuant to Section 8.1. “         On page 9, line 14, after the word “all”, insert “interior”.         At the end of this Section, insert “Tenant is responsible for the proper maintenance and servicing of fire extinguishers and fire protection equipment in the Premises. Notwithstanding anything to the contrary contained in this Section, Tenant shall not be required to remove any of the Tenant Improvements (defined in the Work Letter) constructed by Tenant as part of the Tenant Improvement Work (defined in the Work Letter).” Section 8.3:         On page 10, line 3, in place of the deleted language, insert “upon three (3) business days prior written”.         On page 10, line 11, after the word “Term,”, insert “and Tenant fails to perform such obligations within three (3) business days after written notice to Tenant,”. -------------------------------------------------------------------------------- Section 8.4:         On page 10, line 1, after the word “times”, insert “after prior notice to Tenant (except in the event of an emergency whereupon no prior notice is required)”.         On page 10, line 4, after the word “tenants”, insert “ (during the last fifteen (15) months during the Term)”.         On page 10, line 5, in place of the deleted language, insert “Tenant at all times shall maintain personnel on the Premises twenty-four (24) hours a day who are authorized to provide Landlord access to the Premises in accordance with the provisions of this Section 8.4.” Section 8.5:         On page 10, line 6, after the word “lien”, insert “if Tenant does not post a bond sufficient to remove the lien in accordance with California law within twenty (20) days after Tenant is notified of the existence of the lien”. Section 9.2:         On page 11, line 1, in place of the deleted language, insert “Tenant shall not make or allow to be made any alterations, additions or improvements to the Premises, either at the inception of this Lease or subsequently during the Term, without obtaining the prior written consent of Landlord. Landlord shall not unreasonably withhold its consent to any non-structural alterations, additions or improvements provided that the proposed non-structural alterations, additions or improvements do not require changes or modifications to the Building systems and are consistent with the use of the Premises as first class office space as reasonably determined by Landlord. Landlord shall have the right to withhold its consent to all other alterations, additions or improvements in Landlord’s sole and absolute discretion. Landlord shall respond to any request by Tenant to make any alteration, addition or improvement to the Premises within ten (10) busin ess days after Landlord’s receipt of Tenant’s written request.”         On page 11, line 23, in place of the second deletion, insert “all reasonable third-party costs incurred by Landlord in”.         On page 11, line 25, after the first occurrence of the word “Tenant”, insert “; provided, however, Landlord shall not charge Tenant for costs incurred by Landlord in reviewing Tenant’s plans for the Tenant Improvement Work (as defined in the Work Letter).”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Lease, Tenant shall have the right, without the consent of, but with notice to, Landlord, to make nonstructural alterations within the Premises costing, in the aggregate, less than Twenty-Five Thousand Dollars ($25,000.00) in any twelve (12) month period, provided that the non-structural alterations proposed by Tenant do not (i) diminish the use of the Premises as first class office space as reasonably determined by Landlord and (ii) affect the structure of the Building or the Building systems. Tenant shall provide Landlord with as built drawings of any such alterations. If requested in writing by Tenant at the time Tenant requests Landlord’s consent to any proposed alteration, addition or improvement (or, if Landlord’s consent is not required, at the time Tenant notifies Landlord of any proposed alteration, addition or improvement), Lan dlord shall notify Tenant as to whether Tenant will be required to remove the proposed alteration, addition or improvement and restore the Premises to its original condition at the end of the Term.” Section 10.2:         On page 12, line 8, in place of the deleted word, insert “leases”.         On page 12, line 9, in place of the deleted language, insert “or Tenant’s lease as to all or a portion of the Premises being terminated”.         On page 12, line 12, at the end of the sentence, insert “The provisions of this Section shall not pertain to any interior signage of Tenant that is not visible from the outside of the Premises.”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Section, Tenant shall have the right to install (i) a directional sign on the existing directional signs located within the Phase Common Areas, (ii) a sign on the entry wall adjacent to the main entrance of the Building (“Entry Wall Signs”), and (iii) a sign on the exterior of the Building facing Highway 101 (but only if Tenant has not installed exterior signage -------------------------------------------------------------------------------- on the 4500 Bohannon Building (defined in Section 27) facing Highway 101). Tenant’s right to install the signage referenced in the preceding sentence is subject to Landlord’s prior review and approval of Tenant’s proposed signage, including the size, color, design and exact proposed location of Tenant’s signage, which approval shall not be unreasonably withheld provided that the signage is in accordance with Landlord’s written sign criteria. A copy of Landlord’s written sign criteria is attached hereto as Exhibit G. Landlord approves in advance text reading “E*TRADE” on Tenant’s Building signage so long as the text is black in color; provided, however, the text on Tenant’s monument signs in the Phase and Tenant’s Entry Wall Signs may contain the colors contained in Tenant’s current logo. Tenant Shall obtain all of the necessary governmental permits and approvals required to install Tenant’s signs in the Project and all of Tenant’s signs shall comply with all laws, ordinances and regulations and any of the conditions, covenants and restrictions recorded against the Phase.” Section 11.5:         On page 13, line 5, after the word “Tenant’s”, insert “and Tenant’s employees’, agents’, representatives’ and contractors’”. Section 12.1:         On page 14, line 1, in place of the deleted language, insert “If the Premises and/or the Building are damaged or destroyed, then, subject to the provisions of this Section 12 and provided that neither party terminates this Lease pursuant to this Section 12, (i) Landlord shall promptly and diligently repair or restore the Premises and/or the Building (excluding the Tenant Improvements and all other alterations, additions and improvements made by Tenant to the Premises) and (ii) Tenant shall promptly and diligently repair or restore all of the Tenant Improvements and all other alterations, additions and improvements made by Tenant to the Premises.” Section 12.2:         On page 14, line 4, in place of the deleted language, insert “portions of the Premises or the Building which Landlord is obligated to repair”.         On page 14, line 5, in place of the deleted number, insert “two hundred seventy (270)”.         On page 14, line 8, after the word “notice.”, insert the following:         “In addition, Tenant shall have the right to terminate this Lease upon thirty (30) days’ prior written notice to Landlord if the Premises or the Building is destroyed or damaged by fire or other casualty and either (i) Landlord reasonably determines that the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore cannot be completed within two hundred seventy (270) days from after the date of the casualty or (ii) Landlord fails to substantially complete the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore by the two hundred seventieth (270th) day from after the date of the casualty (hereinafter referred to as the “Outside Completion Date”). The Outside Completion Date shall be extended for an additional ninety (90) days in the event Landlord fails to substantially complete the repair or restoratio n of the portion of the Premises or the Building which Landlord is obligated to repair or restore for any reason not within Landlord’s reasonable control, including, without limitation, inclement weather, labor disputes, or any default by Landlord’s contractor or architect under their agreement with Landlord with respect to the repair or restoration of the Premises or the Building). In addition, the Outside Completion Date shall be extended one day for each day that Landlord is delayed in completing the repair or restoration work due to any interference by Tenant or Tenant’s contractors with Landlord’s repair or restoration work. Tenant shall exercise its right to terminate this Lease pursuant to subsection (i) above, if at all, by written notice to Landlord within thirty (30) days after Landlord notifies Tenant of Landlord’s estimate of the time required to complete the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or rest ore. Tenant shall exercise its right to terminate this Lease pursuant to subsection (ii) above, if at all, by written notice to Landlord within ten (10) days after the expiration of the Outside Completion Date. Notwithstanding the foregoing, if at any time Landlord reasonably determines that Landlord cannot substantially complete the repair or restoration of the Premises by the Outside Completion Date, Landlord shall notify Tenant in writing and Tenant shall have ten (10) days from the date Tenant receives such written notice in which to terminate this Lease by written notice to Landlord.         If neither party exercises its right to terminate this Lease, then (i) Landlord shall promptly commence the process of obtaining all of the necessary permits and approvals for the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore as soon as reasonably practicable, and -------------------------------------------------------------------------------- thereafter prosecute the repair or restoration of the Premises or the Building diligently to completion, and (ii) Tenant shall promptly commence the process of obtaining all of the necessary permits and approvals for the repair or restoration of the Tenant Improvements and any other alterations, additional or improvements made by Tenant to the Premises as soon as reasonably practicable, and thereafter prosecute the repair or restoration of the Tenant Improvements and other improvements to completion. Tenant shall not interfere with Landlord’s repair and restoration work and may commence Tenant’s repair or restoration work in the Premises only to the extent that Tenant’s work does not interfere with Landlord’s repair or restoration work.”         At the end of this Section, insert “Notwithstanding the foregoing, if Landlord elects to terminate this Lease as a result of there being insufficient insurance proceeds to pay for all of the costs of the repair or restoration, Tenant shall have the right to vitiate Landlord’s termination by (i) notifying Landlord in writing within thirty (30) days after Landlord notifies Tenant of its election to terminate this Lease of Tenant’s election to pay for the difference between the cost of restoring the Premises or the Building, as applicable, and the amount of the insurance proceeds available to Landlord for the repair or restoration of the Premises or the Building, and (ii) delivering to Landlord within thirty (30) days after Tenant notifies Landlord of its election to pay for any shortfall in insurance proceeds an amount equal to the difference between the cost of repairing or restoring the Premises or the Building, as reasonably esti mated by Landlord, and the amount of insurance proceeds available to Landlord for the repair or restoration of the Premises or the Building, as applicable. Section 12.3:         At the end of this Section, insert “If Landlord receives any proceeds from either Landlord’s or Tenant’s insurance carrier attributable to the cost of repairing or restoring the Tenant Improvements or any other alterations, additions or improvements made by Tenant in the Premises that are not owned by Landlord, then Landlord shall reimburse Tenant out of those proceeds an amount equal to the amount expended by Tenant in repairing or restoring the alterations, additions or improvements in the Premises. Notwithstanding the foregoing, if either party terminates this Lease as a result of a casualty or for any other reason, all of the insurance proceeds with respect to the Tenant Improvements and any other alterations, additions or improvements made by Tenant to the Premises shall belong to Landlord.” Section 12.5:         On page 14, line 1, in place of the deleted word, insert “Landlord’s and Tenant’s”         On page 14, line 2, in place of the deleted word, insert “either party”.         On page 14, line 3, in place of the deleted word, insert “the other party”.         On page 14, line 4, in place of the deleted language, insert “The party electing to terminate this Lease shall notify the other party”.         On page 14, line 6, in place of the deleted language, insert “neither party elects”. Section 13.2:         On page 15, line 6, in place of the deleted language, insert “Tenant”. Section 13.4:         On page 15, line 2, after the word “right”, insert “such as”. Section 13.5:         On page 15, line 9, in place of the deleted word, insert “Tenant”. Section 14.1 (c):         On page 16, line 3, after the word “Landlord”, insert “; provided, however, if such default cannot be cured within thirty (30) days, Tenant shall not be in default of this Lease so long as Tenant has commenced such cure within the thirty (30) day period and is diligently pursuing the cure to completion (but in no event longer than ninety (90) days from the date Landlord notifies Tenant of the default).” -------------------------------------------------------------------------------- Section 14.1 (j):         At the end of Section 14.1(i), add the following Section:         “(j) 4500 Bohannon Lease. An Event of Default (as that term is defined in the 4500 Bohannon Lease) on the part of the tenant under the 4500 Bohannon Lease.” Section 14. l:         On page 16, in the last sentence in this Section, after the word “Lease”, insert “if the notice of default was drafted for Landlord by Landlord’s attorneys.” Section 15.1:         On page 17, line 5, after the word “withheld”, insert “or delayed”.         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15. t, Tenant shall have the right to assign this Lease or sublet all or a portion of the Premises without Landlord’s consent (but with thirty (30) days’ prior written notice to Landlord) to (i) an Affiliate or (ii) any entity resulting from a merger or consolidation with Tenant (each hereinafter referred to as a “Permitted Assignee”). For purposes of this Section 15, an “Affiliate” is defined as (i) an entity that directly or indirectly controls, is controlled by or is under common control with Tenant or (ii) an entity at least a majority of whose economic interest is owned by Tenant; and “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations. No assignment or subletting by Tenant shall relieve Tenant of any obligation under this Leas e, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.” Section 15.3:         On page 17, line 1, in place of the deleted number, insert “ten (10) business”.         On page 17, line 3, after the word “sublet”, insert “if the term of such sublet is for greater than five (5) years or ends during the last year of the Term or the proposed sublessee is an existing tenant or subtenant in the Project.”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15.3, Landlord shall not have the right to terminate this Lease as to all or any portion of the Premises pursuant to the terms and conditions contained in this Section 15.3 in connection with an assignment by Tenant of its interest in this Lease to a Permitted Assignee or Tenant’s sublease of all or a portion of the Premises to a Permitted Assignee.” Section 15.5:         On page 18, line 15, after the word “Project.”, insert “For purposes of this Section 15.5, the term “prospective tenant” shall mean any prospective lessee of space in the portion of the Project owned by Landlord with whom or which Landlord has been in contact concerning the prospective lessee’s interest in the space within thirty (30) of Tenant’s contact with such prospective lessee or the date on which Tenant requests Landlord’s consent to the proposed sublease or assignment.”         On page 18, line 16, in place of the deleted number, insert “ten (10) business”. Section 15.6:         On page 18, line 10, after the word “Alto,”, insert “and Tenant is not entitled to deduct those costs pursuant to this Section 15.6 prior to calculating the amount of any excess rent or other consideration payable to Landlord in accordance with the terms of this Section 15.6,”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15.6, in calculating the amount of the excess rent or other consideration due to Landlord in connection with any assignment or sublease by Tenant, Tenant shall be entitled to deduct from the total amount of rent or other consideration paid to Tenant (prior to determining Landlord’s share of any excess rent or other consideration) the total amount of (i) any attorneys’ fees and brokerage commissions paid by Tenant in connection with the assignment or sublease and (ii) the cost of installing a demising wall in connection with the partitioning of the Premises for multiple occupancy. In addition, further notwithstanding anything to the contrary contained in Section 15.6, Landlord shall not be entitled to -------------------------------------------------------------------------------- any excess rent or consideration in connection with Tenant’s assignment of its interest in this Lease to a Permitted Assignee or Tenant’s sublease of all or a portion of the Premises to a Permitted Assignee.” Section 15.12:         On page 19, line 4, after the word “release”, insert “; provided, however, Landlord shall be released from its obligation to refund the Security Deposit to Landlord in accordance with the terms of this Lease only if Landlord delivers the Security Deposit to the transferee or the transferee assumes in writing liability for returning the Security Deposit to Tenant in accordance with the terms of this Lease.” Section 15.13:         At the end of Section 15.12, add the following Sections’         “15.13. Additional Space. During the Term, Tenant shall not sublease (as a sublessee) any additional space within the Project or take an assignment of any lease of additional space within the Project which would result in Tenant having subleased or, as a result of one or more assignments, leased in the aggregate more than fifty (50,000) rentable square feet of space in the Project without Landlord’s prior written consent, which may be withheld by Landlord in its sole and absolute discretion. Notwithstanding the foregoing, if Tenant (i) exercises its option pursuant to Section 26 and leases the 4400 Bohannon Expansion Option Space and (ii) exercises its option under the 4500 Bohannon Lease and leases all of the First Expansion Option Space (defined in the 4500 Bohannon Lease), then, from the later of the commencement of Tenant’s lease of the 4400 Bohannon Expansion Option Space or the commencement of Tenant’s lease of a ny increment of the First Expansion Option Space, Tenant shall not occupy or sublease any additional space in the Project, as a result of one or more assignment or sublease of, in the aggregate, more than thirty thousand (30,000) rentable square feet of space without Landlord’s prior written consent, which may be withheld by Landlord in its sole and absolute discretion.         15.14 Landlord Estoppel Certificate. Within ten (10) days after Tenant’s written request, Landlord shall execute and deliver to Landlord, in recordable form, a certificate to Tenant certifying, among other things, (i) that this Lease is unmodified and in full force and effect or, if modified, stating the nature of the modification and certifying that this Lease, as so modified, is in full force and effect, (ii) the date to which the Rent and other charges have been paid in advance, if any; and (iii) that to Landlord’s actual knowledge, there are no uncured defaults on the part of Tenant under this Lease, or if there are uncured defaults on the part of Tenant, stating the nature of the uncured defaults. Any such certificate may be relied upon by Tenant.” Section. 16.1:         On page 20, line 9, after the number “ten (10)”, insert “business”. Section 16.3:         At the end of this Section, insert “Tenant’s obligations under this Lease are conditioned upon Tenant’s receipt of an executed nondisturbance agreement from all current mortgagees (as of the date of this Lease) whose liens are secured by the Phase within sixty (60) days after the date of this Lease. The nondisturbance agreement, among other things, shall provide that Tenant’s possession of the Premises shall not be disturbed in the event of a foreclosure so long as Tenant is not in default under this Lease, and that this Lease shall remain in full force and effect, without materially increasing Tenant’s obligations and duties under this Lease or materially diminishing Tenant’s rights and privileges under this Lease. Tenant shall subordinate Tenant’s interest in the Premises, Building and Phase and this Lease to any future mortgagee or ground lessor provided that such mortgagee or ground lessor agrees to provide Tenant with a nondisturbance agreement on the terms set forth above.” Section 19.5:         On page 21, line 3, in place of the deleted language, insert “constitutes the Phase”. Section 19.12:         On page 22, line 3, in place of the deleted word, insert “one hundred fifty percent (150%) of”.         On page 22, line 7, after the word “addition,”, insert “if Tenant fails to vacate and surrender the Premises to Landlord after the end of the Term within ten (10) days after written notice from Landlord”. -------------------------------------------------------------------------------- Section 19.15:         At the end of this Section, insert “Landlord shall pay to Tenant’s Broker a leasing commission in connection with this Lease in accordance with the terms and conditions set forth in a separate written agreement entered into between Landlord and Tenant’s Broker.” Section 19.17:         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Section, if in the event of any interruption in utilities or services to the Premises that (i) substantially interferes with Tenant’s use of the Premises for Tenant’s business, as reasonably determined by Tenant, for more than five (5) continuous days, and (ii) are not the result of Tenant’s negligence or willful misconduct, the Rent due under this Lease shall abate (but only to the extent of any proceeds received by Landlord from rental abatement insurance) for each successive day that the interruption continues until the utilities or services are restored.” Sections 20 – 26:         The following Sections are incorporated into the Lease: 20.  Early Entry. Upon the execution and delivery of this Lease, Tenant may, at Tenant’s sole risk and cost, enter upon the Premises prior to the Commencement Date for the purposes of performing Tenant’s Work (as defined in the Work Letter) subject to Tenant complying with each of the following terms and conditions during such early entry period: (i) Tenant shall comply with all of the terms and conditions contained in this Lease, except for Tenant’s obligation to pay Base Rent, Impositions and Operating Expenses; (ii) Tenant shall indemnify, protect, defend and hold harmless Landlord and all other Indemnified Parties from all claims and losses, and exempt Landlord and the other Indemnified Parties from any liability, all as more particularly provided in Sections 6.4 and 6.5; (iii) Tenant shall comply with all of the requirements contained in this Lease with respect to the type and amounts of insurance required to be maintained by Tenant and provide Landlord wi th evidence satisfactory to Landlord that Tenant has obtained such insurance; and (iv) Tenant shall pay for all utility services supplied to the Premises and/or used by Tenant. 21.  Adjustments to Base Rent. The monthly Base Rent shall be increased on each anniversary of the Commencement Date during the Term by an amount equal to three and one-half percent (3.5%) of the amount of the then existing monthly Base Rent. 25.  Extension Options         25.1  Options to Extend. Tenant shall have two (2) options to extend the Term for a period of five (5) years each (hereinafter referred to as the “First Extension Term” and “Second Extension Term,” respectively, and each, an “Extension Term”), provided that at the time Tenant’s Extension Notice (defined below) is given and at the time the Extension Term is to commence (i) no Event of Default by Tenant exists and (ii) E-Trade Group, Inc. or a Permitted Assignee of E-Trade Group, Inc. is in occupancy of at least ninety percent (90%) of the Building, the 4500 Bohannon Building and any other space leased to Tenant pursuant to this Lease or the 4500 Bohannon Lease. Tenant shall exercise such option, if at all, by written notice (“Tenant’s Extension Notice”) to Landlord not later than fifteen (15) months, nor earlier than eighteen (18) months, prior to the expiration of the original Te rm (as such Term may be extended pursuant to Section 26) or the First Extension Term, as the case may be. Tenant may exercise its option to extend the Term for an Extension Term only if Tenant concurrently exercises its right to extend the term of the 4500 Bohannon Lease for an equal period of time in accordance with the terms and conditions contained therein. Tenant’s failure to deliver Tenant’s Extension Notice to Landlord in a timely manner shall be deemed a waiver of Tenant’s option to extend the Term and Tenant’s extension option, and any future option to extend the Term, shall lapse and be of no force or effect.         25.2  Exercise of Option.                      (a)   First Extension Term. If Tenant exercises its extension option for the First Extension Term, the Term shall be extended for an additional period of five (5) years on all of the terms and conditions of this Lease, except (i) Tenant’s options to further extend the Term shall be reduced in number by one, (ii) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement and (iii) the monthly Base Rent for the first year of the First Extension Term shall be the greater of (A) the “Initial Fair Market Rent” prevailing at the commencement of the First Extension Term or (B) the monthly Base Rent in effect at the end -------------------------------------------------------------------------------- of the original Term. The Base Rent due during the First Extension Term shall be increased annually by the Average Annual Percentage (defined below), if any.                      (b)   Second Extension Term. If Tenant exercises its extension option for the Second Extension Term, the Term shall be extended for an additional period of five (5) years on all of the terms and conditions of this Lease, except (i) Tenant shall have no further options to extend the Term of this Lease, (ii) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement and (iii) the monthly Base Rent for the first year of the Second Extension Term shall be the greater of (A) the “Initial Fair Market Rent” prevailing at the commencement of the Second Extension Term or (B) the monthly Base Rent in effect at the end of the First Extension Term. The Base Rent due during the Second Extension Term shall be increased annually by the Average Annual Percentage, if any.                      (c)   Real Estate Commission. Tenant shall be responsible for all brokerage costs and/or finder’s fees associated with Tenant’s exercise of its option to extend the Term made by parties claiming through Tenant. Landlord shall be responsible for all brokerage costs and/or finder’s fees associated with Tenant’s exercise of its option to extend the Term made by parties claiming through Landlord.         25.3  Determination of Fair Market Rent.                             (a)  Agreement on Rent. For the purposes of this Section, the “Initial Fair Market Rent” means the monthly base rent (i.e., rent other than operating expenses, taxes and insurance premiums), expected to prevail as of the commencement of an Extension Term for the first year of that Extension Term with respect to leases of office space within buildings located in the “Designated Area” (defined as the Menlo Park and Palo Alto areas other than the Sand Hill Road area, Stanford Research Park and the Palo Alto central business district) of a quality and with interior improvements, parking, site amenities, building systems, location, identity and access all comparable to that of the Premises, for a term equal to the Extension Term. The term “Average Annual Percentage” shall mean the avera ge annual percentage increase in the monthly base rent (i.e., rent other than operating expenses, taxes and insurance premiums) expected to prevail as of the commencement of that particular Extension Term with respect to leases of office space within buildings located in the Designated Area of a quality and with interior improvements, parking, site amenities, building systems, location, identity and access all comparable to that of the Premises, for a term equal to the Extension Term). Within fifteen (15) days after Landlord’s receipt of Tenant’s Extension Notice, by written notice to Tenant (“Landlord’s Rent Notice”), Landlord shall advise Tenant as to Landlord’s determination of the Initial Fair Market Rent and Average Annual Percentage. If Tenant disagrees with Landlord’s determination, Tenant shall advise Landlord as to Tenant’s determination of Initial Fair Market Rent and Average Annual Percentage by written notice (“Tenant’s Rent Notice”) within f ifteen (15) days after Tenant’s receipt of Landlord’s Rent Notice. If Tenant fails to deliver Tenant’s Rent Notice to Tenant within the time period provided above, Tenant shall be bound by Landlord’s determination of the Initial Fair Market Rent and Average Annual Percentage as set forth in Landlord’s Rent Notice. If Tenant shall timely deliver to Landlord Tenant’s Rent Notice, Landlord and Tenant shall attempt in good faith to reach agreement as to the Initial Fair Market Rent and Average Annual Percentage within fifteen (15) days after Landlord’s receipt of Tenant’s Rent Notice.                             (b)  Selection of Appraisers. If Landlord and Tenant are unable to agree as to the amount of the Initial Fair Market Rent and Average Annual Percentage within the aforementioned fifteen (15) day period as evidenced by a written amendment to this Lease executed by them, then, within ten (10)days after the expiration of the fifteen (15) day period, Landlord and Tenant shall each, at its sole cost and by giving notice to the other party, appoint a competent and disinterested real estate appraiser with membership in the Appraisal Institute and M.A.I. designation and with at least five (5) years’ full-time commercial appraisal experience in the Menlo Park and Palo Alto areas to determine the Initial Fair Market Rent and Average Annual Percentage. If either Landlord or Tenant does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall determine the Initial Fair Market Rent and Average Annual Percentage. If Landlord and Tenant as stated in this Section appoint two (2) appraisers, they shall attempt to select a third appraiser meeting the qualifications stated in this Section within ten (10) days. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days’ notice to the other party, can apply to the then president of the real estate board of the county in which the Building is located, or to the Presiding Judge of the Superior Court of the county in which the Building is located, for the selection of a third appraiser who meets the qualifications stated in this paragraph. Landlord and Tenant each shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third -------------------------------------------------------------------------------- appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant.                             (c)  Value Determined By Three (3) Appraisers. The appraisers shall determine the Initial Fair Market Rent and Average Annual Percentage by using the “Market Comparison Approach” with the relevant market being office buildings located in the Designated Area. Within thirty (30) days after the selection of the third appraiser, Landlord’s appraiser shall arrange for the simultaneous delivery to Landlord of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotients shall be the Initial Fair Market Rent and Average Annual Percentage. If, however, the low appraisal and/or the high appraisal of either the Initial Fair Market Rent or the Average Annual Percentage are/is more than ten percent (10%) lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2); the resulting quotients shall be the Initial Fair Market Rent and Average Annual Percentage. If both the low appraisal and the high appraisal of either the Initial Fair Market Rent or the Average Annual Percentage are disregarded as stated in this Section, the middle appraisal shall be the Initial Fair Market Rent or Average Annual Percentage, as applicable.         25.4  Notice to Landlord and Tenant. After the monthly Base Rent for an Extension Term has been set, Landlord and Tenant immediately shall execute an amendment to the Lease stating the monthly Base Rent. 26.  Option to Expand.         26.1   Expansion Option Provided that (i) no Event of Default by Tenant exists under the terms of this Lease at the time Tenant exercises its option to expand the Premises or at the time Tenant is to commence occupancy of the space in question, (ii) E-Trade Group, Inc. or a Permitted Assignee occupies at least ninety percent (90%) of the Building, the 4500 Bohannon Building and all other space leased to Tenant pursuant to this Lease and the 4500 Bohannon Lease, and (iii) Tenant has a financial net worth of at least Five Hundred Million Dollars ($500,000,000.00) at the time Tenant exercises its Expansion Option or otherwise delivers to Landlord the additional security deposit required pursuant to Section 26.6 below, Tenant shall have the option (the “Expansion Option”) to lease the space (the “4400 Bohannon Expansion Option Space”) listed on Exhibit F, attached hereto, upon the terms and conditions cont ained in this Section 26.         26.2  Exercise of Expansion Option. Tenant shall exercise the Expansion Option by written notice to Landlord no earlier June 1, 1999 and no later than August 31, 1999. Notwithstanding the foregoing, if the tenant that currently leases the 4400 Bohannon Expansion Option Space defaults on its obligations under its lease and Landlord either terminates the existing tenant’s lease or enters into a lease termination agreement with the existing tenant (in lieu of bringing an unlawful detainer action against the existing tenant) which results in the 4400 Bohannon Expansion Option Space becoming available for lease prior to August 31, 2000 (hereinafter referred to as an “Early Termination Event”), then Tenant shall exercise its Expansion Option to lease the 4400 Bohannon Expansion Option Space (if at all) within forty-five (45) days after Landlord notifies Tenant in writing of the date that the 4400 Bohannon Expansion Option Space has become or will become available for lease; provided, however, in no event will Tenant be required to exercise its Expansion Option more than twelve (12) months prior to the date the 4400 Bohannon Expansion Option Space b ecomes available for lease. If Tenant fails to exercise the Expansion Option with respect to the 4400 Bohannon Expansion Option Space within the time period provided above, the Expansion Option shall expire, and Tenant and Landlord shall have no further rights or obligations under this Section with respect to the 4400 Bohannon Expansion Option Space.         26.3   Terms of Lease. Landlord shall lease the 4400 Bohannon Expansion Option Space to Tenant on all the same terms and conditions contained in this Lease except (i) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement, (ii) the term of Tenant’s lease of the 4400 Bohannon Expansion Option Space shall be for ten (10) years, commencing on the date on which Landlord delivers to possession of the 4400 Bohannon Expansion Option Space to Tenant (subject to extension pursuant to Section 26.5), (iii) Tenant may not place or install exterior signage on the building in which the 4400 Bohannon Expansion Option Space is located, (iv) Tenant shall deliver to Landlord concurrently with Tenant’s execution of an amendment to this Lease to include the 4400 Bohannon Expansion Option Space or Tenant’s execution of a new lease for the 4400 Bohannon Expansion Option Space (which Tenant shall execute within thirty (30) days after Tenant exercises its Expansion Option and receives the proposed amendment or lease from Landlord) a security deposit for the 4400 Bohannon Expansion Option Space in an amount equal to the last monthly installment of Base Rent due for the 4400 -------------------------------------------------------------------------------- Bohannon Expansion Option Space, (v) the monthly Base Rent per rentable square foot for the 4400 Bohannon Expansion Option Space shall be an amount equal to monthly Base Rent per rentable square foot of the existing Premises in effect at the commencement of the term of the 4400 Bohannon Expansion Option Space, less (1) the amount of the monthly Base Rent per rentable square foot attributable to the Additional Allowance (if any) and (2) the amount of the monthly Base Rent per rentable square foot attributable to the Base Allowance (which the parties agree to be an amount equal to Seven and One-Half Cents ($0.075) per rentable square foot, increased by three and one-half percent (3.5%) per annum beginning on the Commencement Date and ending on the commencement date of the term of the 4400 Bohannon Expansion Space), subject to further increases thereafter in the same percentages and on the same dates as the remainder of the Premises pursuant to Section 4.2, and (vi) Tenant shall lease the 4400 B ohannon Expansion Option Space in its “as is” condition, except Landlord shall deliver the 4400 Bohannon Expansion Option Space to Tenant in broom clean condition, with building systems in good working condition and the roof in water right condition.         26.4  Delivery of 4400 Bohannon Expansion Option Space. If Tenant exercises its Expansion Option, Landlord shall use commercially reasonable efforts to deliver possession of the 4400 Bohannon Expansion Option Space to Tenant within five (5) days after Landlord recovers possession of the 4400 Bohannon Expansion Option Space. Tenant’s obligation to pay Rent to Landlord for the 4400 Bohannon Expansion Option Space shall commence on the forty- fifth (45th) day after Landlord delivers possession of the 4400 Bohannon Expansion Option Space to Tenant; provided, however, if Landlord delivers possession of the 4400 Bohannon Expansion Option Space to Tenant prior to August 31, 2000, Tenant’s obligation to pay Rent to Landlord for the 4400 Bohannon Expansion Option Space shall commence on the forty-fifth (45th) day after Landlord delivers possession of the 4400 Bohannon Expansion Option Space to Tenant; provided, however, if Landlord delivers possession of the 4400 Bohannon Expansion Option Space to Tenant prior to August 31, 2000 as a result of an Early Termination Event, Tenant’s obligation to pay Rent to Landlord for the 4400 Bohannon Expansion Option Space shall commence on the sixtieth (60th) day after Landlord delivers possession of the 4400 Bohannon Expansion Option Space to Tenant.         26.5   Extension of Term. If Tenant exercises its option under the 4500 Bohannon Lease to lease an increment of First Expansion Option Space (defined therein) or Tenant exercises its option under this Lease to lease the 4400 Bohannon Expansion Option Space, the Term with respect to the Premises, any increment of First Expansion Option Space for which Tenant has exercised its expansion option and the 4400 Bohannon Expansion Option Space (provided that Tenant has exercised its Expansion Option with respect to such space) shall be extended until the tenth (10th) year after the latest commencement date of Tenant’s lease of any increment of First Expansion Option Space (for which Tenant has exercised its expansion option) or Tenant’s lease of the 4400 Bohannon Expansion Option Space.         26.6  Additional Security Deposit.               (a) Amount. If Tenant does not have a financial net worth of at least Five Hundred Million Dollars ($500,000,000.00) at the time Tenant exercises its Expansion Option, Tenant may still exercise its Expansion Option provided that Tenant delivers to Landlord concurrently with Tenant’s execution of an amendment to this Lease to include the 4400 Bohannon Expansion Option Space as part of the Preemies or Tenant’s execution of a new lease for the 4400 Bohannon Expansion Option Space (which shall occur no later than thirty (30) days after Tenant’s execution of its Expansion Option), an additional security deposit (the “ Additional Security Deposit”) in an amount equal to the difference between (i) Forty-Five Dollars ($45.00) per rentable square foot of the 4400 Bohannon Expansion Option Space and (ii) the amount of the security deposit due with respect to the 4400 Bohannon Expansion Option Space pursuant to Section 26.3. If Tenant’s financial net worth falls below Five Hundred Million Dollars ($500,000,000.00) at any time after Tenant exercises its Expansion Option, then Tenant shall deliver to Landlord within twenty (20) days after Landlord’s written request the Additional Security Deposit. Alternatively. if Tenant’s financial net worth increases to Five Hundred Million Dollars ($500,000.000.00) or more at any time after Tenant has delivered to Landlord the Additional Security Deposit, then, within twenty (20) days after Tenant’s written request, Landlord shall return the Additional Security Deposit to Tenant or credit the Additional Security Deposit against the next installment of Rent due under this Lease.               (b) Additional Remedy. If Tenant’s financial net worth falls below Five Hundred Million Dollars ($500,000.000.00) at any time after Tenant exercises its Expansion Option, but prior to Tenant’s lease of the 4400 Bohannon Expansion Option Space, and Tenant fails to deliver to Landlord the Additional Security Deposit required pursuant to Section 26.6(a), then, in additional to all other remedies available to Landlord under this Lease, Landlord may vitiate Tenant’ s exercise of its Expansion Option by written notice to Tenant and elect not to lease -------------------------------------------------------------------------------- the 4400 Bohannon Expansion Option Space to Tenant (whereupon Tenant shall have no further rights to lease the 4400 Bohannon Expansion Option Space).               (c) Letter of Credit. In lieu of a cash security deposit, Tenant may deliver to Landlord as the Additional Security Deposit an irrevocable standby letter of credit (the “Letter of Credit”) naming Landlord as beneficiary, in the amount of the Additional Security Deposit. The Letter of Credit shall be issued by a major national bank located in San Francisco or a regional bank located in the San Francisco Bay Area (“Bank”) reasonably satisfactory to Landlord and shall be upon such terms and conditions as Landlord may reasonably require. The Letter of Credit shall allow draws by Landlord upon sight draft accompanied by a statement from Landlord that it is entitled to draw upon the Letter of Credit and shall contain terms which allow Landlord to make partial and multiple draws up to the face amount of the Letter of Credit. If Tenant has not delivered to Landlord at least thirty (30) days prior to the expiration of the original Letter of Credit (or any renewal letter of credit) a renewal or extension thereof, Landlord shall have the right to draw down the entire amount of original Letter of credit (or renewal thereof) and retain the proceeds thereof as the security deposit. If and when Tenant would be entitled to request that Landlord return the security deposit to Tenant or apply the security deposit towards Tenant’s obligation to pay Rent, Landlord shall, at Tenant’s request, return to Tenant any Letter of Credit delivered to Landlord pursuant to this paragraph.         27  4500 Bohannon Lease. Concurrently with the execution of this Lease, Landlord and Tenant are entering into that certain lease (the “4500 Bohannon Lease”) pursuant to which Landlord is leasing to Tenant approximately sixty-two thousand nine hundred twenty (62,920) rentable square feet of space in that certain building (the “4500 Bohannon Building”) located in the Project. The obligations of Landlord and Tenant under this Lease are expressly conditioned upon Landlord and Tenant entering into the 4500 Bohannon Lease.”         IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set forth below.      “Landlord” MENLO OAKS PARTNERS L.P., a Delaware limited partnership   By:   AM Limited Partners, a California limited partnership, its General Partner             By:   Amarok Menlo, Inc., a California corporation, its General Partner        By:   /s/: J. Marty Brill, Jr.      Name: J. Marty Brill, Jr. Its: President           “Tenant” E*TRADE GROUP, INC., a Delaware corporation   By:   /s/: Len Purkis      --------------------------------------------------------------------------------        Name: Len Purkis Its: EVP & CFO   By:   /s/: Kathy Levinson      Name: Kathy Levinson Its: President & COO      -------------------------------------------------------------------------------- Exhibit A [FLOORPLAN APPEARS HERE] -------------------------------------------------------------------------------- Exhibit B LEGAL DESCRIPTION   That certain real property situated in the City of   Menlo Park    , County of San Mateo, State of California, more particularly described as follows: Parcel 1 of that Parcel map recorded December 28, 1984 in Book 55 of maps at page 52-53, San Mateo County Records. -------------------------------------------------------------------------------- Exhibit A [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- EXHIBIT C WORK LETTER (4200 Bohannon Drive)              This Work Letter sets forth Landlord’s and Tenant’s responsibilities, respectively, for the construction of certain tenant improvements in the Premises.               1.  Defined Terms. Unless provided to the contrary herein, the following defined terms shall have the meanings set forth below and the remaining defined terms shall have the meanings set forth in the Lease:              Landlord’s Representative: Michael E. Tamas              Tenant’s Representative: JC Blakely               2.  Landlord’s Work. Tenant’s Work.                      3.1  Tenant Improvements. Tenant shall arrange for the construction of certain general purpose office improvements (the “Tenant Improvements”) in the Premises. The Tenant Improvements shall be subject to Landlord’s prior written approval (as provided below) and conform to Landlord’s General Building Specifications, a copy of which is attached hereto as Schedule 1. The Tenant Improvements shall be constructed by Tenant’s Contractor in accordance with plans and specifications prepared by Tenant’s Architect (each as defined below). Tenant’s construction of the Tenant Improvements is hereinafter referred to as the “Tenant Improvement Work.”                      3.2  Costs. Except for Landlord’s obligation to pay to Tenant the Tenant Improvement Allowance pursuant to Section 4 below, Tenant shall be responsible for all costs incurred in connection with the construction of the Tenant Improvements, including (i) the cost of all labor, materials, equipment and fixtures supplied by Tenant’s Contractor or any subcontractors or materialmen, (ii) fees paid to engineers, architects and interior design specialists for preparation of the Preliminary Plans and Working Drawings and all other services supplied to Tenant in connection with the Tenant Improvements, (iii) all taxes, fees, charges and levies by governmental agencies for authorizations, approvals, licenses or permits, (iii) fees paid to utility service providers for utility connections and installation of utility service meters, and (iv) all costs req uired to comply with any governmental requirements triggered as a result of Tenant’s construction of the Tenant Improvements.                      3.3  Tenant’s Architect and Contractor. Tenant shall notify Landlord in writing of the name of the architect that Tenant proposes to use to prepare the plans and specifications and working drawings for the Tenant Improvements and the name of the contractor that Tenant proposes to use to construct the Tenant Improvements. In addition, Tenant shall deliver to Landlord any information reasonably requested by Landlord concerning the proposed architect or contractor. The architect and the contractor proposed by Tenant must each be approved by Landlord in writing, which approval may not be unreasonably withheld. The architect selected by Tenant and approved by Landlord in connection with the Tenant Improvement Work is hereinafter referred to as “Tenant’s Architect”. The contractor selected by Tenant and approved by Landlord in con nection with the Tenant Improvement Work is hereinafter referred to as “Tenant’s Contractor”. Both Tenant’s Architect and Tenant’s Contractor must be licensed to do business in California. At Landlord’s option, Tenant’s Contractor shall be bondable.                      3.4  Construction.                             3.4.1  Preliminary Plans. Tenant shall arrange for Tenant’s Architect to prepare preliminary plans and specifications (the “Preliminary Plans”) of the proposed Tenant Improvements and submit the Preliminary Plans to Landlord for Landlord’s review and approval. Landlord shall approve or disapprove of the Preliminary Plans by written notice to Tenant within five (5) business days after Landlord’s receipt of the Preliminary Plans. Landlord shall not unreasonably withhold its approval of the Preliminary Plans. If Landlord disapproves the Preliminary Plans, Landlord’s written notice to Tenant disapproving of the Preliminary Plans shall include (i) a description of the disapproved element of the Preliminary Plans, (ii) the reasons for Landlord’s disapproval and (iii) at Landlord’s option, suggested modifications to the Preliminary Plans. If Landlord disapproves of the Preliminary Plans, Tenant shall arrange for Tenant’s Architect to revise the Preliminary Plans to address -------------------------------------------------------------------------------- Landlord’s comments and/or incorporate Landlord’s suggested modifications (if any) and resubmit the Preliminary Plans to Landlord for Landlord’s review and approval. Landlord shall review the revised Preliminary Plans and approve or disapprove of the revised Preliminary Plans within three (3) business days after Landlord’s receipt thereof in accordance with the procedure provided above. If Landlord fails to respond to Tenant’s request for approval or disapproval of the Preliminary Plans within the time periods provided for above, such approval shall be deemed to have been given.                             3.4.2  Working Drawings. Subject to obtaining Landlord’s approval of the Preliminary Plans, Tenant shall arrange for Tenant’s Architect to prepare working drawings and specifications, including architectural, mechanical, electrical, plumbing and other shop drawings (the “Working Drawings”) for the Tenant Improvements. The Working Drawings shall be based on the Preliminary Plans approved by Landlord. Landlord shall approve or disapprove of the Working Drawings by written notice to Tenant within five (5) business days after Landlord’s receipt of the Working Drawings. Landlord shall not unreasonably withholds its approval of the Working Drawings If Landlord disapproves the Working Drawings, Landlord’s written notice to Tenant disapproving of the Working Drawings shall include (i) a de scription of the disapproved element of the Preliminary Plans, (ii) the reasons for Landlord’s disapproval and (iii) at Landlord’s option, suggested modifications to the Working Drawings. If Landlord disapproves of the Working Drawings, Tenant shall arrange for Tenant’s Architect to revise the Working Drawings to address Landlord’s comments and/or incorporate Landlord’s proposed changes and resubmit the Working Drawings to Landlord for Landlord’s review and approval. Landlord shall review the revised Working Drawings and approve or disapprove of the revised Working Drawings within three (3) days after Landlord’s receipt thereof in accordance with the procedure provided above. The Working Drawings which have been approved by Landlord are hereinafter referred to as the “Approved Working Drawings” If Landlord fails to respond to Tenant’s request for approval or disapproval of the Working Drawings within the time periods provided for above, such approval shall be deemed to have been given.                             3.4.3  Changes. Tenant, at its sole cost and expense, shall make all changes to the Approved Working Drawings that are required by law or any governmental agency. All changes to the Approved Working Drawings, including those required by law or any governmental agency, require Landlord’s prior written approval, which approval shall not be unreasonably withheld. All changes to the Approved Working Drawings must be in writing and signed by both Landlord and Tenant prior to the change being made. Notwithstanding the foregoing, Tenant shall have the right, without the need for Landlord’s prior written consent, to make changes to the Approved Working Drawings that cost less than Five Thousand Dollars ($5,000.00) each, and less than Sixty Thousand Dollars ($60,000.00) in the aggregate, provided that (a) such change does not materially adversely affect the use of the Premises as first class office space, (b) Tenant provides Landlord with prior written notice of such changes, and (c) such changes are otherwise performed in accordance with the terms of this Work Letter and in compliance with all governmental laws. If Landlord fails to respond to Tenant’s written request for any change to the Approved Working Drawings within three (3) business days after Landlord’s receipt thereof, the change order shall be deemed to have been approved by Landlord. Tenant shall be responsible for all additional costs attributable to changes to the Approved Working Drawings, including, without limitation, additional architectural fees and increases in construction costs of the Tenant Improvements.                             3.4.4  Construction Contract. Tenant shall deliver to Landlord not less than five (5) days prior to the date Tenant commences the Tenant Improvement Work a copy of the construction contract entered into between Tenant and Tenant’s Contractor with respect to the construction of the Tenant Improvements, along with Tenant’s and Tenant’s Contractor’s estimate of the cost of constructing the Tenant Improvements.                             3.4.5  Insurance. Prior to performing any work in the Premises or the Building, Tenant shall deliver to Landlord certificates evidencing that Tenant’s Contractor has in force (i) a commercial liability insurance policy covering bodily injury in the amounts of Two Million Dollars ($2,000,000.00) per person and Two Million Dollars ($2,000,000.00) per occurrence, and covering property damage in the amount of Two Million Dollars ($2,000,000.00), and (ii) workers’ compensation insurance in an amount reasonably acceptable to Landlord.                             3.4.6  Time Limits. Tenant shall commence the construction of the Tenant Improvements by no later than January 1, 1999 and shall diligently proceed with the construction of the Tenant Improvements until completion. In any event, Tenant shall complete the Tenant Improvements in any portion of the Premises within six (6) months after the date Tenant demolishes the existing improvements in that portion of the -------------------------------------------------------------------------------- Premises. Tenant’s failure to construct the Tenant Improvements in accordance with the terms of this Work Letter constitutes a default by Tenant under this Lease.                             3.4.7  Lien Waivers. Upon completion of the Tenant Improvement Work, Tenant shall deliver to Landlord a release and waiver of lien executed by each contractor, including Tenant’ s Contractor, subcontractor and materialman concerning with the Tenant Improvement Work.                             3.4.8  Cooperation. Landlord shall cooperate with (i) Tenant’s Architect in completing the Preliminary Plans and the Working Drawings and (ii) Tenant’s Contractor in completing the Tenant Improvements; provided, however, Landlord shall not be required to incur any unreimbursed additional expense in so doing.                             3.4.9  Warranties. Tenant hereby warrants to Landlord that (i) the Tenant Improvements will be constructed in a good and workmanlike manner, by well-trained, adequately supplied workers, (ii) the Tenant Improvements and all equipment and material incorporated therein will strictly comply with the Approved Working Drawings, (iii) the Tenant Improvements shall strictly comply with all governmental and quasi-governmental rules regulations, laws and building codes, all private covenants, conditions and restrictions applicable to the construction of the Tenant Improvements and all requirements of Landlord’s and Tenant’s lenders and insurers, and (iv) the Tenant Improvements shall be free from all design, material and workmanship defects. At Landlord’s written request, Tenant shall assign to Landlord a ll of Tenant’s warranties received from Tenant’s Contractor, Tenant’s Architect or any materialman or supplier in connection with the Tenant Improvements.                             3.4.10  Completion. Within ten (10) days after the Tenant’s completion of the Tenant Improvements, Tenant shall deliver to Landlord a breakdown of the total costs incurred by Tenant in constructing the Tenant Improvements. All of the Tenant Improvements shall remain the property of Tenant until the termination of this Lease, at which time they shall be and become the property of Landlord.               4.  Allowance.                      4.1  Tenant Improvement .Allowance. Landlord shall pay to Tenant upon the terms and conditions set forth in this Section 4 up to Six Hundred Ninety-Three Thousand Eight Hundred Twenty-Five Dollars ($693,825.00) (the “Maximum Tenant Improvement Allowance”) as a tenant improvement allowance (the “Tenant Improvement Allowance”) toward the cost of designing, construction and installing the Tenant Improvements in the Building). The Tenant Improvement Allowance may be used by Tenant only to pay for the design and construction of general office improvements in the Building. The Tenant Improvement Allowance may not be used to pay for (i) any trade fixtures, furniture, furnishing, equipment (except electrical, mechanical, plumbing and HVAC systems which may be paid for out of the Tenant Improvement Allowance), decorations, signs, inventory o r other personal property, (ii) rent for leased equipment or other personal property, (iii) interest or financing costs, (iv) utility and permit fees or (v) administrative or overhead costs and expenses paid or incurred by Tenant in connection with the construction of the Tenant Improvements.                      4.2  Amount. Tenant shall notify Landlord in writing by January 1, 1999, of the amount of the Additional Allowance that Tenant will require from Landlord. If the total amount, of the Tenant Improvement Allowance (i.e., the sum of the Base Allowance and the amount of the Additional Allowance requested by Tenant) exceeds Two Hundred Thirty-One Thousand Two Hundred Seventy-Five Dollars ($231,275.00) (the “Base Allowance”), the monthly Base Rent under this Lease shall be increased effective as of the Commencement Date by an amount equal to the product of (i) One and One-half Cents ($0.015) and (ii) the difference between (x) the Tenant Improvement Allowance and (y) the Base Allowance. Tenant shall pay to Landlord on January 1, 1999 any additional Base Rent due to Landlord for the period commencing on the Commencement Date and ending on Dec ember 31, 1998, as a result of Tenant’s election to request from Landlord a portion of the Additional Allowance. For purposes of this Lease, the “Additional Allowance” is defined as the positive difference between (i) the Maximum Tenant Improvement Allowance and (ii) the Base Allowance.                      4.3  Payment of the Tenant Improvement Allowance. Landlord shall pay the Tenant Improvement Allowance to Tenant within thirty (30) days after Tenant’s written request therefore, provided that (i) Tenant is not in default under the terms of this Lease after the expiration of any applicable cure period, (ii) Tenant has completed all of the Tenant Improvement Work in accordance with the Approved Working Drawings and this Work Letter, and (iii) Tenant has delivered to Landlord the following: (a) a copy of a “finaled” building permit issued by the City of Menlo Park or certificate of occupancy for the Premises, (b) a certificate Of completion issued -------------------------------------------------------------------------------- by Tenant’s Architect, certifying that the Tenant Improvement Work has been completed in accordance with the Approved Working Drawings, (c) “as built” drawings for the Premises, (d) evidence that the total cost of the portion of the Tenant Improvement Work which may be paid for out of the Tenant Improvement Allowance is equal to or exceeds the amount of the Tenant Improvement Allowance requited by Tenant, which evidence shall be in the form of copies of paid invoices and the applicable construction contracts, and (e) unconditional lien waivers from Tenant’s Contractor and all subcontractors, materialmen and suppliers that have performed work or supplied materials in connection with the Tenant Improvement Work.               5.  Default. Tenant’s failure to timely commence or complete the Tenant Improvement Work or to comply with any of the other terms or conditions of this Work Letter shall constitute an Event of Default under the Lease.               6.  Representatives.                      6.1  Tenant’s Representative. Tenant has designated Tenant’s Representative as its sole representative with respect to the matters set forth in this Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter. Tenant shall not change the Tenant’s Representative without notice to Landlord.                      6.2  Landlord’s Representative. Landlord has designated Landlord’s Representative as its sore representative with respect to the matters set forth in this Work Letter, who shall have full authorize and responsibility to act on behalf of Landlord as required in this Work Letter. Landlord shall not change Landlord’s Representative without notice to Tenant.               7.  Indemnity. Tenant shall indemnify, protect and defend (with counsel satisfactory to Landlord) and hold harmless Landlord and all other Indemnified Parties from and against any and all suits, claims, actions, losses, costs or expenses (including claims for workers’ compensation, attorneys’ fees and costs) based on personal injury or property damage caused in, or contract claims (including, but not limited to claims for breach of warranty) arising from the performance of the Tenant Improvement Work. Tenant shall repair or replace (or, at Landlord’s election, reimburse Landlord for the cost of repairing or replacing) any portion of the Building, Phase and/or Project, or item of Landlord’s equipment or any of Landlord’s real or personal property, damaged, lost or destroyed in the performance of the Tenant Improvement Work.               8.  No Representations or Warranties. Notwithstanding anything to the contrary contained in the Lease or this Work Letter, Landlord’ s participation in the preparation of the Preliminary Plans and the Approved Working Drawings shall not constitute any representation or warranty, express or implied, that the Preliminary Plans or the Approved Working Drawings are in conformity with applicable governmental codes, regulations or rules. Tenant acknowledges and. agrees that the Premises are intended for use by Tenant and the specification and design requirements for the Tenant Improvements are not within the special knowledge or experience of Landlord.               9.  No Encumbrance. Tenant shall not mortgage, grant a security interest in or otherwise encumber all or any portion of the Tenant Improvements.               10.  Landlord Delays. The Commencement Date shall be delayed one (1) day for each day that Landlord is late in responding to Tenant’ s request for approval of the Preliminary Plans and Working Drawings as provided above.               11.  HVAC System. In the event Tenant elects to use a portion of the Premises for the operation of a data center, then, as part of the Tenant Improvement. Work, Tenant shall install a HVAC system or unit in the Premises. Tenant’s installation of the HVAC system or unit in the Premises shall be subject to Landlord’s review and approval of Tenant’s plans and specifications for the HVAC system or unit (to be included as part of Tenant’s Preliminary Plans and Working Drawings). Landlord, by written notice to Tenant, may require Tenant to remove the HVAC system or unit at the end of the Term and repair any damage to the Premises due to Tenant’s removal of the HVAC system of unit.               12.  Conduit. Tenant shall have the right to install underground conduit in the Project to connect the various building in the Project that are leased by Tenant and the Generator, provided that Tenant complies with each of the following terms and conditions: (i) prior to installing additional conduit in the Phase, Tenant utilizes the existing conduit in the Phase to the extent the conduit can be used in a secure manner (excluding the Generator which will use its own dedicated conduit), (ii) Tenant installs additional conduit in the Phase only in -------------------------------------------------------------------------------- the location designated by Landlord; (iii) all of the terms and conditions contained in the Lease with respect to Tenant’s construction of additional improvements in the Premises, including Landlord’s right to approve Tenant’s proposed plans, shall apply with respect to Tenant’s installation of additional conduit in the Phase, and (iv) following Tenant’s installation of additional conduit in the Phase, Tenant shall restore the landscaping, parking lots and other areas within the Project that are disturbed or affected as a result of Tenant’s installation of additional conduit to their condition existing prior to Tenant’s installation of additional conduit, including applying a seal coat and striping to the parking lot in the area where the additional conduit is placed so that the patched area. of the parking lot (resulting from the installation of the conduit) blends with and is not materially distinguishable from the remaining portion of the parking lot in t he Phase as reasonably determined by Landlord.               13.  Generator.                      13.1  Right to Install Generators. Subject to the terms and conditions set forth below, Tenant shall have the right to install an above-ground emergency diesel generators (each, a “Generator”) in the Project in an area not to exceed forty feet (40’) by forty feet (40’). The Generator may not exceed fifteen feet (15’) in height and shall be located within the area designated on Schedule 2, attached hereto (hereinafter referred to as the “Approved Generator Area”). Tenant shall designate the exact location of the Generator within the Approved Generator Area. Tenant may not install any underground storage tanks in connection with the installation or use of the Generator. Tenant’s right to install and use the Generator within the Approved Generator Area is subject to (i) the rights of the holders of any pre-existing easements over, in or under the Project, and (ii) Tenant’s compliance with all laws, including, without limitation, set-back restrictions, height restrictions and local noise ordinances or standards. If Tenant is unable to install the Generator in the Approved Generator Area for any reason, Landlord shall designate an alternative location within the Project for installation of the Generator.                      13.2  Plans and Specifications. Tenant shall submit to Landlord for Landlord’s review and approval plans and specifications and working drawings (the “Generator Plans”) for the Generator, including plans for the installation of adequate screening for the Generator. Tenant shall submit to Landlord the Generator Plans for the first Generator that Tenant plans to install in the Approved Generator Area along with and at the same time as Tenant submits to Landlord the Preliminary Plans and Working Drawings. The time periods and procedure set forth in Section 3.4 with respect to Tenant’s submission of the Preliminary Plans and Working Drawings to Landlord and Landlord’s review and approval or disapproval of the Preliminary Plans and Working Drawings shall apply with respect to Tenant’s submission to Landlord and Landlord’s review and approval or disapproval of the Generator Plans.                      13.3  Parking. If the number of parking spaces in the Project are at any time reduced due to the location of the Generator or Tenant’s installation of the Generator, Tenant’s right to use a portion of the available parking spaces in the Phase on a non-exclusive basis (as provided in the Lease) shall be reduced by a similar number of parking spaces.                      13.4  Use: Testing. Tenant may use the Generator only in the event of an interruption in the supply of electricity to the Premises or in performing scheduled testing or maintenance of the Generator. Tenant shall conduct all testing and maintenance of the Generator during business days after 6:00 p.m. and before 7:00 a.m. the next morning, and on weekends and holidays; provided, however, if an existing tenant, adjacent property owner or neighbor complains to Tenant or Landlord of the noise caused by the Generator, Tenant shall adjust Tenant’s testing and maintenance schedule to address the complaint. In addition, Tenant may test the Generator during business hours (with each test lasting no more than thirty (30) minutes in duration) in the event of (i) anticipated severe inclement weather that could reasonably lead to a power outage, including, wit hout limitation, thunderstorms, high winds and excessive rain, or (ii) emergency repairs to a Generator.                      13.5  Removal. Tenant shall remove the Generator and restore the portion of the Project on which the Generator was located to its condition existing immediately prior to Tenant’s installation of the Generator at the expiration or earlier termination of this Lease.                      13.6  No Representations or Warranties. Landlord is not making any representation or warranty to Tenant regarding Tenant’s ability to install the Generator in the Project in accordance with applicable governmental codes, regulations or rules. Tenant acknowledges that (i) Tenant is responsible for ensuring that the installation of the Generator in the Project is permitted under the applicable governmental codes, regulations or rules, and (ii) Tenant’s ability to install the Generator in the Project is not a condition precedent to the obligations of Tenant under this Lease. -------------------------------------------------------------------------------- Schedule 2 Approved Generator Area [SITE PLAN – MAP APPEARS HERE] -------------------------------------------------------------------------------- Schedule 1 MENLO OAKS CORPORATE CENTER GENERAL BUILDING SPECIFICATIONS   Page 1 of 2 June 30, 1998 1. Carpet Manufactured by Designweave “New Sabre”, 38oz. cut pile, glue down. Throughout u.o.n.       2. Base Burke 2 ½ inch top set base. Throughout u.o.n.       3. Doors Solid wood core door with Nevemar plastic laminate rustic quartered oak, full height 10’-0” door. As indicated on plans.       4. Frames Manufactured by Eclipse, painted aluminum, standard building finish. As indicated on plans.       5. Hardware Manufactured by Schlage, latchset (L-series 03A. Style: Lever) in brass. (Lockset not included u.o.n.) As indicated on plans.       6. Suspended Ceiling     System USG Donn Fineline grid system. 2’X2” module size. Armstrong Tegular Cortega, Minatone 2X2 No. 704A, White. Throughout u.o.n.       7. Lighting 2’X4’ parabolume fixture (18 cell) with accent. Recessed incadescent light fixtures as indicated on plan. 1 each per 110 usable sq. ft.       8. Wall Finishes Smooth wall gyp. board painted with light roller finish. Building standard 2 coats or paint to cover, Kelley Moore or Fuller O’Brien or equal, flat latex or latex eggshell enamel. Throughout u.o.n.       9. Window Covering Mini-blinds Building standard, Riviera #310. Sand. Throughout u.o.n.       10. Vinyl Tiles VCT: Azrock or equal As indicated on plans.       11. Electrical Power Duplex power receptacles: Wall mounted Typical Office. Conference Room. Open Office Area- Ceiling J-Box or base feed to electrified furniture partition. 2 duplex receptacles. 3 duplex receptacles. As indicated on plans.       12. Telephone/Data Combination telephone and data receptacle, note all data receptacles shall be double gang size. Ring and pull wire – wall mounted. Typical Office and Conference Room. Open Office Area 1 receptacle. As indicated on plans. --------------------------------------------------------------------------------                                     13. Glass Glass sidelight adjacent to door; 2’-0’ wide. Location shown on space plan.   14. HVAC System Existing variable volume system, or package units, with economizer cycle. Throughout u.o.n.   15. Fire Sprinkler Building standard, semi recessed pendant heads designed for normal office use (light hazard), chrome or white escutcheon. Throughout u.o.n. -------------------------------------------------------------------------------- MENLO OAKS CORPORATE CENTER Schedule 1 GENERAL BUILDING SPECIFICATIONS Page 2 of 2 TOILET CORES June 30, 1998 1. Wall Finishes/Ceiling Smooth wall gypsum board with light roller finish. Two coats of paint to cover, Kelly Moore or Fuller O’Brien or equal, eggshell enamel. Ceiling height shall be 9’-0”. 2. Wall Finishes – Wet Walls Ceramic tile. 3. Flooring Ceramic tile flooring. 4. Toilet Partitions Ceiling hung with plastic laminate finish. 5. Fixtures Water closets and urinals shall be wall mounted with flushometer valves. 6. Accessories Bobrick semirecessed, brushed stainless steel finish. Provide floor drain at each toilet room. 7. Lavatories Plastic laminate counters with bullnosed edges, covered splash and wall supported at each end. Vitreous china lavatory, counter mounted. 8. Lighting Incandescent or fluorescent downlights and eggcrate softlitt lighting above lavatory. -------------------------------------------------------------------------------- Schedule 2 Approved Generator Area [MAP APPEARS HERE] -------------------------------------------------------------------------------- EXHIBIT D COMMENCEMENT DATE MEMORANDUM              E*TRADE GROUP, INC., a Delaware corporation (“Tenant”), and MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), entered into a Lease (the “Lease”) dated August ____,1998. Pursuant to the Lease, Landlord leases to Tenant and Tenant leases from Landlord space in Menlo Oaks Corporate Center in Menlo Park, California. Capitalized terms used herein and not defined herein shall have the same meanings as in the Lease.              Tenant hereby acknowledges and certifies to Landlord as follows:         (1)  Landlord delivered possession of the Premises to Tenant on ________________,1998;         (2)  The Commencement Date occurred on ________________, 1998;         (3)  The Term will expire on ______________________; and         (4)  Tenant has accepted and is currently in possession of the Premises.              IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this _____ day of ________________, ____. “Tenant” E*TRADE GROUP, INC., a Delaware corporation By: Name: Its: By: Name: Its:   -------------------------------------------------------------------------------- EXHIBIT E RULES AND REGULATIONS         1.  The sidewalks, driveways, entrances, lobbies, stairways and public corridors shall be used only as a means of ingress and egress and shall remain unobstructed at all times. The enhance and exit doors of all buildings and suites are to be kept closed at all times except as required for orderly passage. Loitering in any part of the Building or the Project or obstruction of any means of ingress or egress to the Project or any building within the Project is not permitted.         2.  Plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no rubbish, newspapers, trash or other inappropriate substances of any kind shall be deposited therein. Personal articles, equipment and clothing shall not be left in restrooms, showers, locker rooms or Common Areas except and unless such articles are stored properly within a locker, and in no circumstance shall such articles remain overnight. Landlord may remove and dispose, at Tenant’s expense, of any articles or property improperly stored or left in restroom, showers, locker rooms or other Common Areas.         3.  Walls, floors, windows, doors and ceilings shall not be defaced in any way and no one shall be permitted to mark, drive nails or screws or drill into, paint, or in any way mar any Building surface, except that pictures, certificates, licenses and similar items normally used in Tenant’s business may be carefully attached to the walls by Tenant in a manner to be prescribed by Landlord. Upon removal of such items by Tenant any damage to the walls or other surfaces shall be repaired by Tenant. No article may be attached to or hung from ceilings, ceiling grids or light fixtures. Tenant is required to protect carpet within its Premises from damage by the use of chair mats or other means below desks and work stations, and by the use of moisture barriers ,under plants.         4.  No awning, shade, sign, advertisement, notice or other article shall be inscribed, coated, painted, displayed or affixed on, in or to any window, door or wall, or any other part of the outside or inside of the Building or Premises without the prior written consent of Landlord. No window displays or other public displays shall be pertained without the prior written consent of Landlord. Tenant shall not place anything against or near glass pardons or doors or windows which may appear unsightly from outside of the Premises. All tenant identification in the or on public corridor, lobby or other Common Area walls or doors will be installed by Landlord for Tenant with the cost borne by Tenant. No lettering or signs will be permitted on public corridor, lobby or other Common Area walls or doors except the name of Tenant, with the size, type and color of letters and the manner of attachment, style of display and location thereof to be prescribed by Landlord. The directory of the Building will be provided exclusively for the identification and location of tenant in the Building, and Landlord reserves the right to exclude all other information therefrom. All change requests for listing on the Building directory shall be submitted to the office of Landlord in writing. Landlord reserves the right to approve all listing requests. Any change requested by Tenant of Landlord of the name or names posted on directory, after initial posting, will be at the expense of Tenant.         5.  The weight, size and position of all safes and other unusually densely weighted or heavy objects used or placed in the Building shall be subject to approval by Landlord prior to installation and shall, in all cases be supported and braced as prescribed by Landlord and as otherwise required by law. The repair of any damage done to the Building or property therein by the installation, removal or maintenance of such safes or other unusually heavy objects shall be paid for by Tenant. Tenant shall bear the cost of any consultant services employed by Landlord in evaluating the placement, location or bracing of unusually heavy items.         6.  No improper or unusually loud noises, vibrations or odors are permitted inside or outside the Building. No person shall be permitted to interfere in any way with other tenants in the Project or those having business with them. No person will be permitted to bring or keep within the Building any animal, cycle or vehicle (whether motor driven or otherwise) except with the prior written consent of Landlord. Bicycles of Tenant and its employees, agents and invitees shall be stored only in designated bicycle racks outside of Buildings and in no other location. No person shall dispose of bash, refuse, cigarettes or other substances of any kind any place inside or outside of the Building except in the appropriate refuse containers provided therefor. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of alcohol or drugs or who shall do any act or violation of these rules and regulations.         7.  All keying of office doors, and all reprogramming of Security Access Cards will be at the expense of Tenant. Tenant shall not re-key any door without making prior arrangements with Landlord. --------------------------------------------------------------------------------         8.  Tenant will not install or use any window coverings except those provided by Landlord, nor shall Tenant use any part of the Building or Phase, other than the Premises, for storage or for any other activity which would detract from the appearance of the Building or the Project or interfere in any way with the use, or enjoyment, of the Building, Phase or Project, by other Tenants. No storage, staging, display or placing of any material, product or equipment outside of Tenant’s Premises is permitted except as may be expressly approved in writing by Landlord.         9.  Any Tenant or agent, employee or invites thereof using the Premises after the Building has closed or on non-business days shall lock any entrance doors to the Building used immediately after entering or leaving the Building. No device may be employed to prop or hold open any Building entrance or suite entrance door without the prior written consent of Landlord. No door or passageway may be obstructed.         10.  The Building shall be open 7:00 a.m. to 6:00 p.m., Monday through Friday (holidays excepted). The hours during which the Building is open may be different than the Business Hours for the Building.         11.  Tenant and Tenant’s employees, agents, invitees, etc., shall not use more than Tenant’s allocated share of the Building parking as provided in the Lease. Automobile parking shall only be in designated areas. Parking shall be nose in only (backing into parking stalls is prohibited), and entirely within painted parking spaces. Overnight parking and parking by Tenant or Tenant’s agents or employees within areas marked visitor is prohibited. Landlord reserves the right to designate exclusive parking for tenants and visitors of the Project, and to require identification of Tenant’s and Tenant’s employees’ vehicles. Vehicles owned or operated by Tenant and its employees, invitees and agents which are parked improperly shall be subject to tow at Tenant’s expense. The servicing or repairing of vehicles on the Lot is prohibited. Tenant and its employees, agents and invitees shall obey all traffic signs in the Project. The vehicle speed limit within the Project is fifteen miles per hour (15 mph). Notwithstanding the foregoing, Tenant may park one (1) van in the Phase overnight.         12.  All equipment of any electrical or mechanical nature shall be placed and maintained by Tenant in settings approved by Landlord and installed so as to absorb or prevent any vibration, noise, interference or annoyance to Landlord and others, and shall not overload any circuit, nor draw more power than has been previously allocated to Tenant.         13.  No air conditioning, heating unit, antenna, electrical panel, alarm, phone system or other similar apparatus shall be installed or used by any Tenant without the prior written consent of Landlord. No modification of any building electrical, mechanical, plumbing or security system is permitted without the prior written consent of Landlord. Tenant is responsible for the proper maintenance and servicing of fire extinguishers and fire protection equipment within the Premises.         14.  Tenant and its employees, agents and invitees may not dispose of any refuse or other waste material except within trash containers for the Building of which the Premises are a part, and then only in compliance with applicable law and regulations. Tenants may not place any articles within a trash enclosure other than within a trash bin. Tenants may not place any cardboard boxes within trash containers unless such boxes have been flattened. The cost of storage, handling, hauling and dumping of Tenant’s trash in excess of quantities incident to similar office parks located in Menlo Park and Palo Alto shall be borne by Tenant. Tenant shall be responsible for closing and securing trash enclosure gates after Tenant or its agents, employees or invitees use the trash enclosure.         15.  No hand trucks may be used in the Building Common Areas except those equipped with rubber tires and rubber side guards. Tenants shall not employ any elevator within any Building for the moving of products, equipment or other non-personnel purposes without first installing proper protective elevator pad (to be provided by Landlord)         16.  Tenant shall notify Landlord immediately of any plumbing blockage, leak, electrical or equipment malfunction, broken Building glass, fire or other damage to the Premises or the Building.         17.  Landlord shall have the right, exercisable without notice or without liability to Tenant, to change the name and address of the Building and to modify these Rules and Regulations.         18.  Tenant shall protect dock areas and pavements from damage due to trucks and trailers.         19.  Tenant shall not store trucks or trailers in the Project, nor park trucks or trailers in the automobile parking areas, traffic aisles, walkways or the public streets adjacent to the Project. --------------------------------------------------------------------------------         20.  Tenant is encouraged to participate in local waste recycling programs when feasible.         21.  Tenant shall employ warm spectrum fluorescent lights in ceiling fixtures wherever feasible.         22.  Tenant shall employ water conservation measures in connection with Tenant’s use of water.         23.  Tenant shall coordinate with RIDES and SAMSTRANS In making carpool, vanpool and transit information available to employees. Tenant shall establish an on-site location for the sale of SAMTRANS and CALTRANS transit tickets.         24.  Tenant shall employ vanpooI and carpool parking spaces only for the purposes indicated.         25.  Tenant is encouraged to establish flextime and/or staggered working hours for employees.         26.  Tenant is encouraged to implement an employment program for local residents and to coordinate skill enhancement with local job training centers.         27.  Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building are prohibited, and each tenant shall cooperate to prevent same.         28.  Tenant shall be deemed to have read these Rules and Regulations and agrees to abide by these Rules and Regulations as a covenant of its lease of the Premises. Tenant shall inform all of Tenant’s employees, agents and invitees of these Rules and Regulations and shall be responsible for the observance of all of these Rules and Regulations by Tenant’s employees, agents and invitees.         29.  Capitalized terms used in these Rules and Regulations and not defined herein shall have the meanings set forth in each tenant’s lease of space in Menlo Oaks Corporate Center. -------------------------------------------------------------------------------- EXHIBIT F 4400 BOHANNON EXPANSION OPTION SPACE Building Suite Approximate Rentable Square Footage 4400 Bohannon Drive (see Exhibit 1) 23,241 rsf -------------------------------------------------------------------------------- Exhibit 1 [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- Exhibit G October 30, 1985 (Revised April 22, 1987) (Revised March 22, 1988) MENLO OAKS CORPORATE CENTER On-Building Signage criteria 1.   “On building signs” shall be limited to a maximum of two signs per building and shall be limited to one per elevation. 2.   Signage will be restricted to company logo or the spelling out of the company name. 3.   The size of the signage will not exceed 42” in height or 15’ in length. The total square footage of the area of the outside boundaries of the signage will not exceed twenty-two (22) square feet. 4.   Signs may be constructed of plastic or metal and are to be firmly attached to the building concrete. The connection will be reviewed by an engineer. 5.   Signs may not protrude more than 6” from face of building concrete. 6.   Signage may be illuminated by internal backlit procedures which result in silhouette letters or logo (commonly thought of as “halo” effect around the signage). Translucent backlit signs will be discouraged. Lighting from the ground will also be discouraged. There are to be no exposed conduits or electrical appurtenances on the building facade. 7.   Signage design, lettering style and color are subject to review and approval of the building owner. -------------------------------------------------------------------------------- SECOND AMENDMENT TO LEASE (4200 BOHANNON DRIVE)              THIS SECOND AMENDMENT TO LEASE (this “Amendment”) dated as of September 30 , 1999, is entered into between MENLO OAKS PARTNERS, L.P. , a Delaware limited partnership (“Landlord”), and E*TRADE GROUP, INC., a Delaware corporation (“Tenant”).              THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts, understandings and intentions:              A. Landlord and Tenant are parties to that certain Menlo Oaks Corporate Center Standard Business Lease (4500 Bohannon Drive) dated as of August 18, 1998, as amended by (i) that certain letter agreement dated January 18, 1999 and (ii) that certain Second Amendment to Lease (as amended, the “4500 Bohannon Lease”), pursuant to which Landlord leased to Tenant approximately sixty-two thousand nine hundred twenty (62,920) rentable square feet of space in the building known as 4500 Bohannon Drive, Menlo Park, California, as more particularly described in the 4500 Bohannon Lease.              B. In accordance with the terms of the 4500 Bohannon Lease, Tenant exercised its option to lease (i) approximately ten thousand nine hundred eighty-five (10,985) rentable square feet of additional space (the “First Increment Expansion Space”) in the building known as 4600 Bohannon Drive, Menlo Park, California (the “4600 Bohannon Building”), and (ii) approximately fourteen thousand one hundred ninety-three (14,193) rentable square feet of additional space (the “Second Increment Expansion Space”) in the 4600 Bohannon Building. As of the date of this Amendment, Tenant’s lease of the First Increment Expansion Space and the Second Increment Expansion Space has not yet commenced.              C. Landlord and Tenant are also parties to that certain Menlo Oaks Corporate Center Standard Business Lease (4200 Bohannon Drive) dated as of August 18, 1998, as amended by that certain letter agreement dated January 18, 1999 (as amended, the “Lease”), pursuant to which Landlord leased to Tenant approximately forty-six thousand two hundred fifty-five (46,255) rentable square feet of space (the “ Premises”) within the building known as 4200 Bohannon Drive, Menlo Park, California (the “4200 Bohannon Building”), as more particularly described in the Lease. The capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings given to such terms in the Lease.              D. The 4200 Bohannon Building is located within a portion of the Project (“Phase I”) consisting of the real property (the “Phase I Lot”) described in Exhibit B to the Lease, all of the Improvements located thereon and all appurtenances thereto. Phase I is referred to in the Lease as the “Phase,” and the Phase I Lot is referred to in the Lease as the “Lot.”              E. Pursuant to Section 26.1 of the Lease, Tenant has an option (the “Expansion Option”) to lease from Landlord approximately twenty-three thousand two hundred forty-one (23,241) rentable square feet of additional space (the “Expansion Space”) within the building known as 4400 Bohannon Drive, Menlo Park, California (the “4400 Bohannon Building”). The Expansion Space is more particularly described in the Lease. The Expansion Space is referred to in the Lease as the “4400 Bohannon Expansion Option Space.”              F. The 4400 Bohannon Building is located within a portion of the Project (“Phase II”) consisting of the real property (the “Phase II Lot”) described in Exhibit A, attached hereto, all of the Improvements located thereon and all appurtenances thereto.              G. Tenant has exercised the Expansion Option with respect to the Expansion Space. In connection therewith, Landlord and Tenant now desire to amend the Lease to, among other things, extend the Term, expand the Premises to include the Expansion Space, and increase both the Base Rent and the percentage of Operating Expenses and Impositions for which Tenant is responsible under the Lease, as provided herein.              NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:              1. Expansion Space. Effective as of the date on which Landlord delivers possession of the Expansion Space to Tenant, in the condition required pursuant to Section 8 below (the “Expansion Space Delivery Date”), the Premises shall be expanded to include, in addition to the space presently leased to Tenant under the Lease, the Expansion Space. If the Expansion Space will become available for lease to Tenant prior to August 31, -------------------------------------------------------------------------------- 2000, Landlord shall notify Tenant in writing of the date on which Landlord expects to deliver the Expansion Space to Tenant.              2. Definitions. Effective as of the Expansion Space Delivery Date, the following terms contained in the Lease shall have the meanings set forth below:               2.1.  Premises. The term “Premises” as used in the Lease shall refer to the existing Premises and the Expansion Space.               2.2.  Building. The term “Building” as used in the Lease shall refer to both the 4200 Bohannon Building and the 4400 Bohannon Building.               2.3.  Lot. The term “Lot” as used in the Lease shall refer to both the Phase I Lot and the Phase II Lot.               2.4.  Phase. The term “Phase” as used in the Lease shall refer to both Phase I and Phase II.               2.5.  Building Common Areas. The term “Building Common Areas” as used in the Lease shall mean (i) the areas and facilities within the 4200 Bohannon Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants of the 4200 Bohannon Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the 4200 Bohannon Building) and (ii) the areas and facilities within the 4400 Bohannon Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants of the 4400 Bohannon Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and app urtenant fixtures servicing the 4400 Bohannon Building).               2.6.  Phase Common Areas. The term “Phase Common Areas” as used in the Lease shall mean (i) the areas and facilities within Phase I provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of Phase I (e.g., uncovered and unreserved parking areas, walkways and accessways) and (ii) the areas and facilities within Phase II provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of Phase II (e.g., uncovered and unreserved parking areas, walkways and accessways).               2.7.  Tenant’s Building Percentage Share. The term “Tenant’s Building Percentage Share” as used in the Lease shall mean (i) one hundred percent with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the ownership, operation, repair and/or maintenance of the 4200 Bohannon Building and (ii) fifty and 245/1000ths percent (50.245%) with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the ownership, operation, repair and/or maintenance of the 4400 Bohannon Building. If the Rentable Area of the Premises or the Rentable Area of either the 4200 Bohannon Building or the 4400 Bohannon Building changes, then (i) Tenant’s Building Percentage Share with respect to the 4200 Bohannon Building shall be adjusted to a percentage equal to the Rentable Area of the Premises in the 4200 Bohannon Building divided by the Rentable Area of the 4200 Bohannon Building and (ii) Tenant’s Building Percentage Share with respect to the 4400 Bohannon Building shall be adjusted to a percentage equal to the Rentable Area of the Premises in the 4400 Bohannon Building divided by the Rentable Area of the 4400 Bohannon Building.               2.8.  Tenant’s Phase Percentage Share. The term “Tenant’s Phase Percentage Share” as used in the Lease shall mean (i) forty-nine and 807/1000ths percent (49.807%) with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the ownership, operation, repair and/or maintenance of Phase I and (ii) twenty-one and 288/1000ths percent (21.288%) with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the ownership, operation, repair and/or maintenance of Phase II. If the Rentable Area of the Premises or the Rentable Area of either Phase I or Phase II changes, then (i) Tenant’s Phase Percentage Share with respect to Phase I shall be adjusted to a percentage equal to the Rentable Area of the Premises in Phase I divided by the Rentable Area of Phase I and (ii) Tenant’ s P hase Percentage Share with respect to Phase II shall be adjusted to a percentage equal to the Rentable Area of the Premises in Phase II divided by the Rentable Area of Phase II.               2.9.  Rent. The term “Rent” shall mean Base Rent, Additional Rent, Expansion Space Base Rent (defined in Section 4 hereof) and all other amounts payable by Tenant under the Lease. --------------------------------------------------------------------------------               2.10.  Base Rent. For purposes of Sections 6.2(e), 7.2, 12.4, 13.2, 14.1, 15.1, 16.1, 19.12, 25.2(a) and (b) and 25.4 of the Lease, the term “Base Rent” shall mean both the Base Rent and the Expansion Space Base Rent.              3. Rentable Area. Landlord and Tenant agree that for all purposes under the Lease, (i) the Rentable Area of the Expansion Space shall be deemed to be the rentable square footage of the Expansion Space as stated in Recital E of this Amendment, (ii) the Rentable Area of the 4400 Bohannon Building as of the date of this Amendment shall be deemed to be forty-six thousand two hundred fifty-five (46,255) rentable square feet and (iii) the Rentable Area of Phase II shall be deemed to be one hundred nine thousand one hundred seventy-five (109,175) rentable square feet.              4. Expansion Space Base Rent. In addition to Tenant’s obligation to pay to Landlord the Base Rent described in Section 4.1 of the Lease, Tenant shall pay to Landlord base rent with respect to Tenant’s lease of the Expansion Space in the amount of Seventy-Three Thousand Nine Hundred Sixty-Eight and 47/100 Dollars ($73,968.47) per month (the “Expansion Space Base Rent”). The Expansion Space Base Rent shall be increased on November 15, 2000, and on each November 15 thereafter during the Term by three and one-half percent (3.5%), regardless of whether the Expansion Space Delivery Date has occurred. Tenant’s obligation to pay Expansion Space Base Rent to Landlord shall commence on the forty-fifth (45th) day after Expansion Space Delivery Date (hereinafter referred to as the “Expansion Space Rent Commencement Date”) and continue thereafter during the Term; provided, howeve r, if Landlord delivers possession of the Expansion Space to Tenant prior to August 31, 2000 as a result of an Early Termination Event, then the Expansion Space Rent Commencement Date shall occur on the sixtieth (60th) day after the Expansion Space Delivery Date. Tenant shall pay to Landlord the Expansion Space Base Rent in advance, on the Expansion Space Rent Commencement Date and on the first day of each calendar month thereafter, together with Tenant’s payment to Landlord of the Base Rent described in Section 4.1 of the Lease, without deduction, abatement or setoff whatsoever. If the Expansion Space Rent Commencement Date or the last day of the Term is other than the first or last day of a calendar month, respectively, then the Expansion Space Base Rent for the partial calendar month in which the Expansion Space Rent Commencement Date or the end of the Term occurs shall be prorated on a per diem basis, based on the number of days in such calendar month.              5. Tenant’s Project Percentage Share. Effective as of the Expansion Space Delivery Date, Tenant’s Project Percentage Share shall be equal to the sum of (i) Tenant’s Project Percentage Share immediately prior to the Expansion Space Delivery Date and (ii) six and 212/1000ths percent (6.212%).              6. Term. The Term shall be extended until the last day of the tenth (10th) year after the latest of (i) the commencement of Tenant’s lease of the First Increment Expansion Space, (ii) the commencement of Tenant’s lease of the Second Increment Expansion Space or (iii) the Expansion Space Delivery Date.              7. Parking. Effective as of the Expansion Space Delivery Date, Tenant shall: have the right to use twenty-one and 288/1000ths percent (21.288%) of the parking spaces in Phase II on a non-exclusive basis.              8. Delivery. Landlord shall use commercially reasonable efforts to deliver possession of the Expansion Space to Tenant within five (5) days after Landlord recovers possession of the Expansion Space. Landlord shall deliver possession of the Expansion Space to Tenant in a broom clean condition, with all building systems in working order and the roof in water-tight condition. Except as provided above, Tenant shall accept delivery of the Expansion Space in its “as is” condition as of the Expansion Space Delivery Date, without any representation or warranty of any kind from Landlord.              9. Security Deposit. Concurrently with the execution of this Amendment, Tenant shall deliver to Landlord an additional security deposit (the “Additional Security Deposit”) in the amount of One Hundred Four Thousand Three Hundred Thirty-Nine and 83/100 Dollars ($104,339.83). The Additional Security Deposit shall be combined with the Security Deposit and secure the performance of all of Tenant’s obligations under the Lease. Tenant shall not be entitled to interest on the Additional Security Deposit. From and after the date of this Amendment, the term “Security Deposit” as used in the Lease shall mean both the original Security Deposit and the Additional Security Deposit.              10. Signage. Notwithstanding anything to the contrary contained in the Lease, Tenant may not install, construct or place any exterior signage on the 4400 Bohannon Building. --------------------------------------------------------------------------------              11. Tenant Improvement Allowance. Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement in connection with or as a result of Tenant’s lease of the Expansion Space.              12. Addendum. The term “Rider” contained in Section 4.2 of the Lease shall refer to the Addendum to Menlo Oaks Corporate Center Lease attached to and constituting a portion of the Lease.              13. Delivery Date Memorandum. Following the commencement of Tenant’s lease of the First Increment Expansion Space, the commencement of Tenant’s lease of the Second Increment Expansion Space and the Expansion Space Delivery Date, Landlord shall prepare and deliver to Tenant a delivery date memorandum (the “Delivery Date Memorandum”) in the form of Exhibit B, attached hereto. The Delivery Date Memorandum shall certify the Expansion Space Delivery Date and the expiration date of the Term. Tenant’s failure to execute and return the executed Delivery Date Memorandum within ten (10) business days after Tenant’s receipt thereof shall be conclusive upon Tenant as to the matters set forth in the Delivery Date Memorandum.              14. New Lease. Within thirty (30) days after Landlord’s written request, Tenant shall enter into (i) an amendment to the Lease (the “ Expansion Space Amendment”) to exclude the Expansion Space from the Premises and (ii) a new lease (the “Expansion Space Lease”) for the Expansion Space. The Expansion Space Lease shall contain all of the same terms and conditions contained in the Lease, with the result being that Landlord’s and Tenant’s rights and obligations with respect to the Expansion Space will be unchanged following the execution of the Expansion Space Amendment and Expansion Space Lease. Specifically, (i) the term of the Expansion Space Lease shall end concurrently with the term of the Lease, (ii) Tenant will not be allowed to place or install exterior signage on the 4400 Bohannon Building, (iii) Landlord will not be required to pay to Tenant any tenant improvemen t allowance or inducement with respect to the Expansion Space, (iv) the Additional Security Deposit shall constitute Tenant’s security deposit under the Expansion Space Lease, (v) a default by Tenant under the Lease or the 4500 Bohannon Lease shall constitute a default by Tenant under the Expansion Space Lease, (vi) the monthly Base Rent for the Expansion Space shall be calculated pursuant to Section 26.3 of the Lease, with the aggregate monthly Base Rent payable by Tenant under the Lease (after execution of the Expansion Space Amendment) and the Expansion Space Lease to be an amount not less than monthly Base Rent payable by Tenant under the Lease prior to the execution of the Expansion Space Amendment and the Expansion Space and (vii) for purposes of determining Tenant’s obligations to surrender the Expansion Space to Landlord in the condition in which it was received upon the expiration or earlier termination of the Expansion Space Lease, the date on which Tenant is to have received possession o f the Expansion Space shall be deemed to be the date on which Tenant received possession of the Expansion Space under the Lease (as amended by this Agreement) as opposed to the date on which Tenant enters into the Expansion Space Lease.              15. Entire Agreement. This Amendment represents the entire understanding between Landlord and Tenant concerning the subject matter hereof, and there are no understandings or agreements between them relating to the Lease, the Premises or the Expansion Space not set forth in writing and signed by the parties hereto. No party hereto has relied upon any representation, warranty or understanding not set forth herein, either oral or written, as an inducement to enter into this Amendment.              16. Continuing Obligations. Except as expressly set forth to the contrary in this Amendment, the Lease remains unmodified and in full force and effect. To the extent of any conflict between the terms of this Amendment and the terms of the Lease, the terms of this Amendment shall control.              IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.      “Landlord” MENLO OAKS PARTNERS, L.P., a Delaware limited partnership   By:               AM Limited Partners, a California limited partnership, its General Partner --------------------------------------------------------------------------------        By:               Amarok Menlo, Inc., a California corporation, its General Partner        By:   /s/ J.Marty Brill, Jr.      --------------------------------------------------------------------------------        J. Marty Brill, Jr. President      “Tenant” E*TRADE GROUP, INC. a Delaware corporation   By:   /s/ Raymond Johnson      --------------------------------------------------------------------------------        Name:  Raymond E. Johnson Its:  VP Facilities        By:   /s/ L.C. Purkis      --------------------------------------------------------------------------------        Name:  L.C. Purkis Its:  CFO -------------------------------------------------------------------------------- EXHIBIT A PHASE II              That certain real property situated in the City of Menlo Park, County of San Mateo, State of California, more particularly described as follows: Parcel 2: Parcel A as shown and delineated on that certain map entitled “Record of Survey of a Lot Line Adjustment, Lands of Amarok Bredero, etc.”, filed April 25, 1986, Book 9 of Licensed Land Survey Maps, Page 123, San Mateo Records. -------------------------------------------------------------------------------- EXHIBIT B DELIVERY DATE MEMORANDUM         E*TRADE GROUP, INC., a Delaware corporation (“Tenant”), and MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), entered into that certain Menlo Oaks Corporate Center Standard Business Lease (           Bohannon Drive) dated      ,      , as amended (the “Lease”). Capitalized terms used herein and not defined herein shall have the same meanings as in the Lease.         Tenant hereby acknowledges and certifies to Landlord as follows:         1.Expansion Space Delivery Date. The Expansion Space Delivery Date occurred on     ,     .         2.Term. The Term will expire on                    ,       .               IN WITNESS WHEREOF, this Delivery Date Memorandum is executed as of                ,      .      “Landlord” MENLO OAKS PARTNERS, L.P., a Delaware limited partnership   By:   AM Limited Partners,             a California limited partnership, its General Partner        By:   Amarok Menlo, Inc.,             a California corporation, its General Partner        By:        --------------------------------------------------------------------------------        S. Marty Brill, Jr., President           “Tenant” E*TRADE GROUP, INC. a Delaware corporation                    By:               Name: Its:        By:               Name: Its: -------------------------------------------------------------------------------- January 18, 1999 VIA FACSIMILE E*Trade Group, Inc. 2400 Geng Road Palo Alto, CA 94303 Attn: Mr. Robert Clegg         Re:  Lease of 4200 Bohannon Drive, Menlo Park, California Dear Robert:               Reference is made to that certain Menlo Oaks Corporate Center Standard Business Lease (4200 Bohannon Drive) (the “Lease”) dated as of August 18, 1998, by and between Menlo Oaks Partner’s, L.P., a Delaware limited partnership (“Landlord”), and E*Trade Group, Inc., a Delaware corporation (“Tenant”). Capitalized terms used herein and not defined herein shall have the meanings set forth in the Lease.               This letter (this “Letter Agreement”) shall evidence Landlord’s and Tenant’s amendment of the Lease as follows:               1.  Preliminary Plans. Landlord hereby approves Tenant’s Preliminary Plans described in Exhibit 1, attached hereto.               2.  Restoration/Modification Obligation. Tenant shall deliver to Landlord for Landlord’s review and approval Tenant’s proposed plans and specifications (the “Modification Work Plans”) for the restoration and modification work described in Exhibit 2, attached hereto (hereinafter referred to as the “Modification Work”), not later than one hundred twenty (120) days prior to the expiration of the Term; provided, however, if the Lease is terminated prior to the expiration of the Term, then Tenant shall deliver to Landlord for Landlord’s review and approval the Modification Work Plans within ninety (90) days after the termination of the Lease. Landlord shall not unreasonably withhold its approval of the Modification Work Plans. Tenant shall complete the Modification Work by the expiration of the Term; provided, however, if the Lease is terminated prior to th e expiration of the Term, Tenant shall commence the Modification Work within ten (10) days after Landlord approves the Modification Work Plans and complete the Modification Work within ninety (90) days after the termination of the Lease.               3.  Additional Deposit. Within ten (10) days after the execution of this Letter Agreement, Tenant shall deliver to Landlord an additional deposit (the “Additional Deposit”) in the amount of Two Hundred Thousand Dollars ($200,000.00). The Additional Deposit shall secure the performance of all of Tenant’s obligations under this Letter Agreement, including Tenant’s obligation to perform the Modification Work.                      a.  Delivery of Letter of Credit. In lieu of depositing the Additional Deposit in cash, Tenant may deliver to Landlord a clean, irrevocable and unconditional letter of credit (the “LC”) in compliance with the terms, provisions and requirements of this Section 3, in the amount of the Additional Deposit and issued by a major California financial institution reasonably acceptable to Landlord.                      b.  Term and Renewal of Letter of Credit. The LC shall be for a term of one (1) year and shall be automatically renewed each year for an additional twelve (12) months from the date of expiration of the LC through the ninetieth (90th) day after the expiration or earlier termination of the Lease. Tenant shall renew, extend or replace the LC as necessary and deliver written evidence thereof to Landlord at least thirty (30) days prior to the expiration date of the LC so that a valid LC which complies with each requirement of this Section 3 is in effect during the entire period required hereby. If Tenant fails to so renew, extend or replace the LC and deliver such written evidence to Landlord, and such failure continues for a period of five (5) days after the date such evidence is due to Landlord, Landlord shall be entitled to immediately draw the entire am ount of the LC, and hold such sum as security deposit for Tenant’s faithful performance of its obligations under this Letter Agreement. If Landlord draws down on the LC pursuant to this Section 3.b as a result of Tenant’s failure to renew, extend or replace the LC and deliver such written notice to Landlord, then Tenant shall have the option of delivering to Landlord a substitute LC which meets all of the requirements set forth in this Section 3 in exchange for Landlord returning to Tenant the portion of the Additional Deposit held by Landlord in cash. -------------------------------------------------------------------------------- E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 2                      c.  Amount of Draw on Letter of Credit. Upon the occurrence of a default by Tenant under this Letter Agreement, Landlord shall be entitled to obtain payment under the LC, in such amount as may be required to satisfy Tenant’s outstanding obligations under this Letter Agreement and shall apply such amount to said obligations. Specifically, Landlord shall be entitled to obtain partial draws pursuant to the LC in the amounts that Tenant is in default.                      d.  Manner of Presentment. Landlord is authorized to draw, for the account of Tenant, the amounts allowable pursuant to this Section 3 by a draft, which shall be payable at sight, accompanied by a statement signed by Landlord that (a) Landlord is entitled to draw on the amount set forth in said draft pursuant to this Letter Agreement, or (b) Landlord is entitled to draw on the full amount of the LC as a result of a failure by Tenant to renew, extend or replace the LC pursuant to the terms of this Letter Agreement. Payment of the draft shall be made in the manner agreed upon by the issuing bank, but Tenant hereby consents to such payment in the manner as Landlord may designate in the draft.                      e.  Return of Additional Deposit. Provided and on the condition that Tenant has performed all of Tenant’s Modification Work, Landlord shall return the Additional Deposit to Tenant within ninety (90) days after the expiration or earlier termination of the Lease. If Landlord sells or otherwise transfers Landlord’s rights or interest under the Lease, Landlord shall deliver the Additional Deposit to the transferee whereupon Landlord shall be released from any further liability to Tenant with respect to the Additional Deposit.               4.  Failure to Timely Perform the Modification Work. If Tenant fails to deliver to Landlord the Modification Work Plans, commence construction of the Modification Work or complete the Modification Work within the time periods or by the dates required pursuant to Section 2 above, then Landlord, by written notice to Tenant, may, but shall not be obligated to, either (i) perform the Modification Work and apply the Additional Deposit toward the cost of performing the Modification Work or (ii) elect not to perform the Modification Work and retain for Landlord’s account all or a portion of the Additional Deposit in an amount equal to the estimated cost of performing the Modification Work, as reasonably determined by Landlord. If the cost of completing the Modification Work exceeds the amount of the Additional Deposit, Tenant shall pay such excess amount to Landlord within ten (10) days after La ndlord’s written request therefor.               5.  Landlord’s Election. Notwithstanding anything to the contrary contained in this Letter Agreement, Landlord may elect for Tenant not to perform the Modification Work by written notice to Tenant not later than (i) one hundred eighty (180) days prior to the expiration of the Term or (ii) if the Lease is terminated prior to the expiration of the Term, within ten (10) days after the termination of the Lease. If Landlord elects for Tenant not to perform the Modification Work, Landlord shall return the Additional Deposit to Tenant.               6.  Tenant Improvement Allowance.                      a.  Basic Lease Information. The provisions titled “Additional Allowance” and “ Adjustment for Overage” under the heading “Tenant Improvements” in the Basic Lease Information are hereby deleted.                      b.  Section 4.1 of Work Letter. The first sentence of Section 4.1 of the Work Letter attached as Exhibit C to the Lease is hereby deleted and replaced by the following:           “Landlord shall pay to Tenant upon the terms and conditions set forth in this Section 4 the amount of Two Hundred Thirty-One Thousand Two Hundred Seventy-Five Dollars ($231,275.00) as a tenant improvement allowance (the “Tenant Improvement Allowance”) toward the cost of designing, constructing and installing the Tenant Improvements in the Building.”                      c.  Section 4.2 of Work Letter. Section 4.2 of the Work Letter is hereby deleted in its entirety.               7.  Commencement of Tenant Improvement Work. The date in Section 3.4.6 of the Work Letter shall be changed to February 1, 1999. -------------------------------------------------------------------------------- E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 3               8.  Condition Precedent. The effectiveness of this Letter Agreement and the obligations of Landlord and Tenant hereunder are conditioned upon the execution by Landlord and Tenant of a separate letter agreement of even date herewith amending that certain Menlo Oaks Corporate Center Standard Business Lease (4500 Bohannon Drive) dated as of August 18, 1998, by and between Landlord, as landlord, and Tenant, as tenant.               9.  Counterparts. This Letter Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall constitute one (1) and the same instrument. This Letter Agreement shall become binding when (i) the condition precedent set forth in Section 8 herein is met and (ii) any one (1) or more counterparts hereof, individually or taken together, shall bear the signatures of Landlord and Tenant.               10.  Conflicts. To the extent that any of the terms contained in this Letter Agreement conflict with the Lease, the terms contained in this Letter Agreement shall control. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 4               Except as modified hereby, the Lease is unmodified and in full force and effect.               Please execute this Letter Agreement in the space below (and return the same to me) to evidence your agreement to the foregoing.      Very truly yours,                  MENLO OAKS PARTNERS, L.P., a Delaware limited partnership        By:   AM Limited Partners, a California limited partnership, its General Partner                    By:   Amarok Menlo, Inc., a California corporation, its General Partner                    By:   /s/ J. Marty Brill, Jr.      --------------------------------------------------------------------------------        Name: J. Marty Brill, Jr. Its: President        By:   /s/ John B. Harrington      --------------------------------------------------------------------------------        Name: John B. Harrington Its: Vice President/Secretary AGREED AND ACCEPTED: E*TRADE GROUP, INC., a Delaware corporation      By: /s/ Robert Clegg      --------------------------------------------------------------------------------            Name: Robert Clegg       Its: Vice President           By: /s/ Len Purkis      --------------------------------------------------------------------------------            Name: Len Purkis       Its: Chief Financial Officer      -------------------------------------------------------------------------------- EXHIBIT 1 PRELIMINARY PLANS              The term “Preliminary Plans” shall refer to the plans listed below prepared by Studios Architecture. Sheet No. Title Date A0.00 Cover Sheet 10/30/98 A1.21 Building 4200-First Floor Demo Plan 10/30/98 A1.22 Building 4200-Second Floor Demo Plan 10/30/98 A2.21 Building 4200-First Floor Plan 10/30/98 A2.22 Building 4200-Second Floor Plan 10/30/98 A6.21 Building 4200-First Floor R.C.P. 10/30/98 A6.22 Building 4200-Second Floor R.C.P. 10/30/98 -------------------------------------------------------------------------------- EXHIBIT 2 RESTORATION CONDITION SPECIFICATIONS              All citations to “Sheets” refer to the Preliminary Plans. Item Modification Work Required Columns The walls that are adjacent to the columns along grid line 3, 4, and 6 shall be moved so that the columns are within such gypsum board walls.   Ceiling systems The reflected ceiling plan of the Preliminary Plans indicates that portions of the ceiling existing as of the date of the Lease are to be removed and, following completion of Tenant’s work in the Premises, there shall be no suspended ceiling system in these areas, but instead the underside of the structure of the second floor, or roof, as the case may be, shall be exposed. In such areas, Tenant shall install a suspended ceiling system to match the adjacent ceiling system, subject to Landlord’s review and approval of such system to be specified in the Modification Work Plans, and which shall be installed with a uniform and level grid, as if all of such areas were finished with the ceiling system at the time of Tenant’s construction activities. The finishes, including but not limited to mechanical systems, lighting and other electrical distribution shall conform to other general office space within the Building as reasonably determined by Landlord.< br>   Building infrastructure The Herculite doors and side light panels in the lobby, six (6) doors with frames in good condition, six (6) doors with frames including integral side lights in good condition, and any VAV boxes that are demolished by Tenant, shall be palletized and delivered to Landlord’s designated storage area.   Gypsum board ceiling system The reflected ceiling plan of the Preliminary Plans indicates that portions of the ceiling existing as of the date of the Lease are to be removed and, following completion of Tenant’s work in the Premises, in certain areas, including the ceiling adjacent to the second floor restroom, gypsum board ceiling will be installed. In such areas, Tenant shall remove the gypsum board ceiling and install a suspended ceiling system to match the adjacent ceiling system specified in the Modification Work Plans, and which ceiling system shall be installed with a uniform and level grid, as if all of such areas were finished with the ceiling system at the time of Tenant’s construction activities. The finishes, including but not limited to mechanical systems, lighting and other electrical distribution shall conform to other general office space within the Building as reasonably determined by Landlord. -------------------------------------------------------------------------------- Additional HVAC The air conditioning units to be installed by Tenant serving the first floor of the building will be removed and the affected area will be restored to general purpose office space including but not limited to mechanical systems, lighting and other electrical distribution which shall conform to other general office space within the Building as reasonably determined by Landlord.   Lobby The fire rated condition of the lobby will be restored and the gypsum board finishes to the stairway (excluding the handrail/guardrail), the finishes to the stairway landing columns, gypsum board ceiling, and wall finishes will be restored including but not limited to mechanical systems, lighting and other electrical distribution as reasonably determined by Landlord. -------------------------------------------------------------------------------- MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE (4500 BOHANNON DRIVE) Exhibit 10.8 BASIC LEASE INFORMATION Effective Date: August 18, 1998   Landlord: MENLO OAKS PARTNERS, L.P., a Delaware limited partnership   Landlord’s Address: 4400 Bohannon Drive Suite 260 Menlo Park, CA 94025 Attn: Mr. J. Marty Brill, Jr. Phone: (650) 329-9030 Fax: (640) 329-0129   Tenant: E*TRADE GROUP, INC., a Delaware corporation   Tenant’s Address:         Before       Commencement Date: 2400 Geng Road Palo Alto, CA 94303 Attn: Vice President of Corporate Services Phone: (650) 842-2500 Fax: (650) 842-2552         After       Commencement Date: 4500 Bohannon Drive Menlo Park, CA 94025 Attn: Vice President of Corporate Services   Premises: Approximately sixty-two thousand nine hundred twenty (62,920) rentable square feet of space in the Building, as more particularly shown on Exhibit A attached hereto.   Building: That certain office building located within the Project, commonly known as “4500 Bohannon Drive,” consisting of approximately sixty-two thousand nine hundred twenty (62,920) rentable square feet of space.   Lot: That certain real property located within the Project on which the Building is located, as more particularly described in Exhibit B, attached hereto.   Phase: A portion of the Project, consisting of the Lot, all improvements located thereon and all appurtenances thereto. The Phase includes approximately one hundred seven-two thousand ninety-five (172,095) rentable square feet of space in three (3) buildings located thereon (including the Building). -------------------------------------------------------------------------------- Project: That certain business office park located in Menlo Park, California, comprised of three (3) separate phases and seven (7) office buildings and including approximately three hundred seventy-four thousand one hundred thirty-nine (374,139) rentable square feet of space. The Project is commonly known as “Menlo Oaks Corporate Center.”   Term: Ten (10) years   Commencement Date: The earlier of (i) the date on which Tenant commences its business operations in the Premises or (ii) November 15, 1998.   Base Rent (Initial): One Hundred Ninety-Eight Thousand One Hundred Ninety-Eight Dollars ($198,198.00) per month, subject to adjustment pursuant to Section 4.2   Security Deposit: Two Hundred Seventy Thousand One Hundred Twenty-Three and 53/100 dollars ($270,123.53)   Tenant’s Building Percentage Share: One hundred percent (100%)   Tenant’s Phase Percentage Share: Thirty-six and 56/100 percent (36.56%)   Tenant’s Project Percentage Share: Sixteen and 82/100 percent (16.82%)   Default Percentage: One hundred twenty-five percent (125%)   Permitted Use: For general office purposes, software research and development, data processing and incidental uses thereto and no other use whatsoever.   Business Hours: Twenty-four (24) hours a day; seven (7) days a week   Non-Exclusive Parking: Thirty-six and 56/100 percent (36.56%) of the available parking spaces in the Phase. The Phase includes approximately six hundred forty-five (645) parking spaces.   Tenant Improvements:         Base Allowance: Three hundred Fourteen Thousand Six Hundred Dollars ($314,600.00)         Additional Allowance: Six Hundred Twenty-Nine Thousand Two Hundred Dollars ($629,200.00)         Adjustment for Overage: Monthly Base Rent shall be increased One and One-Half Cents ($0.015) for each Dollar of Additional Allowance provided by Landlord.   Brokers:         Landlord’s Broker: None         Tenant’s Broker: Tory Corporate Real Estate Advisors, Inc. (dba The Staubach Company) -------------------------------------------------------------------------------- Exhibits: Exhibt A - Diagram of Premises Exhibit B - Legal Description of Lot Exhibit C - Work Letter Exhibit D - Commencement Date Memorandum Exhibit E - Rules and Regulations Exhibit F-1 - First Expansion Option Space Exhibit F-2 - Second Expansion Option Space Exhibit G - Landlord’s Sign Criteria -------------------------------------------------------------------------------- MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE              THIS MENLO OAKS CORPORATE CENTER STANDARD BUSINESS LEASE (this “Lease”), dated as of this 18th day of August, 1998 (the “Effective Date”), is entered into by and between MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), and E*Trade Group, Inc., a Delaware corporation (“Tenant”), on the terms and conditions set forth below. 1.  DEFINITIONS. The following terms shall have the meanings set forth below:         1.1.  Building. The term “Building” shall have the meaning set forth in the Basic Lease Information.         1.2.  Building Common Areas. The Areas and facilities within the Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the Building).         1.3.  Commencement Date. The term “Commencement Date” shall have the meaning set forth in Section 3.         1.4.  Common Areas. The term “Common Areas” shall mean the Building Common Areas, the Phase Common Areas and the Project Common Areas.         1.5.  Lot. The term “Lot” shall mean the land upon which the Building is located, as more particularly described in Exhibit B, attached hereto.         1.6.  Phase. The term “Phase” shall have the meaning set forth in the Basic Lease Information.         1.7.  Phase Common Areas. The areas and facilities within the Phase provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Phase (e.g., uncovered and unreserved parking areas, walkways and accessways).         1.8.  Premises. The term “Premises” shall have the meaning set forth in the Basic Lease Information.         1.9.  Project. The term “Project” shall have the meaning set forth in the Basic Lease Information.         1.10.  Project Common Areas. The term “Project Common Areas” shall mean the areas and facilities within the Project provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants and occupants of the Project (e.g., walkways, traffic aisles, accessways, utilities and communications conduits and facilities).         1.11.  Rentable Area. The term “Rentable Area” shall mean the rentable area of the Premises, Building, Phase and Project as reasonably determined by Landlord. The parties agree that for all purposes under this Lease, the Rentable Area of the Premises, Building, Phase and Project shall be deemed to be the number of rentable square feet identified in the Basic Lease Information.         1.12.  Tenant’s Building Percentage Share. The term “Tenant’s Building Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Building is changed, then Tenant’s Building Percentage Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Building.         1.13.  Tenant’s Phase Percentage Share. The term “Tenant’s Phase Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Phase is changed, then Tenant’s Phase Percentage Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Phase.         1.14.  Tenant’s Project Percentage Share. The term “Tenant’s Project Percentage Share” shall mean the percentage specified in the Basic Lease Information. If the Rentable Area of the Premises or the Rentable Area of the Project is changed, then Tenant’s Percentage Project Share shall be adjusted to a percentage equal to the Rentable Area of the Premises divided by the Rentable Area of the Project. --------------------------------------------------------------------------------         1.15.  Term. The term “Term” shall have the meaning described in Section 3. 2.  PREMISES.         2.1.  Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, together with the right in common to use the Common Areas, for the Term.         2.2.  Condition Upon Delivery. Tenant acknowledges that it has had an opportunity to thoroughly inspect the Premises and, subject to Landlord’s obligations under Section 8.1, Tenant accepts the Premises in its existing “as is” condition, with all faults and defects and without any representation or warranty of any kind, express or implied.         2.3.  Reserved Rights. Landlord reserves the right to do the following from time to time:               (a)  Changes. To install, use, maintain, repair, replace and relocate pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities for service to other parts of the Building, Phase or Project above the ceiling surfaces, below the floor surfaces and within the walls of the Premises and in the central core areas of the Building and in the Building Common Areas, and to install, use, maintain, repair, replace and relocate any pipes, ducts, shafts, conduits, wires, appurtenant meters and mechanical, electrical and plumbing equipment and appurtenant facilities servicing the Premises, which are located either in the Premises or elsewhere outside of the Premises;               (b)  Boundary Changes. To change the boundary lines of the Lot or the Project;               (c)  Facility Changes. To alter or relocate the Common Areas or any facility within the Project;               (d)  Parking. To designate and/or redesignate specific parking spaces in the Phase or the Project for the exclusive or non-exclusive use of specific tenants in the Phase or the Project;               (e)  Services. To install, use, maintain, repair, replace, restore or relocate public or private facilities for communications and utilities on or under the Building, Phase and/or Project; and               (f)  Other. To perform such other acts and make such other changes in, to or with respect to the Common Areas, Building, Phase and/or Project as Landlord may reasonably deem appropriate.         2.4.  Work Letter. Landlord and Tenant shall each perform the work required to be performed by it as described in the Work Letter attached hereto as Exhibit C. Landlord and Tenant shall each perform such work in accordance with the terms and conditions contained therein. 3.  TERM         3.1.  Commencement of Term. The term of this Lease (the “Term”) shall be for the period of time specified in the Basic Lease Information unless sooner terminated as hereinafter provided. The Term shall commence on the (“Commencement Date”) and shall continue in full force and effect for the period specified as the Term or until this Lease is terminated as otherwise provided herein.         3.2.  Commencement Date Memorandum. Following the date on which Landlord delivers possession of the Premises to Tenant or the Commencement Date, Landlord may prepare and deliver to Tenant a commencement date memorandum (the “Commencement Date Memorandum”) in the form of Exhibit D, attached hereto, subject to such changes in the form as may be required to insure the accuracy thereof. The Commencement Date Memorandum shall certify the date on which Landlord delivered possession of the Premises to Tenant and the dates upon which the Term commences and expires. Tenant’s failure to execute and deliver to Landlord the Commencement Date Memorandum within five (5) days after Tenant’s receipt of the Commencement Date Memorandum shall be conclusive upon Tenant as to the matters set forth in the Commencement Date Memorandum. 4.  RENT         4.1.  Base Rent. The monthly base rent (“Base Rent”) shall be the amount set forth in the Basic Lease Information, subject to adjustment pursuant to Section 4.2. Tenant shall pay the Base Rent to Landlord in advance upon the first day of each calendar month of the Term, at Landlord’s address or at such other place designated by Landlord in a notice to Tenant, without any prior demand therefor and without any deduction, abatement or setoff -------------------------------------------------------------------------------- whatsoever. If the Term shall commence or end on a day other than the first day of a calendar month, then Tenant shall pay, on the Commencement Date and first day of the last calendar month, a pro rata portion of the Base Rent, prorated on a per diem basis, with respect to the portions of the fractional calendar month included in the Term. Concurrently with executing this Lease, Tenant shall pay to Landlord the Base Rent due for the first full calendar month during the Term along with the Security Deposit as provided in Section 4.5 below.         4.2.  Adjustment to Base Rent. The Base Rent shall be adjusted as provided in the Rider attached hereto and incorporated herein by reference.         4.3.  Additional Rent. All charges required to be paid by Tenant hereunder, including payments for insurance, Impositions, Operating Expenses and any other amounts payable hereunder, shall be considered additional rent (“Additional Rent”) for the purposes of this Lease, and Tenant shall pay Additional Rent to Landlord upon written demand by Landlord or otherwise as provided in this Lease. The term “ Rent” shall mean Base Rent and Additional Rent.         4.4.  Late Payment. If any installment of Rent is not paid, Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of the amount of such delinquent payment of Rent in addition to the installment of Rent then owing, regardless of whether or not a notice of default or notice of termination has been given by Landlord. This provision shall not relieve Tenant from payment of Rent at the time and in the manner herein specified.         4.5.  Interest. In addition to the imposition of a late payment charge pursuant to Section 4.3 above, any Rent that is not paid due shall bear interest from the date due until the date paid at the rate (the “Interest Rate”) that is the lesser of twelve percent (12%) per annum or the maximum rate permitted by law. Landlord’s acceptance of any interest payments on any past due Rent shall not constitute a waiver by Landlord of Tenant’s default with respect to the amount of Rent past due or prevent Landlord from exercising any of the rights and remedies available to Landlord under this Lease or at law.         4.6.  Security Deposit. Upon executing this Lease, Tenant shall deliver to Landlord cash (the “Security Deposit”) in the amount specified as the Security Deposit in the Basic Lease Information. The Security Deposit shall secure the performance of all of Tenant’s obligations under this Lease, including Tenant’s obligation to pay Rent and other monetary amounts, to maintain the Premises and repair damages thereto, and to surrender the Premises to Landlord upon termination of this Lease in the condition required pursuant to Section 8 below. Landlord may use and commingle the Security Deposit with other funds of Landlord. If Tenant fails to perform Tenant’s obligations hereunder, Landlord may, but without any obligation to do so, apply all or any portion of the Security Deposit towards fulfillment of Tenant’s unperformed obligations. If Landlord does so apply all or any portion of the Security De posit, Tenant, upon written demand by Landlord, shall immediately pay to Landlord a sufficient amount in cash to restore the Security Deposit to the full original amount. Tenant’s failure to pay to Landlord a sufficient amount in cash to restore the Security Deposit to its original amount within five (5) days after receipt of such demand shall constitute an Event of Default. Tenant shall not be entitled to interest on the Security Deposit. Within thirty (30) days after the expiration or earlier termination of this Lease, if Tenant has then performed all of Tenant’s obligations hereunder, Landlord shall return the Security Deposit to Tenant. If Landlord sells or otherwise transfers Landlord’s rights or interest under this Lease, Landlord deliver the Security Deposit to the transferee, whereupon Landlord shall be released from any further liability to Tenant with respect to the Security Deposit. 5.  IMPOSITIONS         5.1.  Tenants Obligations. Tenant shall pay to Landlord, as Additional Rent, Tenant’s Phase Percentage Share of Impositions for the Phase during each year of the Term (prorated for any partial calendar year during the Term).         5.2.  Definition of Impositions. The term “Impositions” shall include all transit charges, housing fund assessments, real estate taxes and all other taxes relating to the Premises, Building, Lot and Phase of every kind and nature whatsoever, including any supplemental real estate taxes attributable to any period during the Term; all taxes which may be levied in lieu of real estate taxes; and all assessments, assessment bonds, levies, fees, penalties (if a result of Tenant’s delinquency) and other governmental charges (including, but not limited to, charges for parking, traffic and any storm drainage/flood control facilities, studies and improvements, water and sewer service studies and improvements, and fire services studies and improvements); and all amounts necessary to be expended because of governmental orders, whether general or special, ordinary or extraordinary, unforeseen as well as foreseen, of any -------------------------------------------------------------------------------- kind and nature for public improvements, services, benefits or any other purpose, which are assessed, based upon the use or occupancy of the Premises, Building, Lot and/or Phase, or levied, confirmed, imposed or become a lien upon the Premises, Building, Lot and/or Phase, or become payable during the Term, and which are attributable to any period within the Term.         5.3.  Limitation. Nothing contained in this Lease shall require Tenant to pay any franchise, estate, inheritance, succession or transfer tax of Landlord, or any income, profits or revenue tax or charge upon the net income of Landlord from all sources; provided, however, that if at any time during the Term under the laws of the United States Government or the State of California, or any political subdivision thereof, a tax or excise on rent, or any other tax however described, is levied or assessed by any such political body against Landlord on account of Rent, or any portion thereof, Tenant shall pay one hundred percent (100%) of any said tax or excise as Additional Rent.         5.4.  Installment Election. In the case of any Impositions which may be evidenced by improvement or other bonds or which may be paid in annual or other periodic installments, Landlord shall elect to cause such bonds to be issued or such assessment to be paid in installments over the maximum period permitted by law.         5.5.  Estimate of Tenant’s Share of Impositions. Prior to the commencement of each calendar year during the Term, or as soon thereafter as reasonably practicable, Landlord shall notify Tenant in writing of Landlord’s estimate of the amount of Impositions which will be payable by Tenant for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year, Tenant shall pay to Landlord in advance, one-twelfth (1/12th) of the estimated amount; provided, however, if Landlord fails to notify Tenant of the estimated amount of Tenant’s share of Impositions for the ensuing calendar year prior to the end of the current calendar year, Tenant shall be required to continue to pay to Landlord each month in advance Tenant’s estimated share of Impositions on the basis of the amount due for the immediately prior month until ten (10) days after Landlord notifies Tenant of the estimat ed amount of Tenant’s share of Impositions for the ensuing calendar year. If at any time it appears to Landlord that Tenant’s share of Impositions payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord’s revised estimate for the year, and subsequent payments by Tenant for the year shall be based on the revised estimate.         5.6.  Annual Adjustment. Within one hundred twenty (120) days after the close of each calendar year during the Term, or as soon after the one hundred twenty (120) day period as reasonably practicable, Landlord shall deliver to Tenant a statement of the adjustment to the Impositions for the prior calendar year. If, on the basis of the statement, Tenant owes an amount that is less than the estimated payments for the prior calendar year previously made by Tenant, Landlord shall apply the excess to the next payment of Impositions due. If, on the basis of the statement, Tenant owes an amount that is more than the amount of the estimated payments made by Tenant for the prior calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of the statement. The year end statement shall be binding upon Tenant unless Tenant notifies Landlord in writing of any objection thereto within thirty (30) da ys after Tenant’s receipt of the year end statement. In addition, if, after the end of any calendar year or any annual adjustment of Impositions for a calendar year, any Impositions are assessed or levied against the Premises, Building or Phase that are attributable to any period within the Term (e.g., supplemental taxes or escaped taxes), Landlord shall notify Tenant of its share of such additional Impositions and Tenant shall pay such amount to Landlord within ten (10) days after Landlord’s written request therefor.         5.7.  Personal Property Taxes. Tenant shall pay or cause to be paid, not less than ten (10) days prior to delinquency, any and all taxes and assessments levied upon all of Tenant’s trade fixtures, inventories and other personal property in, on or about the Premises. When possible, Tenant shall cause Tenant’s personal property to be assessed and billed separately from the real or personal property of Landlord.         5.8.  Taxes on Tenant Improvements. Notwithstanding any other provision hereof, Tenant shall pay to Landlord the full amount of any increase in Impositions during the Term resulting from any and all alterations and tenant improvements of any kind whatsoever placed in, on or about or made to the Premises, Building, Phase or Project for the benefit of, at the request of, or by Tenant. 6.  INSURANCE         6.1.  Landlord. Landlord shall maintain “Special Form” property insurance (or its equivalent if “Special Form” property insurance is not available) including vandalism and malicious mischief coverage for the full replacement cost of the Building (but excluding any equipment, fixtures, alterations, improvements, additions or -------------------------------------------------------------------------------- personal property of Tenant or any alterations, additions or improvements made by or at the request of Tenant to the Premises, other than those tenant improvements owned by Landlord). Such property insurance shall include endorsements for sprinkler leakage, inflation, building ordinance coverage and such other endorsements as selected by Landlord, together with rental value insurance against loss of Rent for a period of twelve (12) months commencing on the date of loss. Landlord may also carry such other insurance as Landlord may deem prudent or advisable, including, without limitation, liability insurance and hazardous materials, earthquake/volcanic action, flood and/or surface water, boiler and machinery comprehensive coverages in such amounts, with such deductibles and upon such terms as Landlord shall determine. Upon Tenant’s written request, Landlord shall deliver to Tenant certificates evidencing the coverage required under this Section 6.1. Landlord, either directly or thro ugh its agent, may maintain any of the insurance required to be maintained by Landlord pursuant to this Section 6.1 under one or more “blanket policies”, insuring other parties and/or other locations, so long as the amounts and coverages required under this Section 6.1 are not diminished as a result thereof.         6.2.  Tenant. Tenant shall, at Tenant’s expense, obtain and keep in force at all times the following insurance:               (a)  Commercial General Liability Insurance (Occurrence Form). A policy of commercial general liability insurance (occurrence form) having a combined single limit of not less than providing coverage for, among other things, blanket contractual liability, premises, products/completed operations and personal and advertising injury coverage;               (b)  Automobile Liability Insurance. Comprehensive automobile liability insurance having a combined single limit of not less than Five Million Dollars ($5,000,000.00) per occurrence, and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired, borrowed or non-owned automobiles;               (c)  Workers’ Compensation and Employer’s Liability Insurance. Workers’ compensation insurance having limits not less than those required by state statute and federal statute, if applicable, and covering all persons employed by Tenant in the conduct of its operations on the Premises (including the all states endorsement and, if applicable, the volunteers endorsement), together with employer’s liability insurance coverage in the amount of at least Five Million Dollars ($5,000,000.00);               (d)  Property Insurance. “Special Form” property insurance (or its equivalent if “Special Form” property insurance is not available), including vandalism and malicious mischief, boiler and machinery comprehensive form, if applicable, and endorsement for earthquake sprinkler damage, each covering damage to or loss of Tenant’s personal property, fixtures and equipment, including electronic data processing equipment (“EDP Equipment”), media and extra expense, and all alterations, additions and improvements made by or at the request of Tenant to the Premises other than those tenant improvements owned by Landlord. EDP Equipment, media and extra expense shall be covered for perils insured against in the so-called “EDP Form”. If the property of Tenant’s invitees is to be kept in the Premises, warehouser’s legal liability or bailee customers insur ance for the full replacement cost of such property;               (e)  Business Insurance. Business insurance in an amount not less than the annual Base Rent and Additional Rent payable by Tenant hereunder for the then current calendar year; and               (f)  Additional Insurance. Any such other insurance as Landlord or Landlord’s lender may reasonably require.         6.3.  General.               (a)  Insurance Companies. Insurance required to be maintained by Tenant shall be written by companies licensed to do business in California and having a “General Policyholders Rating” of at least A:X or better (or such higher rating as may be required by a lender having a lien on the Lot) as set forth in the most current issue of “Best’s Insurance Guide” or “Best’s Key Rating Guide.”               (b)  Increased Coverage. Landlord, upon written notice to Tenant, may require Tenant to increase the amount of any insurance coverage maintained by Tenant under this Section 6 to the amount of insurance coverage that landlords of similar buildings located in Menlo Park and Palo Alto customarily require tenants to maintain. --------------------------------------------------------------------------------               (c)  Certificates of Insurance. Tenant shall deliver to Landlord certificates of insurance with the additional insured endorsement and the primary insurance endorsement(s) attached for all insurance required to be maintained by Tenant, no later than seven (7) days prior to the Commencement Date or such earlier date that Tenant takes possession of the Premises. Tenant shall, at least thirty (30) days prior to expiration of the policy, furnish Landlord with certificates of renewal or “binders” thereof. Each certificate shall expressly provide that such policies shall not be cancelable or otherwise subject to modification except after thirty (30) days’ prior written notice to the parties named as additional insureds in this Lease. If Tenant fails to maintain any insurance required in this Lease, Tenant shall be liable for all losses and cost resulting from said failure.               (d)  Additional Insureds. Landlord, any property management company of Landlord for the Premises and any designated by Landlord shall be named as additional insureds under all of the policies required to be maintained by Tenant under this Section 6. The policies required to be maintained by Tenant under this Section 6 shall provide for severability of interest.               (e)  Primary Coverage. All insurance to be maintained by Tenant shall be primary, without right of contribution from Landlord’s insurance. Any umbrella liability policy or excess liability policy (which shall be in “following form”) shall provide that if the underlying aggregate is exhausted, the excess coverage will drop down as primary insurance. The limits of insurance maintained by Tenant shall not limit Tenant’s liability under this Lease.               (f)  Waiver of Subrogation. Landlord and Tenant waive any right to recover against the other for damages covered by insurance or which would have been covered by insurance had the applicable party maintained the insurance required to be maintained by that party under the terms of this Lease. This provision is intended to waive fully, and for the benefit of Landlord or Tenant, as applicable, any rights and/or claims which might give rise to a right of subrogation in favor of any insurance carrier. The coverages obtained by Landlord and Tenant pursuant to this Lease shall include, without limitation, waiver of subrogation endorsements.         6.4.  Tenant’s Indemnity. Tenant shall indemnify, protect and defend by counsel reasonably satisfactory to Landlord and hold harmless Landlord and Landlord’ s officers, directors, shareholders, employees, partners, members, lenders and successors and assigns (collectively, the “Indemnified Parties” and each, an “Indemnified Party”) from and against any and all claims, demands, causes of action, judgments, losses, costs, liabilities, damages (including punitive and consequential damages) and expenses, including attorneys’ fees and costs (collectively, “Claims”) arising from any cause whatsoever in the Premises, including Claims caused in whole or in part by the act, omission or negligence of the Indemnified Party (but excluding Claims caused by an Indemnified Party’s willful or criminal misconduct). In addition, Tenant shall further indemnify, protect and defend by co unsel reasonably satisfactory to Landlord and hold harmless the Indemnified Parties from and against any and all Claims arising from (i) Tenant’s use or occupancy of the Premises, the conduct of Tenant’s business or any activity, work or things done, permitted or suffered by Tenant in or about the Premises, (ii) any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, and/or (iii) any acts, omissions or negligence of Tenant or any of Tenant’s agents, contractors, employees or invitees. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property in, upon or about the Premises arising from any cause; Tenant hereby waives all claims in respect thereof against Landlord. The provisions of this Section 6.4 shall survive the expiration or earlier termination of this Lease.         6.5.  Exemption of Landlord from Liability. Neither Landlord nor any other Indemnified Party shall be liable to Tenant for any injury to Tenant’s business or loss of income therefrom, loss or damage to property, or injury or death to any persons, including any loss, damage or injury attributable in whole or in part to the act, omission or negligence of any Indemnified Party (but excluding any loss, damage or injury to the extent caused by the willful or criminal misconduct of such Indemnified Party, whether such loss, damage or injury is caused by fire, steam, electricity, gas, water or rain, or from the breakage, leakage or other defects of sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, and whether said loss, damage or injury results from conditions arising upon the Premises, or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant, As a material part of Landlord’s consideration in exchange for entering into this Lease, Tenant assumes all risk of such loss, damage and injury. -------------------------------------------------------------------------------- 7.  OPERATING EXPENSES         7.1.  Operating Expenses. Tenant shall pay to Landlord, as Additional Rent during each year of the Term (prorated or any partial calendar year during the Term), (i) Tenant’s Building Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Building, (ii) Phase Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Phase and (iii) Tenant’s Project Percentage Share of all Operating Expenses attributable to the ownership, operation, repair and/or maintenance of the Project, each as determined by Landlord. Landlord shall not collect any Operating Expense from Tenant more than once.         7.2.  Definition of Operating Expenses. The term “Operating Expenses” shall include all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, operation, repair and/or maintenance of the Building, Phase and/or Project, the surrounding property, and the supporting facilities, including, without limitation, (i) premiums for insurance maintained by Landlord pursuant to this Lease and all costs incidental thereto, (ii) wages, salaries and related expenses and benefits of all employees engaged in operation, maintenance and security of the Building, Phase and/or Project; (iii) costs for all supplies, materials and rental equipment used in the operation of the Building, Phase and/or Project; (iv) all maintenance, janitorial, security and service costs; (v) all management fees; (vi) legal and accounting expenses, including t he cost of audits; (vii) costs for repairs, replacements, uninsured damage or deductibles on property insurance, and general maintenance of the Building, Phase and Project, including service areas, elevators, mechanical rooms, exterior surfaces and all component parts thereof (but excluding any repairs or replacements paid for out of insurance proceeds or by other parties and alterations attributable solely to tenants of the Building other than Tenant); (viii) the cost of any capital improvements made to the Building, Phase or Project, amortized over such reasonable period as Landlord shall determine, together with interest upon the unamortized balance at the or such other higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing the capital improvements; (ix)all charges for heat, water, gas, electricity, sewer, air conditioning, emergency telephone service, trash removal and other utilities used or supplied to the Building, Phase and/or Project (and not separately meter ed and billed to individual tenants); and (x) all business license, permit and inspection fees.         7.3.  Prorated Expenses. Any Operating Expenses attributable to a period which falls only partially within the Term shall be prorated between Landlord and Tenant so that Tenant shall pay only that proportion thereof attributable to the period that falls within the Term.         7.4.  Payment at End of Term. Any amount payable by Tenant which would not otherwise be due until after the termination of this Lease, shall, if the exact amount is uncertain at the time that this Lease terminates, be paid by Tenant to Landlord upon such termination in an amount to be estimated by Landlord with an adjustment to be made once the exact amount is known.         7.5.  Estimates of Tenant’s Share of Operating Expense. Prior to the commencement of each calendar year during the Term, or as soon thereafter as is reasonably practicable, Landlord shall notify Tenant in writing of Landlord’s estimate of the amount of Operating Expenses which will be payable by Tenant for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year Tenant shall pay to Landlord, in advance, one-twelfth (1/12) of the estimated amount; provided however, if Landlord fails to notify Tenant of the estimated amount of Tenant’s share of Operating Expenses for the ensuing calendar year prior to the end of the current calendar year, Tenant shall be required to continue to pay to Landlord each month in advance Tenant’s estimated share of Operating Expenses on the basis of the amount due for the immediately prior month until ten (10) days after Landlord not ifies Tenant of the estimated amount of Tenant’s share of Operating Expenses for the ensuing calendar year. If at any time it appears to Landlord that Tenant’s share of Operating Expenses payable for the current calendar year will vary from Landlord’s estimate, Landlord may give notice to Tenant of Landlord’s revised estimate for the calendar year, and subsequent payments by Tenant for the calendar year shall be based on the revised estimate.         7.6.  Annual Adjustment. Within one hundred twenty (120) days after the close of each calendar year during the Term, or as soon after the one hundred twenty (120) day period as practicable, Landlord shall deliver to Tenant a statement of the adjustment to the Operating Expenses for the prior calendar year. If, on the basis of the statement, Tenant owes an amount that is less than the estimated payments for the prior calendar year previously made by Tenant, Landlord shall apply the excess to the next payment of Operating Expenses due. If, on the basis of the statement, Tenant owes an amount that is more than the amount of estimated payments made by the Tenant for -------------------------------------------------------------------------------- the prior calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of the statement. The year end statement shall be binding upon Tenant unless Tenant notifies Landlord in writing of any objection thereto within ninety (90) days after Tenant’s receipt of the year end statement. In addition, if, after the end of any calendar year or any annual adjustment of Operating Expenses for a calendar year, Operating Expenses are incurred or billed to Landlord that are attributable to any period within the Term (e.g., sewer district flow fees), Landlord shall notify Tenant of its share of such additional Operating Expenses and Tenant shall pay such amount to Landlord within ten (10) days after Landlord’s written request therefor.         7.7.  Less Than Full Occupancy. In the event the Building, Phase or Project are not fully occupied during any year of the Term, an adjustment shall be made in computing Operating Expenses for such year so that the same shall be computed for such year as though the Building, Phase and Project had been fully occupied during such year.         7.8.  Special Services.               (a) Utilities. In the event Landlord provides additional utilities, heating, air conditioning, trash removal and/or cleaning services to Tenant beyond such standard services related to the operation and management similar business office parks located in Menlo Park/Palo Alto areas, or at times other than during Business Hours (as defined in the Basic Lease Information), Tenant shall pay Landlord’s reasonable charge for such special services as Additional Rent. Any cleaning of lunchrooms, cafeterias, conference rooms, etc., shall be on a special services basis (except with respect to the removal of trash from trash receptacles or cleaning incidental to normal cleaning).                (b) Meters. Landlord shall have the right, at Tenant’s sole cost and expense, to install separate metering for electricity, water or gas to the Premises or to separately charge Tenant for any quantity of such utilities consumed by Tenant beyond the amounts customarily consumed by tenants in the Project as reasonably determined by Landlord. Landlord may also charge Tenant for costs of sanitary sewer or trash removal occasioned by Tenant’s excessive consumption of such services. All such charges shall be reasonably determined by Landlord and promptly paid by Tenant to Landlord as Additional Rent. 8.  REPAIRS AND MAINTENANCE         8.1.  Landlord Repairs and Maintenance. Landlord shall maintain those portions of the Building, Lot, Phase and Project that are owned by Landlord and not leased to tenants in the Project or required to be maintained by any tenants in the Project consistent with the standards applied by landlords of similar Class A business office parks located in the Menlo Park and Palo Alto areas.         8.2.  Tenant Repairs and Maintenance. Tenant, at Tenant’s sole cost and expense, shall at all times during the Term keep, maintain and preserve the Premises and all parts, components, systems, fixtures, hardware and finishes of and in the Premises in a first class, clean, safe and sanitary order, condition and repair, excepting only insured casualty to the extent of the insurance proceeds received by Landlord. Tenant shall comply with all applicable manufacturer’s specifications and recommendations and best industry practices in connection with cleaning, protecting, servicing, maintaining and repairing the Premises and all of the parts, components, systems, fixtures, hardware and finishes in the Premises in order to preserve and achieve the maximum aesthetic and economically serviceable life of the Premises and the improvements contained therein. All repairs, replacements and restorations made by Tenant s hall be performed promptly as required, in a good and workmanlike manner, employing materials of equal or better quality, serviceability and utility to those items or parts being replaced, with surface finishes (including color, texture and general appearance) comparable and compatible with adjacent surfaces, to the reasonable satisfaction of Landlord and in compliance with all applicable federal, state or local laws, ordinances, regulations and orders and the requirements of any insurer of the Building. Tenant shall, at Tenant’s own expense, immediately replace all glass in the Premises that may be broken during the Term with glass at least equal to the specification and quality of the glass being replaced. Upon expiration of the Term, Tenant shall surrender the Premises to Landlord in the same condition as received, reasonable wear and tear, damage by fire or other insured casualty to the extent of insurance proceeds received by Landlord excepted. The term “reasonable wear and tear” a s used herein shall mean wear and tear which manifests itself solely through normal intensity of use and passage of time consistent with the employment of commercially prudent measures to protect finishes and components from damage and excessive wear, the application of regular and appropriate preventative maintenance practices and procedures, routine cleaning and servicing, waxing, polishing, adjusting, repair, refurbishment and replacement at a standard of appearance and utility and as often as appropriate for Class A corporate and professional office occupancies in the Palo Alto/Menlo Park office market. The term “reasonable wear and tear” -------------------------------------------------------------------------------- would thus encompass the natural fading of painted surfaces, fabric and materials over time, and carpet wear caused by normal foot traffic. The term “reasonable wear and tear” shall not include any damage or deterioration that could have been prevented by Tenant’s employment of ordinary prudence, care and diligence in the occupancy and use of the Premises and the performance of all of its obligations under this Lease. Items not considered reasonable wear and tear hereunder include the following for which Tenant shall bear the obligation for repair and restoration (except to the extent caused by the gross negligence or willful misconduct of Landlord or its employees or agents), (i) excessively soiled, stained, worn or marked surfaces or finishes; (ii) damage, including holes in building surfaces (e.g., cabinets, doors, walls, ceilings and floors) caused by the installation or removal of Tenant’s trade fixtures, furnishings, decorations, equipment, alterations, utility inst a llations, security systems, communications systems (including cabling, wiring and conduits), displays and signs; (iii) damage to any component, fixture, hardware, system or component part thereof within the Premises, and any such damage to the Building, Phase or Project, caused by Tenant or its agents, contractors or employees, and not fully recovered by Landlord from insurance proceeds. Tenant shall not commit or allow any waste or damage to be committed on any portion of the Premises, Building, Phase or Project.         8.3.  Failure to Maintain, Repair or Restore. The timely performance by Tenant of Tenant’s duties to maintain, repair and restore the Premises is essential to the preservation of Landlord’s property value and the security interests of Landlord’s mortgagee. If, upon expiration of the Term, Tenant has failed to fully perform its obligations under this Section 8 or Sections 9 or 11.2, Landlord shall have the right, but not the obligation, to perform any obligation of Tenant (notice to Tenant) as provided in Section 19.16 hereof, and Tenant shall reimburse Landlord for all costs incurred by Landlord related thereto (including overtime or premium time labor charges as determined by Landlord in its sole discretion). Tenant shall pay to Landlord all costs, fees and penalties owing, due, paid or payable by Landlord to any lender or mortgagee as a result of Tenant’s failure to perform its obligations under this Section 8 or Sections 9 or 11.2, and any fees, penalties, loss, costs, expenses or liabilities whether paid or accrued by Landlord as a result of Landlord’s failure to timely deliver all or a portion of the Premises for occupancy by one or more successor or replacement tenants to the extent such failure is due to Tenant’s failure to perform hereunder. In addition, if Tenant fails to fully perform its obligations pursuant to this Section 13 or Sections 9 or 11.2 by the end of the Term, then for each day required by Landlord to perform such obligations (or each day that would reasonably be required by Landlord to perform such obligations if Landlord elected to do so), Tenant shall pay to Landlord as liquidated damages an amount equal to one thirtieth (1/30th) of the product of (i) the Default Percentage (as stated in the Basic Lease Information) and (ii) the monthly Rent due under this Lease during the last month of the Term (hereinafter referred to as the “ Liquidated Damages Amount”). The Liquidated Damages Amount is intended to compensated Landlord for any loss of rent incurred by Landlord during the period of time required by Landlord to perform Tenant’s unperformed obligations under this Section 8 and Sections 9 and 11.2 (or that would reasonably be required by Landlord to perform such obligations had Landlord elected to do so). Landlord and Tenant agree that Landlord’s actual damages for loss of rents or opportunity as a result of Tenant’s failure to complete its obligations pursuant to this Section 8 and Sections 9 and 11.2 would be difficult or impossible to determine because, inter alia, where a tenant has failed to perform such obligations, it is difficult for a landlord effectively to market that tenant’s premises to prospective tenants, and the Liquidated Damages Amount is the best estimate of the amount of damages Landlord would suffer in the nature of loss of rent or opportunity for any such failure by Tenant. Nothing contained in this paragraph shall limit Landlord’s other remedies pursuant to this Lease or by law with respect to losses other than loss of rent or opportunity, or waive or affect any of Tenant’s indemnity obligations under this Lease and Landlord’s rights to enforce those indemnity obligations. The payment of the Liquidated Damages Amount as liquidated damages is not intended as a forfeiture or penalty within the meaning of California Civil Code Section 3275 or 3369, but is intended to constitute liquidated damages to Landlord pursuant to California Civil Code Section 1671.         8.4.  Inspection of Premises. Landlord and Landlord’s agents, at all reasonable times, may enter the Premises to perform any construction related to the Premises, Building or Phase, to inspect, clean or repair the same, to inspect the performance by Tenant of the terms and conditions contained in this Lease, to affix reasonable signs and displays, to show the Premises to prospective purchasers, tenants and lenders, to post notices of non-responsibility and similar notices, and for all other purposes as Landlord shall reasonably deem necessary.         8.5.  Liens. Tenant shall promptly pay and discharge all claims for work or labor done, supplies furnished or services rendered on behalf of Tenant and shall keep the Premises, Building, Phase and Project free and clear of all mechanic’s and materialmen’s liens in connection therewith. Landlord shall have the right to post or keep posted on the Premises, or in the immediate vicinity thereof, any notices of nonresponsibility for any construction, alteration or repair of the Premises by Tenant. If any such lien is filed, Landlord may, but shall not be required to, -------------------------------------------------------------------------------- take such action or pay such amount as may be necessary to remove such lien; and, Tenant shall pay to Landlord as Additional Rent any such amounts expended by Landlord within five (5) days after Tenant receives Landlord’s written request for payment. 9.  FIXTURES, PERSONAL PROPERTY AND ALTERATIONS         9.1.  Fixtures and Personal Property. Tenant, at Tenant’s sole cost and expense, may install any necessary trade fixtures, equipment and furniture in the Premises, provided that such items are installed and are removable without affecting the structural integrity, character or utility of the Building. Landlord reserves the right to approve or disapprove of any curtains, draperies, shades, paint or other interior improvements that are visible from outside the Premises on wholly aesthetic grounds. Such improvements or replacement items must be submitted for Landlord’s written approval prior to installation, or Landlord may remove or replace such items at Tenant’s sole cost and expense. The trade fixtures, equipment and furniture shall remain Tenant’s property and shall be removed by Tenant prior to the expiration of this Lease. If Tenant fails to remove Tenant’s trade fixtures, equipment and furnitu re prior to the termination of this Lease, Landlord may keep and use the foregoing items or remove and dispose any or all of those items at Tenant’s expense, and cause Tenant’s trade fixtures, equipment and furniture to be stored or sold in accordance with applicable law. Prior to expiration of the Term or earlier termination of this Lease, Tenant shall repair, at Tenant’s sole cost and expense, all damage caused to the Building or Premises as a result of the installation, operation, use or removal of Tenant’s trade fixtures, equipment, furniture, or unauthorized improvements and replacements, and restore the Building and the Premises to their condition at the commencement of the Term.         9.2.  Alterations. Tenant shall deliver to Landlord full and complete plans and specifications of all such alterations, additions or improvements, and no such work shall be commenced by Tenant until Landlord has given its written approval thereof. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any applicable laws, ordinances, etc. Farther, Tenant shall indemnify and hold harmless Landlord from any loss, cost or expense, including attorneys’ fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Tenant’s alterations, additions or improvements to the Premises. All other alterations, additions and improvements shall remain the property of Tenant until termination of this Lease, at which time they shall be and become the property of Landlord. All altera tions, additions, improvements, repairs and restoration by Tenant hereinafter required or permitted shall be done in a good and workmanlike manner, incorporating materials of quality equal to or better than those replaced, with finishes comparable to and compatible with adjacent finishes within the Premises and the Building and in compliance with all applicable laws, ordinances, bylaws, regulations and orders of any federal, state, county, municipal or other public authority and of the insurers of the Building. In addition, all of Tenant’s alterations, additions and improvements shall be constructed in such a manner so as to (i) not unreasonably disturb or otherwise interfere with the use and occupancy of any other tenant of the Building, Phase or Project, (ii) protect by appropriate means and measures all components of the Premises, Building, Phase and Project from soiling or damage associated with Tenant’s work, and (iii) not impose any additional expense or delay upon Landlord in the constructio n of improvements to, or maintenance or operation of, the Building, Phase and/or Project. Tenant shall, reimburse Landlord for reviewing and approving or disapproving plans and specifications for any alterations proposed by Tenant. Tenant shall require that any contractors used by Tenant carry a commercial liability insurance policy covering bodily injury in the amounts of Two Million Dollars ($2,000,000.00) per person and Two Million Dollars ($2,000,000.00) per occurrence, and covering property damage in the amount of Two Million Dollars ($2,000,000.00). Landlord may increase the amount of insurance coverage required pursuant to this Section to reflect inflation, industry cost and recovery experience over time. Landlord may require proof of such insurance prior to commencement of any work on the Premises. 10.  USE AND COMPLIANCE WITH LAWS         10.1.  General Use and Compliance with Laws. Tenant shall only use the Premises for the Permitted Use (as set forth in the Basic Lease Information) and for no other use whatsoever without the prior written consent of Landlord. Tenant, at Tenant’s sole cost and expense, shall comply with all of the requirements of any recorded covenants, conditions and restrictions, and any requirements of municipal, county, state, federal and other applicable governmental authorities, now in force, or which may hereafter be in force, pertaining to the Premises, Building, Phase, and/or Project, including any occupancy permit for the Premises, and secure any necessary permits therefor. Tenant, in Tenant’s use and occupancy of the Premises, shall not subject the Premises to any use which would tend -------------------------------------------------------------------------------- to damage any portion thereof, nor overload the common facilities of the Building, Phase or Project to the detriment of other tenants’ enjoyment thereof.         10.2.  Signs. Tenant shall not install any sign in or on the Premises, Building, Phase or Project without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion. Any sign placed by or erected by Landlord for the benefit of Tenant in or on the Premises, Building, Phase or Project shall be installed at Tenant’s sole cost and expense and, except in the interior of the Premises, shall contain only Tenant’s name, or the name of any affiliate of Tenant actually occupying the Premises, and no advertising matter. No such sign shall be erected until Tenant has obtained Landlord’s prior written approval of the location, material, size, design and content thereof and all necessary governmental and other permit and approvals therefor. Landlord shall have the right, in Landlord’s sole and absolute discretion, to object to any sign proposed by Tenant. Ten ant shall remove all of Tenant’s signs prior to the expiration of the Term or earlier termination of this Lease and shall return the Premises, Building, Phase and Project to their condition existing immediately prior to the placement or erection of said sign or signs. If Tenant places or installs any monument or exterior signs in or on the Building, Phase and/or Project, and at any time thereafter Tenant less than fifty percent (50%) of the original Rentable Area of the Premises (as a result of Tenant having assigned its interest in this Lease, Tenant shall immediately remove all such signs and restore the area of the Building, Phase and/or Project where Tenant’s signs were previously located to their condition prior to Tenant’s installation or placement of such signs.         10.3.  Parking Access. In addition to the general obligation of Tenant to comply with laws and without limitation thereof, Landlord shall not be liable to Tenant nor shall this Lease be affected if any parking privileges appurtenant to the Premises are impaired by reason of any moratorium, initiative, referendum, statute, regulation or other governmental decree or action which could in any manner prevent or limit the parking rights of Tenant hereunder. Any governmental charges or surcharges or other monetary obligations imposed relative to parking rights with respect to the Premises, Building, Phase or Project shall be considered as Impositions and shall be payable by Tenant under the provisions of Section 5. Tenant is allocated the use of a percentage of the parking spaces contained in the Phase on a non-exclusive basis as provided in the Basic Lease Information. Tenant shall not permit any on street parking, unauthorize d parking upon private property, or parking in excess of Tenant’s allocation by Tenant’s employees, agents or invitees.         10.4.  Floor Load. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor is designed to carry. 11.  HAZARDOUS MATERIALS.         11.1.  Definitions.               (a) Hazardous Materials. The term “Hazardous Materials” shall mean any substance that: (A) now or in the future is regulated or governed by, requires investigation or remediation under, or is defined as a hazardous waste, hazardous substance, pollutant or contaminant under any governmental statute, code, ordinance, regulation, rule or order, and any amendment thereto, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. § 5901 et seq., or 03) is toxic, explosive, corrosive, flammable, radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon and urea formaldehyde foam insulation.               (b) Environmental Requirements. The term “Environmental Requirements” shall mean all present and future federal, state and local laws, ordinances, orders, permits, licenses, approvals, authorizations and other requirements of any kind applicable to Hazardous Materials.               (c) Environmental Losses. The term “Environmental Losses” shall mean all costs and expenses, damages, including foreseeable and unforeseeable consequential damages, fines and penalties incurred in connection with any violation of and compliance with Environmental Requirements, and all losses of any kind attributable to the diminution of value, loss of use or adverse effect on the marketability or use of any portion of the Premises, Building, Phase or Project.         11.2.  Tenant’s Covenants. Tenant shall not use, install, handle, generate, store, dispose, discharge, release, abate or transport any Hazardous Materials on or about the Premises, Building, Phase or Project without Landlord’s prior written consent, which consent may be granted, denied or conditioned upon compliance with -------------------------------------------------------------------------------- Landlord’s requirements, all in Landlord’s sole and absolute discretion. Notwithstanding the foregoing, Tenant may use and store at the Premises normal quantities of those Hazardous Materials customarily used in the conduct of general office activities, such as copier fluids and cleaning supplies (Permitted Hazardous Materials without Landlord’s prior written consent, provided that Tenant’s use, storage and disposal of all Hazardous Materials shall at all times comply with all Environmental Requirements. At the expiration or termination of this Lease, Tenant shall promptly remove from the Premises, Building, Phase and Project all Hazardous Materials used, installed, handled, generated, stored, disposed, discharged, released, abated or transported by Tenant on or under the Premises, Building, Phase or Project. Tenant shall keep Landlord fully and promptly informed of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or t ransportation of any Hazardous Materials other than Permitted Hazardous Materials. Tenant shall be responsible and liable for compliance with all of the provisions of this Section 11 by Tenant’s agents, employees, contractors, licensees, assignees, sublessees, transferees, representatives, guests, customers, invitees and visitors, and all of Tenant’s obligations under this Section 11 (including its indemnification obligations under Section 11.5 below) shall survive the expiration or termination of this Lease.         11.3.  Compliance. Tenant shall, at Tenant’s sole cost and expense, promptly take all actions required by any governmental agency or entity in connection with or as a result of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transportation of any Hazardous Materials on or about the Premises, Building, Phase or Project, including inspecting and testing, performing all cleanup, removal and remediation work required with respect to those Hazardous Materials, complying with all closure requirements and post-closure monitoring, and filing all required reports or plans. All of the foregoing work shall be performed in a good, safe and workmanlike manner by consultants qualified and licensed to undertake such work and in a manner that will not unreasonably interfere with any other tenants’ quiet enjoyment of the Building, Phase and/or Project or Landlord’s use, operation, leasing and sale of the Project or any portion thereof. Tenant shall deliver to Landlord, prior to delivery to any governmental agency, or promptly after receipt from any governmental agency, copies of all permits, manifests, closure or remedial action plans, notices and all other documents relating to Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any of Hazardous Materials on or about the Premises, Building, Phase or Project. If any lien attaches to the Premises, Building, Phase or Project in connection with or as a result of Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials, and Tenant does not cause the same to be released, by payment, bonding or otherwise, within ten (10) days after the attachment thereof, Landlord shall have the right, but not the obligation, to cause the lien to be released and any sums expended by Landlo rd in connection therewith shall be payable by Tenant on demand.         11.4.  Landlord’s Rights. Landlord shall have the right, but not the obligation, to enter the Premises upon forty-eight (48) hours, prior written notice to Tenant, except in instances in which Landlord, in its reasonable discretion, deems an emergency or a breach by Tenant of the terms and conditions of this Section 11 to exist in which no prior notice shall be required, (i) to confirm Tenant’s compliance with the provisions of this Section 11, and (ii) to perform Tenant’s obligations under this Section 11 if Tenant has failed to do so or commence to do so within five (5) days after written notice to Tenant. Landlord shall also have the right to engage qualified Hazardous Materials consultants to inspect the Premises, Building, Phase and/or Project and review Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials, inclu ding review of all permits, reports, plans and other documents, the costs of which shall be reimbursed by Tenant to Landlord on demand. Tenant shall pay to Landlord on demand the all costs incurred by Landlord in performing Tenant’s obligations under this Section 11. Landlord shall not be responsible for any interference caused by Landlord’s entry on the Premises.         11.5.  Tenant’s Indemnification. Tenant agrees to indemnify, protect and defend with counsel acceptable to Landlord and hold harmless Landlord, its partners or members, and its or their partners, members, directors, officers, shareholders, employees and agents from all Environmental Losses and all other claims, actions, losses, damages, liabilities, costs and expenses of every kind, including attorneys’, experts’ and consultants’ fees and costs, that are incurred at any time and arising from or in connection with Tenant’s use, installation, handling, generation, storage, disposal, discharge, release, abatement or transport of any Hazardous Materials at or about the Premises, Building, Phase and Project, or Tenant’s failure to comply in full with all Environmental Requirements with respect to the Premises, Building, Phase and Project. -------------------------------------------------------------------------------- 12.  DAMAGE AND DESTRUCTION         12.1.  Obligation to Rebuild.         12.2.  Right to Terminate. Landlord shall have the option to terminate this Lease if the Premises or the Building is destroyed or damaged by fire or other casualty, regardless of whether the casualty is insured against under this Lease, if Landlord reasonably determines that (i) there are insufficient insurance proceeds to pay all of the costs of the repair or restoration or (ii) the repair or restoration of the cannot be completed within days after the date of the casualty. If Landlord elects to exercise the right to terminate this Lease as a result of a casualty, Landlord shall exercise the right by giving Tenant written notice of its election to terminate this Lease within forty-five (45) days after the date of the casualty, in which event this Lease shall terminate fifteen (15) days after the date of the notice.         12.3.  Limited Obligation to Repair. Landlord’s obligation, should Landlord elect or be obligated to repair or rebuild, shall be limited to the shell of the Building and any tenant improvements owned by Landlord. Tenant, at its sole cost and expense, shall replace or fully repair all trade fixtures and equipment owned by Tenant in the Premises and all improvements, additions and alterations constructed by or at the request of Tenant in the Premises (other than any tenant improvements owned by Landlord) and existing at the time of the damage or destruction.         12.4.  Abatement of Rent. In the event of any damage or destruction to the Premises that is not caused by Tenant’s negligence or the negligence of Tenant’s agents, employees or invitees, the Base Rent shall be temporarily abated proportionately to the degree the Premises are rendered untenantable as a result of the damage or destruction, but only to the extent of any proceeds received by Landlord from rental abatement insurance. Such abatement shall commence on the date of the damage or destruction and continue through the period required by Landlord to substantially complete the repair and restoration of the Premises or until such time as the Premises are tenantable for the operation of Tenant’s business, whichever is earlier. Except for the rent abatement provided above, Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the Premises, damage to Tenant’s p ersonal property or any inconvenience occasioned by any damage, repair or restoration.         12.5.  Damage Near End of Term and Extensive Damage. In addition to Landlord’s right to terminate this Lease under Section 12.2, shall have the right to terminate this Lease upon thirty (30) days’ prior written notice to if the Premises or Building is substantially destroyed or damaged during the last twelve (12) months of the Term. in writing of its election to terminate this Lease under this Section 12.5, if at all, within forty-five (45) days after Landlord determines that the Premises or Building has been substantially destroyed. If to terminate this Lease, the repair of the Premises or Building shall be governed by Sections 12.1 and 12.3.         12.6.  Insurance Proceeds. If this Lease is terminated, Landlord may keep all the insurance proceeds resulting from the damage, except for those proceeds that specifically insured Tenant’s personal property and trade fixtures (if any).         12.7.  Waiver. With respect to any destruction which Landlord is obligated to repair or elects to repair under the terms of this Section 12, Tenant waives all of its rights to terminate this Lease pursuant to rights presently or hereafter accorded by law to tenants, including the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code. 13.  EMINENT DOMAIN         13.1.  Total Consideration. If the whole of the Premises is acquired or condemned by eminent domain, inversely condemned or sold in lieu of condemnation; for any public or quasi-public use or purpose (“Condemned”), then this Lease shall terminate as of the date of title vesting in such proceeding, and Rent shall be adjusted as of the date of such termination. Tenant shall immediately notify Landlord of any such occurrence.         13.2.  Partial Condemnation. If any portion of the Premises is Condemned, and such partial condemnation readers the Premises unusable for the business of Tenant, as reasonably determined by Landlord, or if a substantial portion of the Building is Condemned, as reasonably determined by Landlord, then this Lease shall terminate as of the date of title vesting in such proceeding and Rent shall be adjusted as of the date of termination. If such condemnation is not sufficiently extensive to render the Premises unusable for the business of Tenant, as reasonably determined by, then Landlord shall promptly restore the Premises to a condition comparable to its condition immediately prior to such condemnation less the portion thereof lost in such condemnation, and this Lease -------------------------------------------------------------------------------- shall continue in full force and effect, except that after the date of title vesting the Base Rent shall be proportionately reduced as reasonably determined by Landlord. Notwithstanding the foregoing, in restoring the Premises to their original condition, Landlord shall not be required to expend an amount greater than the product of (i) Tenant’s Building Percentage Share and (ii) the total amount of any condemnation proceeds for the Building received by Landlord. If any parking areas are Condemned, Landlord has the option, but not the obligation, to supply Tenant with other parking areas.         13.3.  Landlord’s Award. If the Premises are wholly or partially Condemned, then, subject to the provision of Section 13.4 below, Landlord shall be entitled to the entire award paid in connection with such condemnation, and Tenant waives any right or claim to any part thereof from Landlord or the condemning authority.         13.4.  Tenant’s Award. Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant’s own right on account of any and all costs which Tenant might incur in moving Tenant’s merchandise, furniture, fixtures, leasehold improvements and equipment to a new location.         13.5.  Temporary Condemnation. If the whole or any part of the Premises shall be Condemned for any temporary public or quasi-public use or purpose, this Lease shall remain in effect and Tenant shall be entitled to receive for itself such portion or portions of any award made for such use with respect to the period of the taking which is within the Term. If a temporary condemnation remains in force at the expiration or earlier termination of this Lease, Tenant shall pay to Landlord an amount equal to the reasonable cost of performing any obligations required of Tenant by this Lease with respect to the surrender of the Premises, including, without limitation, repairs and maintenance, and upon such payment Tenant shall be excused from any such obligations. If a temporary condemnation is for an established period which extends beyond the Term and such temporary condemnation this Lease shall renders the Premises unusable for t he business of Tenant, as reasonably determined by   terminate as of the date of occupancy by the condemning authority, and the damages shall be as provided in Sections 13.3 and 13.4 and Rent shall be adjusted as of the date of occupancy.         13.6.  Notice and Execution. Landlord shall notify Tenant in writing immediately upon service of process in connection with any condemnation or potential condemnation. Tenant shall immediately execute and deliver to Landlord all instruments that may be required to effectuate the provisions of this Section 13. 14.  DEFAULT         14.1.  Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” on the part of Tenant with or without notice from Landlord:               (a)  Abandonment. Tenant’s abandonment of the Premises;               (b)  Payment. Tenant’s failure to pay any installment of Base Rent, Additional Rent or other sums due and payable hereunder by the date such payment is due;               (c)  Performance. Tenant’s failure to perform any of Tenant’s covenants, agreements or obligations under this Lease (other than a failure to pay Rent or other sums), which default has not been cured within thirty (30) days after written notice thereof from Landlord;               (d)  Assignment. A general assignment by Tenant for the benefit of its creditors;               (e)  Bankruptcy. The commencement of a case or proceeding by Tenant or any of Tenant’s creditors seeking the rehabilitation, liquidation or reorganization of Tenant under any law relating to bankruptcy, insolvency or other relief of debtors;               (f)  Receivership. The appointment of a receiver or other custodian to take possession of all or substantially all of Tenant’s assets or this leasehold;               (g)  Insolvency, Dissolution, Etc. Tenant shall become insolvent or unable to pay its debts, or shall fail generally to pay its debts as they become due; or any court shall enter a decree or order directing the winding up or liquidation of Tenant or of all or substantially all of its assets; or Tenant shall take any action toward the dissolution or winding up of its affairs or the cessation or suspension of its use of the Premises; --------------------------------------------------------------------------------               (h)  Attachment. The attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or this leasehold;               (i)  Failure to Comply. Tenant’s failure to comply with the provisions contained in Sections 16.1 and 16.3;               An Event of Default shall constitute a default by Tenant under this Lease. In addition, any notice required to be given by Landlord under this Lease shall be in lieu Of, and not in addition to, any notice required under Section 1161 of the California Civil Code of Procedure. Tenant shall pay to Landlord the amount of Two Hundred Fifty Dollars ($250.00) for each notice of default given to Tenant under this Lease, which amount is the amount the parties reasonably estimate will compensate Landlord for the cost of giving such notice of default.         14.2.  Landlord’s Remedies. Upon an Event of Default, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law, equity, statute or otherwise provided in this Lease, to which Landlord may resort cumulatively or in the alternative:               (a)  Continue Lease. Landlord may continue this Lease in full force and effect, and this Lease shall continue in full force and effect so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have the right to collect Rent when due. In such event, Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations), or any successor statute.               (b)  Terminate Lease. Landlord may terminate Tenant’s right to possession of the Premises at any time by giving written notice to that effect. Upon termination of this Lease, Landlord shall have the right, at Tenant’s sole cost and expense, to remove all of Tenant’s personal property from the Premises and store Tenant’s personal property on Tenant’s behalf. Landlord shall have the right to recover from Tenant: (1) the worth at the time of award of unpaid Rent and other sums due and payable which had been earned at the time of termination; plus (2) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable which would have been payable after termination until the time of award exceeds the amount of the Rent loss that Tenant proves could have been reasonably avoided; plus (3) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable for the balance of the Term after the time of award exceeds the amount of the Rent loss that Tenant proves could be reasonably avoided; plus (4) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which, in the ordinary course of things, would be likely to result therefrom.               (c)  Definition. The “worth at the time of award” of the amounts referred to in Subsections 14.2(b)(1), (2) and (3) is defined in California Civil Code Section 1951.2.               (e)  Cumulative. Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in dais Lease or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease, or now or hereafter existing at law or in equity or by statute or otherwise, shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise.               (f)  No Waiver. Landlord’s failure to insist upon the strict performance of any term hereof or to exercise any right or remedy upon a default by Tenant under this Lease shall not constitute a waiver of any such term or default. In addition, Landlord’s acceptance of Rent shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent accepted, regardless of Landlord’s knowledge of such preceding breach at the time Landlord accepts such Rent. Efforts by Landlord to mitigate the damages caused by Tenant’s breach of this Lease shall not be construed to be a waiver of Landlord’s right to recover damages under this Section 14. Nothing in this Section 14 affects the right of Landlord to indemnification by Tenant in accordance with the terms of this Lease for any liability arising prior to the termination of this Lease for personal injuries or property damage. 15.  ASSIGNMENT AND SUBLETTING         15.1.  Assignment and Subletting; Prohibition. Tenant shall not assign, mortgage, pledge or otherwise transfer this Lease, in whole or in part (each hereinafter referred to as an “assignment”), nor sublet or permit -------------------------------------------------------------------------------- occupancy by any party other than Tenant of all or any part of the Premises (each hereinafter referred to as a “sublet” or “subletting”), without the prior written consent of Landlord in each instance, which consent shall not be unreasonably withheld. No assignment or subletting by Tenant shall relieve Tenant of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder. Any purported assignment or subletting contrary to the provisions of this Lease without Landlord’s prior written consent shall be void. The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for obtaining Landlord’s consent to any subsequent assignment or subletting. Landlord may consent to any subsequent assignment or subletting, or any amendment to or modification of this Lease with the assignees of Tenant, without notifying Tenant or any successor of Tenant, and without obtaining its or thei r consent thereto, and such action shall not relieve Tenant or any successor of Tenant of any liability under this Lease. As Additional Rent hereunder, Tenant shall reimburse Landlord for all reasonable legal fees and other expenses incurred by Landlord in connection with any request by Tenant for consent to an assignment or subletting.         15.2.  Information to be Furnished. If Tenant desires at any time to assign its interest in this Lease or sublet the Premises, Tenant shall first notify Landlord of its desire to do so and shall submit in writing to Landlord: (i) the name of the proposed assignee or subtenant; (ii) the nature of the proposed assignee’s or subtenant’s business to be conducted in the Premises; (iii) the terms and provisions of the proposed assignment or sublease, including the date upon which the assignment shall be effective or the commencement date of the sublease (hereinafter referred to as the “Transfer Effective Date”) and a copy of the proposed form of assignment or sublease; and (iv) such financial information, including financial statements, and other information as Landlord may reasonably request concerning the proposed assignee or subtenant.         15.3.  Landlord’s Election. At any time within days after Landlord’s receipt of the information specified in Section 15.2, Landlord may, by written notice to Tenant, elect to (i) terminate this Lease as to the space in the Premises that Tenant proposes to sublet; (ii) terminate this Lease as to entire Premises (available only if Tenant proposes to assign all of its interest in this Lease (iii) consent to the proposed assignment or subletting by Tenant; or (iv) withhold its consent to the proposed assignment or subletting by Tenant.         15.4.  Termination. If Landlord elects to terminate this Lease with respect to all or a portion of the Premises pursuant to Section 15.3(0 or (ii) above, this Lease shall terminate effective as of the Transfer Effective Date.         15.5.  Withholding Consent. Without limiting other situations in which it may be reasonable for Landlord to withhold its consent to any proposed assignment or sublease, Landlord and Tenant agree that it shall be reasonable for Landlord to withhold its consent in any one (1) or more of the following situations: (1) in Landlord’s reasonable judgment, the proposed subtenant or assignee or the proposed use of the Premises would detract from the status of the Building as a first-class office building, generate vehicle or foot traffic, parking or occupancy density materially in excess of the amount customary for the Building or the Project or result in a materially greater use of the elevator, janitorial, security or other Building services (e.g., HVAC, trash disposal and sanitary sewer flows) than is customary for the Project; (2) in Landlord’s reasonable judgment, the creditworthiness of the proposed subtenant or as signee does not meet the credit standards applied by Landlord in considering other tenants for the lease of space in the Project on comparable terms, or Tenant has failed to provide Landlord with reasonable proof of the creditworthiness of the proposed subtenant or assignee; (4) the proposed assignee or subtenant is a governmental entity, agency or department or the United States Post Office; or (5) the proposed subtenant or assignee is a then existing or prospective tenant of the Project. If Landlord fails to elect either of the alternatives within the day period referenced in Section 15.3, it shall be deemed that Landlord has refused its consent to the proposed assignment or sublease.         15.6.  Bonus Rental. If, in connection with any assignment or sublease, Tenant receives rent or other consideration, either initially or over the term of the assignment or sublease, in excess of the Rent called for hereunder, or in case of the sublease of a portion of the Premises, in excess of such Rent fairly allocable to such portion, Tenant shall pay to Landlord, as Additional Rent hereunder, fifty percent (50%) of the excess of each such payment of Rent or other consideration received by Tenant promptly after Tenant’s receipt of such Rent or other costs or expenses normally paid by a landlord in connection with a lease of commercial office property located in Menlo Park or Palo Alto, or a sublandlord in connection with a sublease of office space in Menlo Park or Palo Alto, or the subtenant purchases goods or services from sublandlord or an affiliate of sublandlord for an amount in excess of the fair market value for such goods or services, such costs incurred or amounts expended shall be deemed to be “other consideration” for purposes of calculating excess Rent due to Landlord hereunder. --------------------------------------------------------------------------------         15.7.  Scope. The prohibition against assigning or subletting contained in this Section 15 shall be construed to include a prohibition against any assignment or subletting by operation of law. If this Lease is assigned, or if the underlying beneficial interest of Tenant is transferred, or if the Premises or any part thereof is sublet or occupied by anybody other than Tenant, Landlord may collect rent from the assignee, subtenant or occupant and apply the net amount collected to the Rent due herein and apportion any excess rent so collected in accordance with the terms of Section 15.6, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of the provisions regarding assignment and subletting, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance, by Tenant of covenants on the part of Tenant herein contained. No assignment or su bletting shall affect the continuing primary liability of Tenant (which, following assignment, shall be joint and several with the assignee), and Tenant shall not be released from performing any of the terms, covenants and conditions of this Lease.         15.8.  Executed Counterparts. No sublease or assignment shall be valid, nor shall any subtenant or assignee take possession of the Premises, until a fully executed counterpart of the sublease or assignment has been delivered to Landlord and Landlord, Tenant and the applicable assignee or subtenant have entered into a consent to assignment or sublease in a form acceptable to Landlord.         15.9.  Transfer of a Majority Interest. If Tenant is a non-publicly traded corporation, the transfer (as a consequence of a single transaction or any number of separate transactions) of fifty percent (50%) or more or of a controlling interest or the beneficial ownership interest of the voting stock of Tenant issued and outstanding as of the Effective Date shall constitute an assignment hereunder for which Landlord’s prior written consent is required. If Tenant is a partnership, limited liability company, trust or an unincorporated association, the transfer of a controlling or majority interest therein shall constitute an assignment hereunder for which Landlord’s prior written consent is required.         15.10.  Indemnity. If Landlord reasonably withholds its consent to any proposed assignment or sublease, Tenant shall indemnify, protect, defend and hold harmless Landlord against and from any and all loss, liability, damages, costs and expenses (including attorneys’ fees and disbursements) resulting from any claims that may be made. against Landlord by the proposed assignee or sublessee or by any brokers or any persons claiming a commission or similar compensation in connection with the proposed assignment or sublease. Notwithstanding any contrary provision of law, including, without limitation, California Civil Code Section 1995.310, the provisions of which Tenant hereby waives, Tenant shall have no right to terminate this Lease, in the event Landlord is determined to have unreasonably withheld or delayed its consent to a proposed sublease or assignment,         15.11.  Waiver. Notwithstanding any assignment or sublease, or any indulgences, waivers or extensions of time granted by Landlord to any assignee or sublessee, or failure by Landlord to take action against any assignee or sublessee, Tenant waives notice of any default of any assignee or sublessee and agrees that Landlord may, at its option, proceed against Tenant without having taken action against or joined such assignee or subleases, except that Tenant shall have the benefit of any indulgences, waivers and extensions of time granted to any such assignee or sublessee.         15.12.  Release. Whenever Landlord conveys its interest in the Phase and/or Building, Landlord shall be automatically released from the further performance of covenants on the part of Landlord herein contained, and from any and all further liability, obligations, costs and expenses, demands, causes of action, claims or judgments arising from or growing out of, or connected with this Lease after the effective date of said release. The effective date of Tenant’s release shall be the date the assignee executes an assumption agreement pursuant to which the assignee expressly agrees to assume all of Landlord’s obligations, duties, responsibilities and liabilities with respect to this Lease. If requested, Tenant shall execute a form of release and such other documentation as may be required to further effect the provisions of this Section 15. 16.  ESTOPPEL, ATTORNMENT AND SUBORDINATION         16.1.  Estoppel. Within ten (10) days after Landlord’s written request, Tenant shall execute and deliver to Landlord, in recordable form, a certificate to Landlord and any existing or proposed mortgagee or purchaser certifying, among other things, (i) that this Lease is unmodified and in full force and effect or, if modified, stating the nature of the modification and certifying that this Lease, as so modified, is in full force and effect, (ii) the date to which the Rent and other charges have been paid in advance, if any; (iii) that to Tenant’s knowledge, there are no uncured defaults on the part of Landlord or Tenant under this Lease, or if there are uncured defaults on the part of Landlord or Tenant, stating the nature of the uncured defaults; (iv) that Tenant has no right to purchase, option or -------------------------------------------------------------------------------- right of first refusal to purchase all or any portion of the Building, Phase or Project; and (v) any other statement or provision reasonably requested by Landlord or any existing or proposed mortgagee or prospective purchaser. Any such certificate may be relied upon by Landlord and any mortgagee, beneficiary, ground or underlying lessor, purchaser or prospective purchaser or mortgagee of the Project, Phase and/or Building or any interest therein. Tenant’s failure to timely deliver said statement shall be conclusive upon Tenant that: (i) this Lease is in full force and effect, without modification except as may be represented by Landlord; (ii) there are no uncured defaults in Landlord’s performance and Tenant has no right of offset, counterclaim or deduction against Rent hereunder; (iii) Tenant has no right to purchase, option or right of first refusal to purchase all or any portion of the Building, Phase or Project, and (iv) no more than one month’s Base Rent has been paid in a dvance. In addition, Tenant hereby irrevocably appoints Landlord as its agent and attorney-in-fact to execute, acknowledge and deliver any such certificate in the name of and on behalf of Tenant if Tenant fails to execute, acknowledge and deliver any such certificate within ten days after Landlord’s written request therefor.         16.2.  Attornment. In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage or deed of trust made by Landlord or its successors or assigns that encumbers the Phase or the Building, or any part thereof, or in the event of a termination of any ground lease, if any, Tenant, if so requested, shall attorn to the purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of foreclosure and recognize such purchaser as Landlord under this Lease.         16.3.  Subordination. This Lease is subject and subordinate to all ground and underlying leases, mortgages and deeds of trust which now or may hereafter encumber the Phase, Building or Premises, and to all renewals, modifications, consolidations, replacements and extensions thereof. Within ten (10) days after Landlord’s written request therefor, Tenant shall execute any and all documents required by Landlord, the lessor under any ground or underlying lease (“Lessor”), or the holder or holders of any mortgage or deed of trust (“Holder”), in order to make this Lease subordinate to the lien of any lease, mortgage or deed of trust, as the case may be. In addition, if Lessor or Holder desires to make this Lease prior and superior to the ground lease, mortgage or deed of trust, then, within seven (7) days after Landlord’s written request, Tenant shall execute, have acknowledged and deliver to Landl ord any and all documents or instruments, in the form presented to Tenant, which Landlord, Lessor or Holder deems necessary or desirable to make this Lease prior and superior to the lease, mortgage or deed of trust: 17.  NOTICES. All notices required to be given hereunder shall be in writing and given by United States registered or certified mail, postage prepaid, return receipt requested; personal delivery; electronic mail (e.g., facsimile); or any commercial overnight courier service (e.g., FedEx); and sent to the appropriate address indicated in the Basic Lease Information or at such other place or places as either Landlord or Tenant may, from time to time, respectively, designate in a written notice given to the other. Notices that are sent by electronic mail shall be deemed to have been given upon receipt. Notices which are mailed shall be deemed to have been given when seventy-two (72) hours haw elapsed after the notice was deposited in the United States mail, registered or certified, postage prepaid, addressed to the party to be served. Notices that are sent by commercial overnight courier shall be deemed to have been given on the next business day after the notice was deli vered to the commercial overnight courier. 18.  SUCCESSORS BOUND. This Lease and each of the covenants and conditions contained herein shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, successors, legal representatives and assigns, subject to the provisions hereof. Whenever in this Lease a reference is made to Landlord, such reference shall be deemed to refer to the person in whom the interest of Landlord shall be vested, and Landlord shall have no obligation hereunder as to any claim arising after the transfer of its interest in the Premises. Any successor or assignee of Tenant who accepts an assignment or the benefit of this Lease and enters into possession or enjoyment hereunder shall thereby assume and agree to perform and be bound by the covenants and conditions contained in this Lease. Nothing contained herein shall be deemed in any manner to give a right of assignment to Tenant without the written consent of Landlord. 19.  MISCELLANEOUS         19.1.  Waiver. No waiver of any default or breach of any covenant by either party hereunder shall be implied from any omission by either party to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and said waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term or condition contained herein by either party shall not be construed as a waiver of any subsequent breach of the same -------------------------------------------------------------------------------- covenant, term or condition. The consent or approval by either party to or of any act by the other party shall not be deemed to waive or render unnecessary a party’s consent or approval to or of any subsequent similar acts.         19.2.  Easements. Landlord reserves the right to grant easements on the Phase and dedicate for public and private use portions thereof without Tenant’s consent; provided, however, that no such grant or dedication shall materially interfere with Tenant’s use of the Premises. From time to time, and upon Landlord’s demand, Tenant shall execute, acknowledge and deliver to Landlord, in accordance with Landlord’s instructions, any and all documents, instruments, maps or plats necessary to effectuate Tenant’s covenants hereunder.         19.4.  Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this Lease.         19.5.   Limitation of Landlord’s Liability. The obligations of Landlord under this Lease do not constitute personal obligations of the individual partners, members, directors, officers or shareholders of Landlord, and Tenant shall look solely to the real estate that and to no other assets of Landlord for satisfaction of any liability in respect of this Lease and will not seek recourse against the individual partners, members, directors, officers or shareholders of Landlord or any of their personal assets for such satisfaction.         19.6.  Time. Time is of the essence of every provision hereof.         19.7.  Attorneys’ Fees. In any action or proceeding which Landlord or Tenant brings against the other party in order to enforce its respective rights hereunder or by reason of the other party failing to comply with all of its obligations hereunder, whether for declaratory or other relief, the unsuccessful party therein agrees to pay all costs incurred by the prevailing party therein, including reasonable attorneys’ fees, to be fixed by the court, and said costs and attorneys’ fees shall be made a part of the judgment in said action. A party shall be deemed to have prevailed in any action (without limiting the definition of prevailing party) if such action is dismissed upon the payment by the other party of the amounts allegedly due or the performance of obligations which were allegedly not performed, or if such party obtains substantially the relief sought by such party in the action, regardless or whether such action is prosecuted to judgment.         19.8.  Captions and Section Numbers. The captions, section numbers and table of contents appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent or such sections or sections of this Lease nor in any way affect this Lease.         19.9.  Severability If any term, covenant, condition or provision of this Lease, or the application thereof to any person or circumstance, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions or provisions of this Lease, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated.         19.10.  Applicable Law. This Lease, and the rights and Obligations of the parties hereto, shall be construed and enforced in accordance with the laws of the State of California.         19.11.  Submission of Lease. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of or option for leasing the Premises. This document shall become effective and binding only upon execution and delivery hereof by Landlord and Tenant. No act or omission of any employee or agent of Landlord or of Landlord’s broker or agent shall alter, change or modify any of the provisions in this Lease.         19.12.  Holding Over. Should Tenant, or any of its successors in interest, hold over in the Premises, or any part thereof, after the expiration of the Term unless otherwise agreed to in writing, such holding over shall constitute and be construed as tenancy from month-to-month only, at a monthly rent equal to the greater of (i) the Base Rent owed during the final year of the Term, as the same may have been extended, together with the Additional Rent due under this Lease, or (ii) fair market rent for the Premises, as reasonably determined by Landlord. The inclusion of the preceding sentence shall not be construed as Landlord’s permission for Tenant to hold over. In addition, Tenant shall indemnify, protect, defend and hold harmless Landlord for all losses, expenses -------------------------------------------------------------------------------- and damages, including any consequential damages incurred by Landlord, as a result of Tenant failing to surrender the Premises to Landlord and vacate the Premises by the end of the Term.         19.13.  Rules and Regulations. At all times during the Term, Tenant shall comply with the rules and regulations for the Building, Phase and Project set forth in Exhibit D, attached hereto, and all amendments as Landlord may reasonably adopt.         19.14.  No Nuisance. Tenant shall conduct its business and control its agents, employees, invitees and visitors in such a manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant in the Building, Phase or Project, or Landlord in its operation of the Building, Phase and Project.         19.15.  Broker. Tenant warrants that it has had no dealings with any real estate broker or agent other than the broker(s) referenced in the Basic Lease Information (“Broker”) in connection with the negotiation of this Lease, and that it knows of no other real estate broker or agent who is entitled to any commission or finder’s fee in connection with this Lease. Tenant agrees to indemnify, protect, defend and hold harmless Landlord from and against any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation, attorneys’ fees and costs) with respect to any leasing commission or equivalent compensation alleged to be owing on account of Tenant’s dealings with any real estate broker or agent other than Broker.         19.16.  Landlord’s Right to Perform. Upon Tenant’s failure to perform any obligation of Tenant hereunder, including without limitation, payment of Tenant’s insurance premiums, charges of contractors who have supplied materials or labor to the Premises, etc., Landlord shall have the right to perform such obligation of Tenant on behalf of Tenant and/or to make payment on behalf of Tenant to such parties. Tenant shall reimburse Landlord for the reasonable cost of Landlord’s performing such obligation on Tenant’s behalf, including reimbursement of any amounts that may be expended by Landlord, plus interest at the Interest Rate.         19.17.  Nonliability. Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall the rental herein reserved be abated by reason of, (i) the interruption of use of the Premises as a result of the installation of any equipment in connection with the use, operation or maintenance of the Premises, Building, Phase and/or Project, (ii) any failure to furnish or delay in furnishing any services required to be provided by Landlord when such failure or delay is caused by accident or any condition beyond the reasonable control of Landlord or by the making of necessary repairs or improvements to the Premises, Building, Phase or Project, or (iii) the limitation, curtailment, rationing or restriction on use of water or electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises, Building, Phase or Project. Landlord shall use reasonable efforts to remedy any interruption in the furnishing of such services.         19.18.  Financial Statements. Within ten (10) days after Landlord’s written request, Tenant shall deliver to Landlord Tenant’s most current quarterly and annual financial statements audited by Tenant’s certified public accountant or, if audited financial statements are not available, Tenant shall deliver to Landlord, Tenant’s financial statements certified to be true and correct by Tenant’s chief financial officer. Tenant’s annual financial statements shall not be dated more than twelve (12) months prior to the date of Landlord’s request.         19.19.  Entire Agreement. This Lease sets forth all covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises, Building, Phase and Project, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between Landlord and Tenant other than as are herein set forth. Except as otherwise provided in this Lease, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by Landlord and Tenant.         19.20.  Addendum. The Addendum attached hereto is incorporated herein by reference. If no Addendum, state “none” in the following space:          .         IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above-written. -------------------------------------------------------------------------------- “Landlord”      “Tenant”           MENLO OAKS PARTNERS L.P., a Delaware limited partnership      E*TRADE GROUP, INC. a Delaware corporation        By:   /s/ Len Purkis      By  AM Limited Partners, a California limited        partnership, its General Partner      Name: Len Purkis Its:EVP & COO        By:   /s/ Kathy Levinson      By:  Amarok Menlo, Inc., a California        corporation, its General Partner      Name: Kathy Levinson Its: President & COO        By:   /s/ J. Marty Brill, Jr.             Name: J. Marty Brill, Jr. Its: President -------------------------------------------------------------------------------- ADDENDUM TO MENLO OAKS CORPORATE CENTER LEASE (4500 Bohannon Drive)         THIS ADDENDUM TO MENLO OAKS CORPORATE CENTER LEASE (this “Addendum”) is entered into by and between Menlo Oaks Partners, L.P., a Delaware limited partnership (“Landlord” ), and E*TRADE GROUP, INC., a Delaware corporation (“Tenant”). This Addendum is made a part of that certain Menlo Oaks Corporate Center Lease (the “Lease”), entered into between Landlord and Tenant concurrently herewith, pursuant to which Landlord leases to Tenant that certain building commonly known as 4500 Bohannon Drive, located in Menlo Park, California. Capitalized terms used herein and not defined herein shall have the meanings set forth in the Lease. Section 1.3:         On page 1, line 2, in place of the deleted language, insert “the Basic Lease Information”. Section 2.3:         At the end of this Section, insert “Landlord shall use commercially reasonable efforts in exercising its rights under this Section 2.3 so as not to materially impair Tenant’s access to or use of the Premises.” Section 2.5:         At the end of Section 2.4, insert the following Section:         “2.5  Parking. Tenant shall have the right to use up to thirty-six and 56/100ths percent (36.56%) of the available parking spaces in the Phase on a non-exclusive basis. The Phase includes approximately six hundred forty-five (645) parking spaces. At Tenant’s written request, Landlord shall designate up to six (6) of the parking spaces allocated for Tenant’s use and located near the Building as “visitor parking”. Section 3.3:         At the end of Section 3.2, insert the following Section:         “3.3  Delivery of Possession. Landlord shall deliver possession of the Premises to Tenant within one (1) business day after the Effective Date, in a broom clean condition with all building systems in working order and the roof in water-tight condition.” Section 4.4:         On page 3, line 1, in place of the deleted language, insert “within three (3) business days after Tenant’s receipt of written notice from Landlord that such installment of Rent is past due”. Section 4.5:         On page 3, line 2, in place of the deleted word, insert “within three (3) business days after Tenant’s receipt of written notice from Landlord that such installment of Rent is past”. Section 4.6:         On page 4, line 3, in place of the deleted word, insert “will”.         On page 4, line 4, after the word “transferee”, insert “or the transferee will assume in writing Landlord’s obligation to return the Security Deposit to Tenant in accordance with the terms of this Lease.” Section 5.6:         At the end of this Section, insert “Landlord shall furnish Tenant with copies of tax bills for the prior calendar year within ten (10) days after Tenant’s written request.” Section 6.1:         On page 5, line 9, after the word “action”, insert “coveting the Building, the Tenant Improvements and all other improvements made by Tenant to the Premises (if available at commercially reasonable rates)”. Section 6.2(a): --------------------------------------------------------------------------------         On page 5, line 2, in place of the deleted language, insert “Five Million Dollars ($5,000,000.00) per occurrence and Ten Million Dollars ($10,000,000.00) aggregate”.         On page 5, line 5, after the word “coverage”, add a period and insert “Tenant may satisfy the insurance requirement pursuant to this Section 6.2 (a) in combination with an umbrella policy.” Section 6.2(b):         On page 5, line 1, before the word “Comprehensive”, insert “Solely with respect to the Project,”.         On page 5, line 4, after the word “automobiles”, add a period and insert “Tenant may satisfy the insurance requirement pursuant to this Section 6.2(b) in combination with an umbrella policy”. Section 6.2 (c):         On page 5, line 5, after the amount “($5,000,000)”, insert “in the state of California. Tenant may satisfy the insurance requirement with respect to the employer’s liability insurance in combination with an umbrella policy”. Section 6.2 (d):         On page 6, line 6, in place of the deleted language, add a period and insert “Tenant shall maintain full replacement cost property insurance with respect to all of the alterations, improvements and additions made by Tenant in the Premises or the Building (including the Tenant Improvement Work). Tenant’s property insurance with respect to such alterations, improvements and additions shall provide that all claims made thereunder shall be adjusted by Landlord and all proceeds payable thereunder shall be paid to Landlord. Tenant shall maintain, at a minimum, actual value insurance with respect to the EDP Equipment.” Section 6.2(e):         On page 6, line 1, in place of the first deletion, insert “Interruption”.         On page 6, line 1, in place of the second deletion, insert “interruption”. Section 6.3 (d):         On page 6, line 2, in place of the deleted language, insert “mortgagee, ground lessee, partner, agent or affiliate of Landlord”.         On page 6, line 3, after the word “Section 6”, insert “, except workers’ compensation insurance and business interruption insurance”. Section 6.3 (f):         On page 7, line 1, after the word “The”, insert “property insurance”. Section 6.4:         On page 7, line 2, in place of the deleted word, insert “property manager”.         On page 7, line 8, after the word “misconduct”, insert “or Environmental Losses (defined in Section 11.1) not covered by Sections 11.3 and 11.5 of this Lease”.         On page 7, line 15, after the word “cause”, insert “excluding any loss, damage or injury to the extent caused by the willful or criminal misconduct of any Indemnified Party”. Section 6.5:         On page 7, line 8, in place of the deleted language, insert “or Building”. Section 7.2:         On page 7, line 8, after the word “fees”, insert “(not to exceed in any year three percent (3%) of the annual Base Rent due for such year)”. --------------------------------------------------------------------------------         On page 8, line 1, in place of the deleted language, insert “rate equal to the Prime Rate plus one percent (1%) (with the term “Prime Rate” defined as the reference rate (or its equivalent) announced publicly in San Francisco, California, from time to time by Wells Fargo Bank, N.A. or, if Wells Fargo Bank, N.A. ceased to exist, the largest bank, in terms of assets, headquartered in California)”.         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Lease, Operating Expenses chargeable to Tenant shall not include the following:         1.  The cost of any capital repairs, replacements and/or improvements made to the structural portions of the Building or the Phase, including the structural walls of the Building, the Building foundation and the structural portions of the roof (but excluding the roof membrane);”         2.  The cost of providing any service direct to and paid directly by any other tenant of the Project (excluding such tenant’s share of Operating Expenses);         3.  The cost of any items for which Landlord is reimbursed by insurance proceeds, condemnation awards, a tenant of the Project or otherwise (excluding any payment by a tenant of that tenant’s share of Operating Expenses), to the extent so reimbursed;         4  Any real estate brokerage commission or other costs incurred in procuring tenants, or any fee in lieu of commission;         5.  Payments of principal or interest on mortgages or ground lease payments (if any);         6.  Costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Building, Phase or Project, or any law, code, regulation, ordinance or the like (except to the extent attributable to Tenant’s acts or omissions);         7.  Landlord’s general corporate overhead and general and administrative expenses;         8.  Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord (other than in the parking facility for the Phase or the Project); and         9.  Costs incurred to (i) comply with laws relating to the removal of any Hazardous Material (as that term is defined in Section 11) of such nature that a federal, state or municipal governmental authority, if it then had knowledge of the presence of such Hazardous Material, in the state and under the conditions that the Hazardous Material then existed in or on the Building, Phase or Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto, and (ii) remove, remedy, contain or treat any Hazardous Material which is brought onto the Building, Phase or Project after the date hereof by Landlord or any other tenant of the Project, and which is of such a nature, at that time, that a federal, state or municipal governmental authority, if it then had knowledge of the presence of such Hazardous Material, in the state and under the conditions that it then existed in or o n the Building, Phase or Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto.” Section 7.8 (a):         At the end of this Section, insert “Tenant shall arrange and provide for its own janitorial services in the Building.” Section 7.8 (b):         At the end of this Section, insert “Landlord represents to Tenant that the Building is separately metered for electricity, gas and water.” Section 7.9:         At the end of Section 7.8, add the following Section:         7.9  Tenant’s Audit Rights. Tenant shall have ninety (90) days after Tenant receives the year end statement of the adjustment to the Operating Expenses for the prior calendar year to notify Landlord in writing of Tenant’s desire to conduct, at Tenant’s sole cost and expense, an audit of Landlord’s books and records relating to the prior calendar year. Any such audit must be conducted by Tenant or its agent during regular business hours at the offices -------------------------------------------------------------------------------- of Landlord or the offices of Landlord’s designated agent and must be completed within one hundred fifty (150) days after Tenant receives the applicable year end statement. The person or entity performing the audit or review of Landlord’s books and records on Tenant’s behalf or at Tenant’s request may not be compensated for the audit or review on a contingency fee basis. If Landlord objects to the findings of Tenant’s audit, Landlord and Tenant shall attempt to resolve their disagreement concerning the amount of Tenant’s proportionate share of Operating Expenses within the next thirty (30) days. If Landlord and Tenant are unable to agree upon the amount of Tenant’s proportionate share of Operating Expenses (after Tenant has completed its audit), the parties shall submit the matter to binding arbitration before a single neutral arbitrator having experience in real estate valuation, property management or accounting or, alternatively, the arbitrator may be a retired judge or justice of a California Superior Court or Court of Appeal. The matter shall be decided by arbitration in accordance with the applicable arbitration statutes and the then existing Commercial Arbitration Rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other party. Within thirty (30) days after the other party’s receipt of written notice of demand for arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, either party may request the American Arbitration Association to appoint the arbitrator in accordance with its Commercial Arbitration Rules. The provisions of California Code of Civil Procedure Section 1283.05 or its successor section(s) are incorporated in and made a part of this Lease with respect to any arbitration requested in accordance with the provisions contained in this Section. Depositions may be taken and discovery may be obtained in any arbitration proceeding requested pursuant to this Section in accordance with the provisions of California Code of Civil Procedure Section 1283.05 or its successor section(s). Arbitration hearing(s) shall be conducted in Santa Clara County California. Any relevant evidence, including hearsay, shall be admitted by the arbitrator if it is the sort of evidence upon which responsible persons are accustomed to rely in the conduct of serious affairs, regardless of the admissibility of such evidence in a court of law; however, the arbitrator shall apply California law relating to privileges and work product. In rendering his or her award, the arbitrator shall set forth the reasons for his or her decision. The fees and expenses of the arbitrator shall be paid in the manner allocated by the arbitrator. This agreement to arbitrate any dispute concerning the findings of Tenant’s audit shall be specifically e nforceable under the prevailing arbitration law. Judgment on the award rendered by the arbitration may be entered in any court having jurisdiction thereof. If, subsequent to Tenant’s audit, the parties determine that Landlord has overstated Tenant’s percentage share of the Operating Expenses by more than five percent (5%) during the applicable calendar year, Landlord shall reimburse Tenant for the reasonable cost of the audit.” Section 8.1:         At the end of this Section, insert “Specifically, Landlord shall maintain the structural portions of the Building, including the structural elements of the walls, floor slabs and roof; the heating, ventilating and air conditioning system in the Building (the “Building HVAC”); the elevator; the plumbing and electrical systems in the Common Areas (with Tenant maintaining the plumbing and electrical systems in the Premises); the Common Area parking lots in the Phase; the exterior of the Building, including the exterior glass; and the foundation. If the existing Building HVAC breaks or malfunctions during the Term, then, to the extent it is commercially reasonable to do so, Landlord shall repair the existing Building HVAC as opposed to replacing the existing Building HVAC. Landlord shall notify Tenant in writing prior to replacing the existing Building HVAC. Landlord shall be responsible for ensuring that the Building HVAC and the ele vators are in working order on January 1, 2000.” Section 8.2:         On page 9, line 4, after the word “Landlord”, insert “and those items or components of the Building that Landlord is obligated to repair pursuant to Section 8.1.”         On page 9, line 14, after the word “all”, insert “interior”.         At the end of this Section, insert “Tenant is responsible for the proper maintenance and servicing of fire extinguishers and fire protection equipment in the Premises. Notwithstanding anything to the contrary contained in this Section, Tenant shall not be required to remove any of the Tenant Improvements (defined in the Work Letter) constructed by Tenant as part of the Tenant Improvement Work (defined in the Work Letter).” Section 8.3:         On page 10, line 3, in place of the deleted language, insert “upon three (3) business days prior written”. --------------------------------------------------------------------------------         On page 10, line 11, after the word “Term,”, insert “and Tenant fails to perform such obligations within three (3) business days after written notice to Tenant,”. Section 8.4:         On page 10, line 1, after the word “times”, insert “after prior notice to Tenant (except in the event of an emergency whereupon no prior notice is required)”.         On page 10, line 4, after the word “tenants”, insert “ (during the last fifteen (15) months during the Term)”.         On page 10, line 5, in place of the deleted language, insert “Tenant at all times shall maintain personnel on the Premises twenty-four (24) hours a day who are authorized to provide Landlord access to the Premises in accordance with the provisions of this Section 8.4.” Section 8.5:         On page 10, line 6, after the word “lien”, insert “if Tenant does not post a bond sufficient to remove the lien in accordance with California law within twenty (20) days after Tenant is notified of the existence of the lien”. Section 9.2:         On page 11, line 1, in place of the deleted language, insert “Tenant shall not make or allow to be made any alterations, additions or improvements to the Premises, either at the inception of this Lease or subsequently during the Term, without obtaining the prior written consent of Landlord. Landlord shall not unreasonably withhold its consent to any non-structural alterations, additions or improvements provided that the proposed non-structural alterations, additions or improvements do not require changes or modifications to the Building systems and are consistent with the use of the Premises as first class office space as reasonably determined by Landlord. Landlord shall have the right to withhold its consent to all other alterations, additions or improvements in Landlord’s sole and absolute discretion. Landlord shall respond to any request by Tenant to make any alteration, addition or improvement to the Premises within ten (10) busin ess days after Landlord’s receipt of Tenant’s written request.”         On page 11, line 23, in place of the second deletion, insert “all reasonable third-party costs incurred by Landlord in”.         On page 11, line 25, after the first occurrence of the word “Tenant”, insert “; provided, however, Landlord shall not charge Tenant for costs incurred by Landlord in reviewing Tenant’s plans for the Tenant Improvement Work (as defined in the Work Letter).”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Lease, Tenant shall have the right, without the consent of, but with notice to, Landlord, to make nonstructural alterations within the Premises costing, in the aggregate, less than Twenty-Five Thousand Dollars ($25,000.00) in any twelve (12) month period, provided that the non-structural alterations proposed by Tenant do not (i) diminish the use of the Premises as first class office space as reasonably determined by Landlord and (ii) affect the structure of the Building or the Building systems. Tenant shall provide Landlord with as built drawings of any such alterations. If requested in writing by Tenant at the time Tenant requests Landlord’s consent to any proposed alteration, addition or improvement (or, if Landlord’s consent is not required, at the time Tenant notifies Landlord of any proposed alteration, addition or improvement), Lan dlord shall notify Tenant as to whether Tenant will be required to remove the proposed alteration, addition or improvement and restore the Premises to its original condition at the end of the Term.” Section 10.2:         On page 12, line 8, in place of the deleted word, insert “leases”.         On page 12, line 9, in place of the deleted language, insert “or Tenant’s lease as to all or a portion of the Premises being terminated”.         On page 12, line 12, at the end of the sentence, insert “The provisions of this Section shall not pertain to any interior signage of Tenant that is not visible from the outside of the Premises.”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Section, Tenant shall have the right to install (i) a directional sign on the existing directional signs located within the Phase -------------------------------------------------------------------------------- Common Areas, (ii) a sign on the entry wall adjacent to the main entrance of the Building (“Entry Wall Signs”), and (iii) a sign on the exterior of the Building facing Highway 101 (but only if Tenant has not installed exterior signage on the 4200 Bohannon Building (defined in Section 27) facing Highway 101). Tenant’s right to install the signage referenced in the preceding sentence is subject to Landlord’s prior review and approval of Tenant’s proposed signage, including the size, color, design and exact proposed location of Tenant’s signage, which approval shall not be unreasonably withheld provided that the signage is in accordance with Landlord’s written sign criteria. A copy of Landlord’s written sign criteria is attached hereto as Exhibit G. Landlord approves in advance text reading “E*TRADE” on Tenant’s Building signage so long as the text is black in color; provided, however, the text on Tenant’s monument signs in the P hase and Tenant’s Entry Wall Signs may contain the colors contained in Tenant’s current logo. Tenant Shall obtain all of the necessary governmental permits and approvals required to install Tenant’s signs in the Project and all of Tenant’s signs shall comply with all laws, ordinances and regulations and any of the conditions, covenants and restrictions recorded against the Phase.” Section 11.5:         On page 13, line 5, after the word “Tenant’s”, insert “and Tenant’s employees’, agents’, representatives’ and contractors’”. Section 12.1:         On page 14, line 1, in place of the deleted language, insert “If the Premises and/or the Building are damaged or destroyed, then, subject to the provisions of this Section 12 and provided that neither party terminates this Lease pursuant to this Section 12, (i) Landlord shall promptly and diligently repair or restore the Premises and/or the Building (excluding the Tenant Improvements and all other alterations, additions and improvements made by Tenant to the Premises) and (ii) Tenant shall promptly and diligently repair or restore all of the Tenant Improvements and all other alterations, additions and improvements made by Tenant to the Premises.” Section 12.2:         On page 14, line 4, in place of the deleted language, insert “portions of the Premises or the Building which Landlord is obligated to repair”.         On page 14, line 5, in place of the deleted number, insert “two hundred seventy (270)”.         On page 14, line 8, after the word “notice.”, insert the following:         “In addition, Tenant shall have the right to terminate this Lease upon thirty (30) days’ prior written notice to Landlord if the Premises or the Building is destroyed or damaged by fire or other casualty and either (i) Landlord reasonably determines that the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore cannot be completed within two hundred seventy (270) days from after the date of the casualty or (ii) Landlord fails to substantially complete the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore by the two hundred seventieth (270th) day from after the date of the casualty (hereinafter referred to as the “Outside Completion Date”). The Outside Completion Date shall be extended for an additional ninety (90) days in the event Landlord fails to substantially complete the repair or restoratio n of the portion of the Premises or the Building which Landlord is obligated to repair or restore for any reason not within Landlord’s reasonable control, including, without limitation, inclement weather, labor disputes, or any default by Landlord’s contractor or architect under their agreement with Landlord with respect to the repair or restoration of the Premises or the Building). In addition, the Outside Completion Date shall be extended one day for each day that Landlord is delayed in completing the repair or restoration work due to any interference by Tenant or Tenant’s contractors with Landlord’s repair or restoration work. Tenant shall exercise its right to terminate this Lease pursuant to subsection (i) above, if at all, by written notice to Landlord within thirty (30) days after Landlord notifies Tenant of Landlord’s estimate of the time required to complete the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or rest ore. Tenant shall exercise its right to terminate this Lease pursuant to subsection (ii) above, if at all, by written notice to Landlord within ten (10) days after the expiration of the Outside Completion Date. Notwithstanding the foregoing, if at any time Landlord reasonably determines that Landlord cannot substantially complete the repair or restoration of the Premises by the Outside Completion Date, Landlord shall notify Tenant in writing and Tenant shall have ten (10) days from the date Tenant receives such written notice in which to terminate this Lease by written notice to Landlord. --------------------------------------------------------------------------------         If neither party exercises its right to terminate this Lease, then (i) Landlord shall promptly commence the process of obtaining all of the necessary permits and approvals for the repair or restoration of the portion of the Premises or the Building which Landlord is obligated to repair or restore as soon as reasonably practicable, and thereafter prosecute the repair or restoration of the Premises or the Building diligently to completion, and (ii) Tenant shall promptly commence the process of obtaining all of the necessary permits and approvals for the repair or restoration of the Tenant Improvements and any other alterations, additional or improvements made by Tenant to the Premises as soon as reasonably practicable, and thereafter prosecute the repair or restoration of the Tenant Improvements and other improvements to completion. Tenant shall not interfere with Landlord’s repair and restoration work and may commence Tenant’s repair or restoration work in the Premises only to the extent that Tenant’s work does not interfere with Landlord’s repair or restoration work.”         At the end of this Section, insert “Notwithstanding the foregoing, if Landlord elects to terminate this Lease as a result of there being insufficient insurance proceeds to pay for all of the costs of the repair or restoration, Tenant shall have the right to vitiate Landlord’s termination by (i) notifying Landlord in writing within thirty (30) days after Landlord notifies Tenant of its election to terminate this Lease of Tenant’s election to pay for the difference between the cost of restoring the Premises or the Building, as applicable, and the amount of the insurance proceeds available to Landlord for the repair or restoration of the Premises or the Building, and (ii) delivering to Landlord within thirty (30) days after Tenant notifies Landlord of its election to pay for any shortfall in insurance proceeds an amount equal to the difference between the cost of repairing or restoring the Premises or the Building, as reasonably est imated by Landlord, and the amount of insurance proceeds available to Landlord for the repair or restoration of the Premises or the Building, as applicable. Section 12.3:         At the end of this Section, insert “If Landlord receives any proceeds from either Landlord’s or Tenant’s insurance carrier attributable to the cost of repairing or restoring the Tenant Improvements or any other alterations, additions or improvements made by Tenant in the Premises that are not owned by Landlord, then Landlord shall reimburse Tenant an amount equal to the amount expended by Tenant in repairing or restoring those alterations, additions or improvements in the Premises not to exceed the amount of the proceeds received by Landlord. Notwithstanding the foregoing, if either party terminates this Lease as a result of a casualty or for any other reason, all of the insurance proceeds with respect to the Tenant Improvements and any other alterations, additions or improvements made by Tenant to the Premises shall belong to Landlord.” Section 12.5:         On page 14, line 1, in place of the deleted word, insert “Landlord’s and Tenant’s”         On page 14, line 2, in place of the deleted word, insert “either party”.         On page 14, line 3, in place of the deleted word, insert “the other party”.         On page 14, line 4, in place of the deleted language, insert “The party electing to terminate this Lease shall notify the other party”.         On page 14, line 6, in place of the deleted language, insert “neither party elects”. Section 13.2:         On page 15, line 6, in place of the deleted language, insert “Tenant”. Section 13.4:         On page 15, line 2, after the word “right”, insert “such as”. Section 13.5:         On page 15, line 9, in place of the deleted word, insert “Tenant”. Section 14.1 (c):         On page 16, line 3, after the word “Landlord”, insert “; provided, however, if such default cannot be cured within thirty (30) days, Tenant shall not be in default of this Lease so long as Tenant has commenced such cure -------------------------------------------------------------------------------- within the thirty (30) day period and is diligently pursuing the cure to completion (but in no event longer than ninety (90) days from the date Landlord notifies Tenant of the default).” Section 14.1 (j):         At the end of Section 14.1(i), add the following Section:         “(j)  4200 Bohannon Lease. An Event of Default (as that term is defined in the 4200 Bohannon Lease) on the part of the tenant under the 4200 Bohannon Lease.” Section 14.l:         On page 16, in the last sentence in this Section, after the word “Lease”, insert “if the notice of default was drafted for Landlord by Landlord’s attorneys.” Section 15.1:         On page 17, line 5, after the word “withheld”, insert “or delayed”.         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15.1, Tenant shall have the right to assign this Lease or sublet all or a portion of the Premises without Landlord’s consent (but with thirty (30) days’ prior written notice to Landlord) to (i) an Affiliate or (ii) any entity resulting from a merger or consolidation with Tenant (each hereinafter referred to as a “Permitted Assignee”). For purposes of this Section 15, an “Affiliate” is defined as (i) an entity that directly or indirectly controls, is controlled by or is under common control with Tenant or (ii) an entity at least a majority of whose economic interest is owned by Tenant; and “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations. No assignment or subletting by Tenant shall relieve Tenant of any obligation under this Lease , including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.” Section 15.3:         On page 17, line 1, in place of the deleted number, insert “ten (10) business”.         On page 17, line 3, after the word “sublet”, insert “if the term of such sublet is for greater than five (5) years or ends during the last year of the Term or the proposed sublessee is an existing tenant or subtenant in the Project.”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15.3, Landlord shall not have the right to terminate this Lease as to all or any portion of the Premises pursuant to the terms and conditions contained in this Section 15.3 in connection with an assignment by Tenant of its interest in this Lease to a Permitted Assignee or Tenant’s sublease of all or a portion of the Premises to a Permitted Assignee.” Section 15.5:         On page 18, line 15, after the word “Project.”, insert “For purposes of this Section 15.5, the term “prospective tenant” shall mean any prospective lessee of space in the portion of the Project owned by Landlord with whom or which Landlord has been in contact concerning the prospective lessee’s interest in the space within thirty (30) of Tenant’s contact with such prospective lessee or the date on which Tenant requests Landlord’s consent to the proposed sublease or assignment.”         On page 18, line 16, in place of the deleted number, insert “ten (10) business”. Section 15.6:         On page 18, line 10, after the word “Alto,”, insert “and Tenant is not entitled to deduct those costs pursuant to this Section 15.6 prior to calculating the amount of any excess rent or other consideration payable to Landlord in accordance with the terms of this Section 15.6,”         At the end of this Section, insert “Notwithstanding anything to the contrary contained in Section 15.6, in calculating the amount of the excess rent or other consideration due to Landlord in connection with any assignment or sublease by Tenant, Tenant shall be entitled to deduct from the total amount of rent or other consideration paid to Tenant (prior to determining Landlord’s share of any excess rent or other consideration) the total amount of (i) any -------------------------------------------------------------------------------- attorneys’ fees and brokerage commissions paid by Tenant in connection with the assignment or sublease and (ii) the cost of installing a demising wall in connection with the partitioning of the Premises for multiple occupancy. In addition, further notwithstanding anything to the contrary contained in Section 15.6, Landlord shall not be entitled to any excess rent or consideration in connection with Tenant’s assignment of its interest in this Lease to a Permitted Assignee or Tenant’s sublease of all or a portion of the Premises to a Permitted Assignee.” Section 15.12:         On page 19, line 4, after the word “release”, insert “; provided, however, Landlord shall be released from its obligation to refund the Security Deposit to Landlord in accordance with the terms of this Lease only if Landlord delivers the Security Deposit to the transferee or the transferee assumes in writing liability for returning the Security Deposit to Tenant in accordance with the terms of this Lease.” Section 15.13:         At the end of Section 15.12, add the following Sections:         “15.13.  Additional Space. During the Term, Tenant shall not sublease (as a sublessee) any additional space within the Project or take an assignment of any lease of additional space within the Project which would result in Tenant having subleased or, as a result of one or more assignments, leased in the aggregate more than fifty (50,000) rentable square feet of space in the Project without Landlord’s prior written consent, which may be withheld by Landlord in its sole and absolute discretion. Notwithstanding the foregoing, if Tenant (i) exercises its option pursuant to Section 26 and leases all of the First Expansion Option Space and (ii) exercises its option under the 4200 Bohannon Lease and leases the 4400 Bohannon Expansion Option Space (defined in the 4200 Bohannon Lease), then, from the later of the commencement of Tenant’s lease of the 4400 Bohannon Expansion Option Space or the commencement of Tenant’s lease of any increment of the First Expansion Option Space, Tenant shall not occupy or sublease any additional space in the Project, as a result of one or more assignment or sublease of, in the aggregate, more than thirty thousand (30,000) rentable square feet of space without Landlord’s prior written consent, which may be withheld by Landlord in its sole and absolute discretion.         15.14.  Landlord Estoppel Certificate. Within ten (10) days after Tenant’s written request, Landlord shall execute and deliver to Landlord, in recordable form, a certificate to Tenant certifying, among other things, (i) that this Lease is unmodified and in full force and effect or, if modified, stating the nature of the modification and certifying that this Lease, as so modified, is in full force and effect, (ii) the date to which the Rent and other charges have been paid in advance, if any; and (iii) that to Landlord’s actual knowledge, there are no uncured defaults on the part of Tenant under this Lease, or if there are uncured defaults on the part of Tenant, stating the nature of the uncured defaults. Any such certificate may be relied upon by Tenant.” Section. 16.1:         On page 20, line 9, after the number “ten (10)”, insert “business”. Section 16.3:         At the end of this Section, insert “Tenant’s obligations under this Lease are conditioned upon Tenant’s receipt of an executed nondisturbance agreement from all current mortgagees (as of the date of this Lease) whose liens are secured by the Phase within sixty (60) days after the date of this Lease. The nondisturbance agreement, among other things, shall provide that Tenant’s possession of the Premises shall not be disturbed in the event of a foreclosure so long as Tenant is not in default under this Lease, and that this Lease shall remain in full force and effect, without materially increasing Tenant’s obligations and duties under this Lease or materially diminishing Tenant’s rights and privileges under this Lease. Tenant shall subordinate Tenant’s interest in the Premises, Building and Phase and this Lease to any future mortgagee or ground lessor provided that such mortgagee or ground lessor agrees to provid e Tenant with a nondisturbance agreement on the terms set forth above.” Section 19.5:         On page 21, line 3, in place of the deleted language, insert “constitutes the Phase”. Section 19.12:         On page 22, line 3, in place of the deleted word, insert “one hundred fifty percent (150%) of”. --------------------------------------------------------------------------------         On page 22, line 7, after the word “addition,”, insert “if Tenant fails to vacate and surrender the Premises to Landlord after the end of the Term within ten (10) days after written notice from Landlord”. Section 19.15:         At the end of this Section, insert “Landlord shall pay to Tenant’s Broker a leasing commission in connection with this Lease in accordance with the terms and conditions set forth in a separate written agreement entered into between Landlord and Tenant’s Broker.” Section 19.17:         At the end of this Section, insert “Notwithstanding anything to the contrary contained in this Section, if in the event of any interruption in utilities or services to the Premises that (i) substantially interferes with Tenant’s use of the Premises for Tenant’s business, as reasonably determined by Tenant, for more than five (5) continuous days, and (ii) are not the result of Tenant’s negligence or willful misconduct, the Rent due under this Lease shall abate (but only to the extent of any proceeds received by Landlord from rental abatement insurance) for each successive day that the interruption continues until the utilities or services are restored.” Sections 20-26:         The following Sections are incorporated into the Lease:         20.  Early Entry. Upon the execution and delivery of this Lease, Tenant may, at Tenant’s sole risk and cost, enter upon the Premises prior to the Commencement Date for the purposes of performing Tenant’s Work (as defined in the Work Letter) subject to Tenant complying with each of the following terms and conditions during such early entry period: (i) Tenant shall comply with all of the terms and conditions contained in this Lease, except for Tenant’s obligation to pay Base Rent, Impositions and Operating Expenses; (ii) Tenant shall indemnify, protect, defend and hold harmless Landlord and all other Indemnified Parties from all claims and losses, and exempt Landlord and the other Indemnified Parties from any liability, all as more particularly provided in Sections 6.4 and 6.5; (iii) Tenant shall comply with all of the requirements contained in this Lease with respect to the type and amounts of insurance required t o be maintained by Tenant and provide Landlord with evidence satisfactory to Landlord that Tenant has obtained such insurance; and (iv) Tenant shall pay for all utility services supplied to the Premises and/or used by Tenant.         21.  Adjustments to Base Rent. The monthly Base Rent shall be increased on each anniversary of the Commencement Date during the Term by an amount equal to three and one-half percent (3.5%) of the amount of the then existing monthly Base Rent.         25.  Extension Options         25.1  Options to Extend. Tenant shall have two (2) options to extend the Term for a period of five (5) years each (hereinafter referred to as the “First Extension Term” and “Second Extension Term,” respectively, and each, an “Extension Term”), provided that at the time Tenant’s Extension Notice (defined below) is given and at the time the Extension Term is to commence (i) no Event of Default by Tenant exists and (ii) E-Trade Group, Inc. or a Permitted Assignee of E-Trade Group, Inc. is in occupancy of at least ninety percent (90%) of the Building, the 4200 Bohannon Building and any other space leased to Tenant pursuant to this Lease or the 4200 Bohannon Lease. Tenant shall exercise such option, if at all, by written notice (“Tenant’s Extension Notice”) to Landlord not later than fifteen (15) months, nor earlier than eighteen (18) months, prior to the expiration of the original Te rm (as such Term may be extended pursuant to Section 26) or the First Extension Term, as the case may be. Tenant may exercise its option to extend the Term for an Extension Term only if Tenant concurrently exercises its right to extend the term of the 4200 Bohannon Lease for an equal period of time in accordance with the terms and conditions contained therein. Tenant’s failure to deliver Tenant’s Extension Notice to Landlord in a timely manner shall be deemed a waiver of Tenant’s option to extend the Term and Tenant’s extension option, and any future option to extend the Term, shall lapse and be of no force or effect.         25.2  Exercise of Option.               (a)  First Extension Term. If Tenant exercises its extension option for the First Extension Term, the Term shall be extended for an additional period of five (5) years on all of the terms and conditions of this Lease, except (i) Tenant’s options to further extend the Term shall be reduced in number by one, (ii) Landlord shall -------------------------------------------------------------------------------- not be required to pay to Tenant any tenant improvement allowance or inducement and (iii) the monthly Base Rent for the first year of the First Extension Term shall be the greater of (A) the “Initial Fair Market Rent” prevailing at the commencement of the First Extension Term or (B) the monthly Base Rent in effect at the end of the original Term. The Base Rent due during the First Extension Term shall be increased annually by the Average Annual Percentage (defined below), if any.               (b)  Second Extension Term. If Tenant exercises its extension option for the Second Extension Term, the Term shall be extended for an additional period of five (5) years on all of the terms and conditions of this Lease, except (i) Tenant shall have no further options to extend the Term of this Lease, (ii) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement and (iii) the monthly Base Rent for the first year of the Second Extension Term shall be the greater of (A) the “Initial Fair Market Rent” prevailing at the commencement of the Second Extension Term or (B) the monthly Base Rent in effect at the end of the First Extension Term. The Base Rent due during the Second Extension Term shall be increased annually by the Average Annual Percentage, if any.               (c)  Real Estate Commission. Tenant shall be responsible for all brokerage costs and/or finder’s fees associated with Tenant’s exercise of its option to extend the Term made by parties claiming through Tenant. Landlord shall be responsible for all brokerage costs and/or finder’s fees associated with Tenant’s exercise of its option to extend the Term made by parties claiming through Landlord.         25.3  Determination of Fair Market Rent.               (a)  Agreement on Rent. For the purposes of this Section, the “Initial Fair Market Rent” means the monthly base rent (i.e., rent other than operating expenses, taxes and insurance premiums), expected to prevail as of the commencement of an Extension Term for the first year of that Extension Term with respect to leases of office space within buildings located in the “ Designated Area” (defined as the Menlo Park and Palo Alto areas other than the Sand Hill Road area, Stanford Research Park and the Palo Alto central business district) of a quality and with interior improvements, parking, site amenities, building systems, location, identity and access all comparable to that of the Premises, for a term equal to the Extension Term. The term “Average Annual Percentage” shall mean the average annual percentage increase in the monthly base rent (i.e., rent other than operat ing expenses, taxes and insurance premiums) expected to prevail as of the commencement of that particular Extension Term with respect to leases of office space within buildings located in the Designated Area of a quality and with interior improvements, parking, site amenities, building systems, location, identity and access all comparable to that of the Premises, for a term equal to the Extension Term). Within fifteen (15) days after Landlord’s receipt of Tenant’s Extension Notice, by written notice to Tenant (“Landlord’s Rent Notice”), Landlord shall advise Tenant as to Landlord’s determination of the Initial Fair Market Rent and Average Annual Percentage. If Tenant disagrees with Landlord’s determination, Tenant shall advise Landlord as to Tenant’s determination of Initial Fair Market Rent and Average Annual Percentage by written notice (“Tenant’s Rent Notice”) within fifteen (15) days after Tenant’s receipt of Landlord’s Rent Notice. If Tena nt fails to deliver Tenant’s Rent Notice to Tenant within the time period provided above, Tenant shall be bound by Landlord’s determination of the Initial Fair Market Rent and Average Annual Percentage as set forth in Landlord’s Rent Notice. If Tenant shall timely deliver to Landlord Tenant’s Rent Notice, Landlord and Tenant shall attempt in good faith to reach agreement as to the Initial Fair Market Rent and Average Annual Percentage within fifteen (15) days after Landlord’ s receipt of Tenant’s Rent Notice.               (b)  Selection of Appraisers. If Landlord and Tenant are unable to agree as to the amount of the Initial Fair Market Rent and Average Annual Percentage within the aforementioned fifteen (15) day period as evidenced by a written amendment to this Lease executed by them, then, within ten (10)days after the expiration of the fifteen (15) day period, Landlord and Tenant shall each, at its sole cost and by giving notice to the other party, appoint a competent and disinterested real estate appraiser with membership in the Appraisal Institute and M.A.I. designation and with at least five (5) years’ full-time commercial appraisal experience in the Menlo Park and Palo Alto areas to determine the Initial Fair Market Rent and Average Annual Percentage. If either Landlord or Tenant does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall determine the Initial Fair Market Rent and Average Annual Percentage. If Landlord and Tenant as stated in this Section appoint two (2) appraisers, they shall attempt to select a third appraiser meeting the qualifications stated in this Section within ten (10) days. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days’ notice to the other party, can apply to the then president of the real estate board of the county in which the Building is located, or to the Presiding Judge of the Superior Court of the county in which the Building is located, for the selection of a third -------------------------------------------------------------------------------- appraiser who meets the qualifications stated in this paragraph. Landlord and Tenant each shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant.               (c)  Value Determined By Three (3) Appraisers. The appraisers shall determine the Initial Fair Market Rent and Average Annual Percentage by using the “Market Comparison Approach” with the relevant market being office buildings located in the Designated Area. Within thirty (30) days after the selection of the third appraiser, Landlord’s appraiser shall arrange for the simultaneous delivery to Landlord of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotients shall be the Initial Fair Market Rent and Average Annual Percentage. If, however, the low appraisal and/or the high appraisal of either the Initial Fair Market Rent or the Average Annual Percentage are/is more than ten percent (10%) lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisa l shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2); the resulting quotients shall be the Initial Fair Market Rent and Average Annual Percentage. If both the low appraisal and the high appraisal of either the Initial Fair Market Rent or the Average Annual Percentage are disregarded as stated in this Section, the middle appraisal shall be the Initial Fair Market Rent or Average Annual Percentage, as applicable.         25.4  Notice to Landlord and Tenant. After the monthly Base Rent for an Extension Term has been set, Landlord and Tenant immediately shall execute an amendment to the Lease stating the monthly Base Rent.         26.  Option to Expand.         26.1  First Expansion Option Space.               (a)  Option to Expand. Provided that (i) no Event of Default by Tenant exists under the terms of this Lease at the time Tenant exercises its option to expand the Premises or at the time Tenant is to commence occupancy of the space in question, (ii) E-Trade Group, Inc. or a Permitted Assignee occupies at least ninety percent (90%) of the Building, the 4200 Bohannon Building and all other space leased to Tenant pursuant to this Lease and the 4200 Bohannon Lease, and (iii) Tenant has a financial net worth of at least Five Hundred Million Dollars ($500,000,000.00) at the time Tenant exercises its First Expansion Option, or Tenant otherwise delivers to Landlord the additional security deposit required pursuant to Section 26.3 below, Tenant shall have the option (the “First Expansion Option”) to lease the space (the “First Expansion Option Space”) listed on Exhibit F-1, at tached hereto, in the increments listed on Exhibit F-1, upon the terms and conditions contained in this Section 26.               (b)  Exercise of First Expansion Option. Tenant shall exercise the First Expansion Option with respect to either or both of the increments of First Expansion Option Space by written notice to Landlord no earlier than fifteen (15) months prior to the expiration date (the “FEOS Current Lease Expiration Date”) of the existing lease of the applicable increment of First Expansion Option Space (noted on Exhibit F-1) and no later than January 31, 1999. If Tenant fails to exercise the First Expansion Option with respect to an increment of First Expansion Option Space within the time period provided above, the First Expansion Option with respect to that increment of First Expansion Option Space shall expire, and Tenant and Landlord shall have no further rights or obligations under this Section with respect to that increment of First Expansion Option Space.               (c)  Terms of Lease. Landlord shall lease each increment of First Expansion Option Space to Tenant on all the same terms and conditions contained in this Lease except (i) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement, (ii) the term of Tenant’s lease of each increment of First Expansion Option Space shall be for ten (10) years, commencing on the date on which Landlord delivers to Tenant possession of the increment of First Expansion Option Space (subject to extension pursuant to Section 26.1(e) and Section 26.2(e) below), (iii) Tenant shall not have the right to install exterior signage on the building in which the First Expansion Option Space is located, (iv) Tenant shall deliver to Landlord concurrently with Tenant’s execution of an amendment to the Lease to include the additional premises or Tenant’s execution of a new lease for the additional premises (which Tenant shall execute within thirty (30) days after Tenant exercises its First Expansion Option and receives the proposed amendment or lease from Landlord) a security deposit for the applicable increment of First Expansion Option Space leased by Tenant in an amount equal to the last monthly installment of Base Rent due for the applicable increment of First Expansion Option Space, (v) the monthly Base Rent per rentable square foot for the increment of First Expansion Option Space leased by Tenant shall be an amount equal to monthly Base Rent per rentable square foot of the existing Premises in effect at the commencement of the term of the applicable increment of First Expansion Option Space, less (1) the amount of the monthly Base Rent per rentable -------------------------------------------------------------------------------- square foot attributable to the Additional Allowance (if any) and (2) the amount of the monthly Base Rent per rentable square foot attributable to the Base Allowance (which the parties agree to be an amount equal to Seven and One-Half Cents ($0.075) per rentable square foot, increased by three and one-half percent (3.5%) per annum beginning on the Commencement Date and ending on the commencement date of the term Of the applicable increment of First Expansion Option Space), subject to further increases thereafter in the same percentages and on the same dates as the remainder of the Premises pursuant to Section 4,2, and (vi) Tenant shall lease the First Expansion Option Space in its “as is” condition, except Landlord shall deliver the First Expansion Option Space to Tenant in broom clean condition, with all building systems in good working condition and the roof in water-tight condition.               (d)  Delivery of First Expansion Option Space. If Tenant exercises the First Expansion Option with respect to any increment of First Expansion Option Space, Landlord shall use commercially reasonable efforts to deliver possession of the applicable increment of First Expansion Option Space to Tenant within five (5) days after Landlord recovers possession of the increment of First Expansion Option Space. Tenant’s obligation to pay Rent to Landlord for an increment of First Expansion Option space shall commence on the forty-fifth (45th) day after Landlord delivers possession of the applicable increment of First Expansion Option Space to Tenant.               (e)  Extension of Term. If Tenant exercises its option to lease an increment of First Expansion Option Space or Tenant exercises its option under the 4200 Bohannon Lease to lease the 4400 Bohannon Expansion Option Space, then the Term with respect to the Premises, the 4400 Bohannon Expansion Option Space (provided that Tenant has exercised its option with respect to such space) and all increments of First Expansion Option Space for which Tenant has exercised its First Expansion Option, shall be extended until the end of the tenth (10th) year after latest commencement date of Tenant’s lease of any increment of First Expansion Option Space (for which Tenant has exercised its First Expansion Option) or the commencement date of Tenant’s lease of the 4400 Bohannon Expansion Option Space (for which Tenant has exercised its expansion option).         26.2  Second Expansion Option Spaces.               (a)  Option to Expand. Provided that (i) no Event of Default by Tenant exists under the terms of this Lease at the time Tenant exercises its option to expand the Premises or at the time Tenant is to commence occupancy of the space in question, (ii) E-Trade Group, Inc. or a Permitted Assignee occupies at feast ninety percent (90%) of the Building, the 4200 Bohannon Building and all other space leased to Tenant pursuant to this Lease and the 4200 Bohannon Lease (including the 4400 Bohannon Expansion Option Space), (iii) Tenant has exercised the First Expansion Option with respect to all of the First Expansion Option Space, (iv) Tenant has exercised its expansion option with respect to and the 4400 Bohannon Expansion Option Space, and (v) Tenant has a financial net worth of at least Seven Hundred Million Dollars ($700,000,000.00) at the time Tenant exercises its Second Expansion Option, or Tenant otherwise delivers to Landlord the additional security deposit required pursuant to Section 26.3 below, Tenant shall have the option (the “Second Expansion Option”) to lease the space (the “Second Expansion Option Space”) listed on Exhibit F-2, attached hereto, in the increments listed on Exhibit F-2, upon the terms and conditions contained in this Section 26.               (b)  Exercise of Second Expansion Option. Tenant shall exercise the Second Expansion Option with respect to either or both of the increments of Second Expansion Option Space by written notice to Landlord no earlier than fifteen (15) months prior to the expiration date (the “SEOS Current Lease Expiration Date”) of the existing lease of the applicable increment of Second Expansion Option Space (noted on Exhibit F-2) and no later than twelve (12) months prior to the SEOS Current Lease Expiration Date. Notwithstanding the foregoing, if the tenant that currently leases the Second Expansion Option Space defaults on its obligations under its lease and Landlord either terminates the existing tenant’s lease or enters into a lease termination agreement with the existing tenant (in lieu of bringing an unlawful detainer action against the existing tenant) which results in an incremen t of Second Expansion Option Space becoming available for lease prior to the SEOS Current Lease Expiration Date (hereinafter referred to as an “Early Termination Event”), then Tenant shall exercise its option to lease the applicable increment of Second Expansion Option Space (if at all) within forty-five (45) days after Landlord notifies Tenant in writing of the date that the increment of Second Expansion Option Space has become or will become available for lease (hereinafter referred to as the “SEOS Early Availability Date”); provided, however, in no event will Tenant be required to exercise its Second Expansion Option with respect to any increment of Second Expansion Option Space more than twelve (12) months prior to the SEOS Early Availability Date. If Tenant fails to exercise the Second Expansion Option with respect to any increment of Second Expansion Option Space within the time period provided above, the Second Expansion Option with respect to that increment of Second Expansion -------------------------------------------------------------------------------- Option Space shall expire, and Tenant and Landlord shall have no further rights or obligations under this Section with respect to that increment of Second Expansion Option Space.               (c)  Terms of Lease. Landlord shall lease each increment of Second Expansion Option Space to Tenant on all the same, terms and conditions contained in this Lease except (i) Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement, (ii) the term of Tenant’s lease of each increment of Second Expansion Option Space shall be for twelve (12) years, commencing on the date on which Landlord delivers to Tenant possession of the increment of Second Expansion Option Space (subject to extension pursuant to Section 26.2(e) below), (iii) Tenant may not place exterior building signage on the building located at 4600 Bohannon Drive (but Tenant shall have the right to place exterior building signage on the building located at 4700 Bohannon Drive in accordance with the provisions contained in this Lease pertaining to exterior building signage), (iv) Tenant shall deliv er to Landlord concurrently with Tenant’s execution of an amendment to this Lease to include the additional premises or Tenant’s execution of a new lease for the additional premises (which Tenant shall execute within thirty (30) days after Tenant exercises its Second Expansion Option and receives the proposed amendment or lease from Landlord) a security deposit for the applicable increment of Second Expansion Option Space in an amount equal to the last monthly installment of Base Rent due for the applicable increment of Second Expansion Option Space, (v) the monthly Base Rent per rentable square foot for the increment of Second Expansion Option Space leased by Tenant shall be an amount equal to monthly Base Rent per rentable square foot of the existing Premises in effect at the commencement of the term of the applicable increment of Second Expansion Option Space, less (1) the amount of the monthly Base Rent per rentable square foot attributable to the Additional Allowance (if any) and (2) the amoun t of the monthly Base Rent per rentable square foot attributable to the Base Allowance (which the parties agree to be an amount equal to Seven and One-Half Cents ($0.075) per rentable square foot, increased by three and one-half percent (3.5%) per annum beginning on the Commencement Date and ending on the commencement date of the term of the applicable increment of Second Expansion Option Space), subject to further increases thereafter in the same percentages and on the same dates as the remainder of the Premises pursuit to Section 4.2, and (vi) Tenant shall lease the Second Expansion Option Space in its “as is” condition, except Landlord shall deliver the Second Expansion Option Space to Tenant in broom clean condition, with all building systems in good working condition and the roof in water-tight condition.               (d)  Delivery of Second Expansion Option Space. If Tenant exercises its Second Expansion Option with respect to any increment of Second Expansion Option Space, Landlord shall use commercially reasonable efforts to deliver possession of the applicable increment of Second Expansion Option Space to Tenant within five (5) days after Landlord recovers possession o f the increment of Second Expansion Option Space. Tenant’s obligation to pay Rent to Landlord for an increment of Second Expansion Option Space shall commence on the forty-fifth (45th) day after Landlord delivers possession of the increment of Second Expansion Option Space to Tenant; provided, however, if Landlord delivers possession of an increment of Second Expansion Option Space to Tenant prior to the SEOS Current Lease Expiration Date for the applicable increment of space as a result of an Early Termination Event, Tenant’s obligation to pay Rent to Landlord for that increment of Second Expansion Option Space shall commence on the sixtieth (60th) day after Landlord delivers possession of that increment of Second Expansion Option Space to Tenant.               (e)  Extension of Term. If Tenant exercises its option to lease an increment of Second Expansion Option Space, the Term solely with respect to the First Expansion Option Space and the Second Expansion Option Space for which Tenant has exercised its Second Expansion Option shall be extended until the end of the twelfth (12th) year after latest commencement date of Tenant’s lease of any increment of First Expansion Option Space or any increment of Second Expansion Option Space (for which Tenant has exercised its Second Expansion Option). The Term with respect to the remaining Premises shall not be extended.         26.3  Additional Security Deposit.         (a)  First Expansion Option.               (l)  FEOS Additional Security Deposit. If Tenant does not have a financial net worth of at least Five Hundred Million Dollars ($500,000,000.00) at the time Tenant exercises its First Expansion Option, Tenant may still exercise its First Expansion Option provided that Tenant delivers to Landlord concurrently with Tenant’s execution of an amendment to this Lease to include the increment of First Expansion Option Space Leased by Tenant or Tenant’s execution of a new lease for the increment of First Expansion Option Space (which shall occur no later than thirty (30) days after Tenant’s execution of its First Expansion Option), an additional security -------------------------------------------------------------------------------- deposit (the “FEOS Additional Security Deposit”) in an amount equal to the difference between (i) Forty-Five Dollars ($45.00) per rentable square foot of the increment of First Expansion Option Space for which Tenant is exercising its First Expansion Option, and (ii) the amount of the security deposit due with respect to the applicable increment of First Expansion Option Space pursuant to Section 26. l(c). If Tenant’s financial net worth falls below Five Hundred Million Dollars ($500,000,000.00) at any time after Tenant exercises its First Expansion Option, then Tenant shall deliver to Landlord within twenty (20) days after Landlord’s written request the FEOS Additional Security Deposit for each increment of First Expansion Option Space leased by Tenant or for which Tenant has exercised its First Expansion Option. Alternatively, if Tenant’s Financial net worth increases to Five Hundred Million Dollars ($500,000,000.00) or more at any time after Tenant has delivered to Landlord the FEOS Additional Security Deposit, then, within twenty (20)days after Tenant’s written request. Landlord shall return the FEOS Additional Security Deposit to Tenant or credit the FEOS Additional Security Deposit against the next installment of Rent due under this Lease.               (2)  Additional Remedy. If Tenant’s financial net worth falls below Five Hundred Million Dollars ($500,000,000.00) at any time after Tenant exercises its First Expansion Option, but prior to Tenant’s lease of the increment of First Expansion Option Space for which Tenant has exercised its First Expansion Option, and Tenant fails to deliver to Landlord the FEOS Additional Security Deposit required pursuant to Section 26.3(a), then, in additional to all other remedies available to Landlord under this Lease, Landlord may vitiate Tenant’s exercise of its First Expansion Option by written notice to Tenant and elect not to lease the applicable increment of First Expansion Option Space to Tenant (whereupon Tenant shall have no further rights to lease that increment of First Expansion Option Space).         (b)  Second-Expansion Option.               (1)  SEOS Additional Security-Deposit. If Tenant does not have a financial net worth of at least Seven Hundred Million Dollars ($700,000,000.00) at the time Tenant exercises its Second Expansion Option, Tenant may still exercise its Second Expansion Option provided that Tenant delivers to Landlord concurrently with Tenant’s execution of an amendment to this Lease to include the increment of Second Expansion Option Space leased by Tenant or Tenant’s execution of a new lease for the increment of Second Expansion Option Space (which shall occur no later than thirty (30) days after Tenant’s execution of its Second Expansion Option), an additional security deposit (the “SEOS Additional Security Deposit”) in an amount equal to the difference between (i) Forty-Seven Dollars ($47.00) per rentable square foot of the increment of Second Expansion Option Space for which Tenant is exercising its Second Expansion Option, and (ii) the amount of the security deposit due with respect to the applicable increment of Second Expansion Option Space pursuant to Section 26.2(c). If Tenant’s financial net worth falls below Seven Hundred Million Dollars ($700,000,000.00) at any time after Tenant exercises its Second Expansion Option, then Tenant shall deliver to Landlord within twenty (20 days after Landlord’s written request the SEOS Additional Security Deposit for each increment of Second Expansion Option Space leased by Tenant or for which Tenant has exercised its Second Expansion Option. Alternatively,. if Tenant’s financial net worth increases to Seven Hundred Million Dollars ($700,000,000.00) or more at any time after Tenant has delivered to Landlord the SEOS Additional Security Deposit, then, within twenty (20) days after Tenant’s written request, Landlord shall return the SEOS Additional Security Deposit to Tenant or credit the SEOS Additional Security Deposit against the next installment of Rent due under this Lease.               (2)  Additional Remedy. If Tenant’s financial net worth falls below Second Hundred Million Dollars ($700,000,000.00) at any time after Tenant exercises its Second Expansion Option, but prior to Tenant’s lease of the increment of Second Expansion Option Space for which Tenant has exercised its Second Expansion Option, and Tenant fails to deliver to Landlord the SEOS Additional Security. Deposit required pursuant to Section 26.3(b), then, in additional to all other remedies available to Landlord under this Lease, Landlord may vitiate Tenant’s exercise of its Second Expansion Option by written notice to Tenant and elect not to lease the applicable increment of Second Expansion Option Space to Tenant (whereupon Tenant shall have no further rights to lease that increment of Second Expansion Option Space).               (c)  Letter of Credit. In lieu of a cash security deposit, Tenant may deliver to Landlord as the FEOS Additional Security Deposit or the SEOS Additional Security Deposit an irrevocable standby letter of credit (the “Letter of Credit”) naming landlord as beneficiary, in the amount of the FEOS Additional Security Deposit or the SEOS Additional Security Deposit, as applicable. The Letter of Credit shall be issued by a major national bank located in San Francisco or a regional bank located in the San Francisco Bay Area (“Bank”) reasonably satisfactory to Landlord and shall be upon such terms and conditions as Landlord may reasonably require. The Letter of Credit -------------------------------------------------------------------------------- shall allow draws by Landlord upon sight draft accompanied by a statement from Landlord that it is entitled to draw upon the Letter of Credit and shall contain terms which allow Landlord to make partial and multiple draws up to the face amount of the Letter of Credit. It Tenant has not delivered to Landlord at least thirty (30) days prior to the expiration of the original Letter of Credit (or any renewal letter of credit) a renewal or extension thereof, Landlord shall have the right to draw down the entire amount of original Letter of credit (or renewal thereof) and retain the proceeds thereof as the security deposit. If and when Tenant would be entitled to request that Landlord return the security deposit to Tenant or apply the security deposit towards Tenant’s obligation to pay Rent, Landlord shall, at Tenant’s request, return to Tenant any Letter of Credit delivered to Landlord pursuant to this paragraph.         27.  4200 Bohannon Lease. Concurrently with the execution of this Lease, Landlord and Tenant are entering into that certain lease (the “4200 Bohannon Lease”) pursuant to which Landlord is leasing to Tenant approximately forty-six thousand two hundred fifty-five (46,255) rentable square feet of space in that certain building (the “4200 Bohannon Building”) located in the Project. The obligations of Landlord and Tenant under this Lease are expressly conditioned upon Landlord and Tenant entering into the 4200 Bohannon Lease.”         IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set forth below. “Landlord” MENLO OAKS PARTNERS L.P., a Delaware limited partnership By:      AM Limited Partners,      a California limited partnership,      its General Partner By: Amarok Menlo, Inc., a California corporation, its General Partner By: /s/  J. Marty Brill, Jr. Name:  J. Marty Brill, Jr. Its:   President “Tenant” E*TRADE GROUP, INC., a Delaware corporation By: /s/  Len Purkis Name:  Len Purkis Its:    EVP & CFO -------------------------------------------------------------------------------- By: /s/  Kathy Levinson Name:  Kathy Levinson Its:   President & COO -------------------------------------------------------------------------------- Exhibit A [4500 BOHANNON DRIVE, FIRST FLOOR, FLOOR PLAN APPEARS HERE] 4500 BOHANNON DRIVE FIRST FLOOR -------------------------------------------------------------------------------- Exhibit A [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- Exhibit B LEGAL DESCRIPTION               That parcel of land in the City of Menlo Park, County of San Marco, State of California, described as follows:               Parcel B as shown and delineated on that certain map entitled “Record of Survey of a Lot Line Adjustment, Lands of Amarok-Bredero, etc.”, filed April 25, 1986, Book 9 of Licensed Land Survey Maps, page 123, San Mateo County Records. -------------------------------------------------------------------------------- EXHIBIT C WORK LETTER (4200 Bohannon Drive)         This Work Letter sets forth Landlord’s and Tenant’s responsibilities, respectively, for the construction of certain tenant improvements in the Premises.               1.  Defined Terms. Unless provided to the contrary herein, the following defined terms shall have the meanings set forth below and the remaining defined terms shall have the meanings set forth in the Lease:         Landlord’s Representative:  Michael E. Tamas         Tenant’s Representative:  JC Blakely               2.  Landlord’s Work. Tenant’s Work.                      3.1  Tenant Improvements. Tenant shall arrange for the construction of certain general purpose office improvements (the “Tenant Improvements”) in the Premises. The Tenant Improvements shall be subject to Landlord’s prior written approval (as provided below) and conform to Landlord’s General Building Specifications, a copy of which is attached hereto as Schedule 1. The Tenant Improvements shall be constructed by Tenant’s Contractor in accordance with plans and specifications prepared by Tenant’s Architect (each as defined below). Tenant’s construction of the Tenant Improvements is hereinafter referred to as the “Tenant Improvement Work.”                      3.2  Costs. Except for Landlord’s obligation to pay to Tenant the Tenant Improvement Allowance pursuant to Section 4 below, Tenant shall be responsible for all costs incurred in connection with the construction of the Tenant Improvements, including (i) the cost of all labor, materials, equipment and fixtures supplied by Tenant’s Contractor or any subcontractors or materialmen, (ii) fees paid to engineers, architects and interior design specialists for preparation of the Preliminary Plans and Working Drawings and all other services supplied to Tenant in connection with the Tenant Improvements, (iii) all taxes, fees, charges and levies by governmental agencies for authorizations, approvals, licenses or permits, (iii) fees paid to utility service providers for utility connections and installation of utility service meters, and (iv) all costs req uired to comply with any governmental requirements triggered as a result of Tenant’s construction of the Tenant Improvements.                      3.3  Tenant’s Architect and Contractor. Tenant shall notify Landlord in writing of the name of the architect that Tenant proposes to use to prepare the plans and specifications and working drawings for the Tenant Improvements and the name of the contractor that Tenant proposes to use to construct the Tenant Improvements. In addition, Tenant shall deliver to Landlord any information reasonably requested by Landlord concerning the proposed architect or contractor. The architect and the contractor proposed by Tenant must each be approved by Landlord in writing, which approval may not be unreasonably withheld. The architect selected by Tenant and approved by Landlord in connection with the Tenant Improvement Work is hereinafter referred to as “Tenant’s Architect”. The contractor selected by Tenant and approved by Landlord in conn ection with the Tenant Improvement Work is hereinafter referred to as “Tenant’s Contractor”. Both Tenant’s Architect and Tenant’s Contractor must be licensed to do business in California. At Landlord’s option, Tenant’s Contractor shall be bondable.                      3.4  Construction.                             3.4.1  Preliminary Plans. Tenant shall arrange for Tenant’s Architect to prepare preliminary plans and specifications (the “Preliminary Plans”) of the proposed Tenant Improvements and submit the Preliminary Plans to Landlord for Landlord’s review and approval. Landlord shall approve or disapprove of the Preliminary Plans by written notice to Tenant within five (5) business days after Landlord’s receipt of the Preliminary Plans. Landlord shall not unreasonably withhold its approval of the Preliminary Plans. If Landlord disapproves the Preliminary Plans, Landlord’s written notice to Tenant disapproving of the Preliminary Plans shall include (i) a description of the disapproved element of the Preliminary Plans, (ii) the reasons for Landlord’s disapproval and (iii) at Landlord’s option, suggested modifications to the Preliminary Plans. If Landlord disapproves -------------------------------------------------------------------------------- of the Preliminary Plans, Tenant shall arrange for Tenant’s Architect to revise the Preliminary Plans to address Landlord’s comments and/or incorporate Landlord’s suggested modifications (if any) and resubmit the Preliminary Plans to Landlord for Landlord’s review and approval. Landlord shall review the revised Preliminary Plans and approve or disapprove of the revised Preliminary Plans within three (3) business days after Landlord’s receipt thereof in accordance with the procedure provided above. If Landlord fails to respond to Tenant’s request for approval or disapproval of the Preliminary Plans within the time periods provided for above, such approval shall be deemed to have been given.                             3.4.2  Working Drawings. Subject to obtaining Landlord’s approval of the Preliminary Plans, Tenant shall arrange for Tenant’s Architect to prepare working drawings and specifications, including architectural, mechanical, electrical, plumbing and other shop drawings (the “Working Drawings”) for the Tenant Improvements. The Working Drawings shall be based on the Preliminary Plans approved by Landlord. Landlord shall approve or disapprove of the Working Drawings by written notice to Tenant within five (5) business days after Landlord’s receipt of the Working Drawings. Landlord shall not unreasonably withholds its approval of the Working Drawings. If Landlord disapproves the Working Drawings, Landlord’s written notice to Tenant disapproving of the Working Drawings shall include (i) a description of the disapproved element of the Preliminary Plans, (ii) the reasons for Landlord’s disapproval and (iii) at Landlord’s option, suggested modifications to the Working Drawings. If Landlord disapproves of the Working Drawings, Tenant shall arrange for Tenant’s Architect to revise the Working Drawings to address Landlord’s comments and/or incorporate Landlord’s proposed changes and resubmit the Working Drawings to Landlord for Landlord’s review and approval. Landlord shall review the revised Working Drawings and approve or disapprove of the revised Working Drawings within three (3) days after Landlord’s receipt thereof in accordance with the procedure provided above. The Working Drawings which have been approved by Landlord are hereinafter referred to as the “Approved Working Drawings”. If Landlord fails to respond to Tenant’s request for approval or disapproval of the Working Drawings within the time periods provided for above, such approval shal l be deemed to have been given.                             3.4.3  Changes. Tenant, at its sole cost and expense, shall make all changes to the Approved Working Drawings that are required by law or any governmental agency. All changes to the Approved Working Drawings, including those required by law or any governmental agency, require Landlord’s prior written approval, which approval shall not be unreasonably withheld. All changes to the Approved Working Drawings must be in writing and signed by both Landlord and Tenant prior to the change being made. Notwithstanding the foregoing, Tenant shall have the right, without the need for Landlord’s prior written consent, to make changes to the Approved Working Drawings that cost less than Five Thousand Dollars ($5,000.00) each, and less than Sixty Thousand Dollars ($60,000.00) in the aggregate, provided that (a) such change does not materially adversely affect the use of the Premises as first class office space, (b) Tenant provides Landlord with prior written notice of such changes, and (c) such changes are otherwise performed in accordance with the terms of this Work Letter and in compliance with all governmental laws. If Landlord fails to respond to Tenant’s written request for any change to the Approved Working Drawings within three (3) business days after Landlord’s receipt thereof, the change order shall be deemed to have been approved by Landlord. Tenant shall be responsible for all additional costs attributable to changes to the Approved Working Drawings, including, without limitation, additional architectural fees and increases in construction costs of the Tenant Improvements.                             3.4.4  Construction Contract. Tenant shall deliver to Landlord not less than five (5) days prior to the date Tenant commences the Tenant Improvement Work a copy of the construction contract entered into between Tenant and Tenant’s Contractor with respect to the construction of the Tenant Improvements, along with Tenant’s and Tenant’s Contractor’s estimate of the cost of constructing the Tenant Improvements.                             3.4.5  Insurance. Prior to performing any work in the Premises or the Building, Tenant shall deliver to Landlord certificates evidencing that Tenant’s Contractor has in force (i) a commercial liability insurance policy covering bodily injury in the amounts of Two Million Dollars ($2,000,000.00) per person and Two Million Dollars ($2,000,000.00) per occurrence, and covering property damage in the amount of Two Million Dollars ($2,000,000.00), and (ii) workers’ compensation insurance in an amount reasonably acceptable to Landlord.                             3.4.6  Time Limits. Tenant shall commence the construction of the Tenant Improvements by no later than January 1, 1999 and shall diligently proceed with the construction of the Tenant Improvements until completion. In any event, Tenant shall complete the Tenant Improvements in any portion of the Premises within six (6) months after the date Tenant demolishes the existing improvements in that portion of the -------------------------------------------------------------------------------- Premises. Tenant’s failure to construct the Tenant Improvements in accordance with the terms of this Work Letter constitutes a default by Tenant under this Lease.                             3.4.7  Lien Waivers. Upon completion of the Tenant Improvement Work, Tenant shall deliver to Landlord a release and waiver of lien executed by each contractor, including Tenant’s Contractor, subcontractor and materialman concerning with the Tenant Improvement Work.                             3.4.8  Cooperation. Landlord shall cooperate with (i) Tenant’s Architect in completing the Preliminary Plans and the Working Drawings and (ii) Tenant’s Contractor in completing the Tenant Improvements; provided, however, Landlord shall not be required to incur any unreimbursed additional expense in so doing.                             3.4.9  Warranties. Tenant hereby warrants to Landlord that (i) the Tenant Improvements will be constructed in a good and workmanlike manner, by well-trained, adequately supplied workers, (ii) the Tenant Improvements and all equipment and material incorporated therein will strictly comply with the Approved Working Drawings, (iii) the Tenant Improvements shall strictly comply with all governmental and quasi-governmental rules, regulations, laws and building codes, all private covenants, conditions and restrictions applicable to the construction of the Tenant Improvements and all requirements of Landlord’s and Tenant’s lenders and insurers, and (iv) the Tenant Improvements shall be free from all design, material and workmanship defects. At Landlord’s written request, Tenant shall assign to Landlord all of Tenant’s warranties received from Tenant’s Contractor, Tenant’s Architect or any materialman or supplier in connection with the Tenant Improvements.                             3.4.10  Completion. Within ten (10) days after the Tenant’s completion of the Tenant Improvements, Tenant shall deliver to Landlord a breakdown of the total costs incurred by Tenant in constructing the Tenant Improvements. All of the Tenant Improvements shall remain the property of Tenant until the termination of this Lease, at which time they shall be and become the property of Landlord.               4.  Allowance.                      4.1  Tenant Improvement Allowance. Landlord shall pay to Tenant upon the terms and conditions set forth in this Section 4 up to Nine Hundred Forty-Three Thousand Eight Hundred Dollars ($943,800.00) (the “Maximum Tenant Improvement Allowance”) as a tenant improvement allowance (the “Tenant Improvement Allowance”) toward the cost of designing, construction and installing the Tenant Improvements in the Building). The Tenant Improvement Allowance may be used by Tenant only to pay for the design and construction of general office improvements in the Building. The Tenant Improvement Allowance may not be used to pay for (i) any trade fixtures, furniture, furnishing, equipment (except electrical, mechanical, plumbing and HVAC systems which may be paid for out of the Tenant Improvement Allowance), decorations, signs, inventory or other perso nal property, (ii) rent for leased equipment or other personal property, (iii) interest or financing costs, (iv) utility and permit fees or (v) administrative or overhead costs and expenses paid or incurred by Tenant in connection with the construction of the Tenant Improvements.                      4.2  Amount. Tenant shall notify Landlord in writing by January 1, 1999, of the amount of the Additional Allowance that Tenant will require from Landlord. If the total amount of the Tenant Improvement Allowance (i.e., the sum of the Base Allowance and the amount of the Additional Allowance requested by Tenant) exceeds Three Hundred Fourteen Thousand Six Hundred Dollars ($314,600.00) (the “Base Allowance”), the monthly Base Rent under this Lease shall be increased effective as of the Commencement Date by an amount equal to the product of (i) One and One-half Cents ($0.015) and (ii) the difference, between (x) the Tenant Improvement Allowance and (y) the Base Allowance. Tenant shall pay to Landlord on January 1, 1999 any additional Base Rent due to Landlord for the period commencing on the Commencement Date and ending on December 31, 199 8, as a result of Tenant’s election to request from Landlord a portion of the Additional Allowance. For purposes of this Lease, the “Additional Allowance” is defined as the positive difference between (i) the Maximum Tenant Improvement Allowance and (ii) the Base Allowance.                      4.3  Payment of the Tenant Improvement Allowance. Landlord shall pay the Tenant Improvement Allowance to Tenant within thirty (30) days after Tenant’s written request therefore, provided that (i) Tenant is not in default under the terms of this Lease after the expiration of any applicable cure period, (ii) Tenant has completed all of the Tenant Improvement Work in accordance with the Approved Working Drawings and this Work Letter, and (iii) Tenant has delivered to Landlord the following: (a) a copy of a “finaled” building permit issued by the City of Menlo Park or certificate of occupancy for the Premises, (b) a certificate of completion issued -------------------------------------------------------------------------------- by Tenant’s Architect, certifying that the Tenant Improvement Work has been completed in accordance with the Approved Working Drawings, (c) “as built” drawings for the Premises, (d) evidence that the total cost of the portion of the Tenant Improvement Work which may be paid for out of the Tenant Improvement Allowance is equal to or exceeds the amount of the Tenant Improvement Allowance requested by Tenant, which evidence shall be in the form of copies of paid invoices and the applicable construction contracts, and (e) unconditional lien waivers from Tenant’s Contractor and all subcontractors, materialmen and suppliers that have performed work or supplied materials in connection with the Tenant Improvement Work.               5.  Default. Tenant’s failure to timely commence or complete the Tenant Improvement Work or to comply with any of the other terms or conditions of this Work Letter shall constitute an Event of Default under the Lease.               6.  Representatives.                      6.1  Tenant’s Representative. Tenant has designated Tenant’s Representative as its sole representative with respect to the matters set forth in this Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter. Tenant shall not change the Tenant’s Representative without notice to Landlord.                      6.2  Landlord’s Representative. Landlord has designated Landlord’s Representative as its sore representative with respect to the matters set forth in this Work Letter, who shall have full authority and responsibility to act on behalf of Landlord as required in this Work Letter. Landlord shall not change Landlord’s Representative without notice to Tenant.               7.  Indemnity. Tenant shall indemnify, protect and defend (with counsel satisfactory to Landlord) and hold harmless Landlord and all other Indemnified Parties from and against any and all suits, claims, actions, losses, costs or expenses (including claims for workers’ compensation, attorneys’ fees and costs) based on personal injury or property damage caused in, or contract claims (including, but not limited to claims for breach of warranty) arising from the performance of the Tenant Improvement Work. Tenant shall repair or replace (or, at Landlord’s election, reimburse Landlord for the cost of repairing or replacing) any portion of the Building, Phase and/or Project, or item of Landlord’s equipment or any of Landlord’s real or personal property, damaged, lost or destroyed in the performance of the Tenant Improvement Work.               8.  No Representations or Warranties. Notwithstanding anything to the contrary contained in the Lease or this Work Letter, Landlord’ s participation in the preparation of the Preliminary Plans and the Approved Working Drawings shall not constitute any representation or warranty, express or implied, that the Preliminary Plans or the Approved Working Drawings are in conformity with applicable governmental codes, regulations or rules. Tenant acknowledges and agrees that the Premises are intended for use by Tenant and the specification and design requirements for the Tenant Improvements are not within the special knowledge or experience of Landlord.               9.  No Encumbrance. Tenant shall not mortgage, grant a security interest in or otherwise encumber all or any portion of the Tenant Improvements.               10.  Landlord Delays. The Commencement Date shall be delayed one (1) day for each day that Landlord is late in responding to Tenant’ s request for approval of the Preliminary Plans and Working Drawings as provided above.               11.  HVAC System. In the event Tenant elects to use a portion of the Premises for the operation of a data center, then, as part of the Tenant Improvement Work, Tenant shall install a HVAC system or unit in the Premises. Tenant’s installation of the HVAC system or unit in the Premises shall be subject to Landlord’s review and approval of Tenant’s plans and specifications for the HVAC system or unit (to be included as part of Tenant’s Preliminary Plans and Working Drawings). Landlord, by written notice to Tenant, may require Tenant to remove the HVAC system or unit at the end of the Term and repair any damage to the Premises due to Tenant’s removal of the HVAC system of unit.               12.  Conduit. Tenant shall have the right to install underground conduit in the Project to connect the various building in the Project that are leased by Tenant and the Generator, provided that Tenant complies with each of the following terms and conditions: (i) prior to installing additional conduit in the Phase, Tenant utilizes the existing conduit in the Phase to the extent the conduit can be used in a secure manner (excluding the Generator which will use its own dedicated conduit), (ii) Tenant installs additional conduit in the Phase only in -------------------------------------------------------------------------------- the location designated by Landlord; (iii) all of the terms and conditions contained in the Lease with respect to Tenant’s construction of additional improvements in the Premises, including Landlord’s right to approve Tenant’s proposed plans, shall apply with respect to Tenant’s installation of additional conduit in the Phase, and (iv) following Tenant’s installation of additional conduit in the Phase, Tenant shall restore the landscaping, parking lots and other areas within the Project that are disturbed or affected as a result of Tenant’s installation of additional conduit to their condition existing prior to Tenant’s installation of additional conduit, including applying a seal coat and striping to the parking lot in the area where the additional conduit is placed so that the patched area of the parking lot (resulting from the installation of the conduit) blends with and is not materially distinguishable from the remaining portion of the parking lot in th e Phase as reasonably determined by Landlord. -------------------------------------------------------------------------------- Schedule 1 Page 1 of 2 June 30, 1998 MENLO OAKS CORPORATE CENTER GENERAL BUILDING SPECIFICATIONS 1. Carpet Manufactured by Designweave “New Sabre”, 38oz. cut pile, glue down. Throughout u.o.n.       2. Base Burke 2 ½ inch top set base. Throughout u.o.n.       3. Doors Solid wood core door with Nevemar plastic laminate rustic quartered oak, full height 10’-0” door. As indicated on plans.       4. Frames Manufactured by Eclipse, painted aluminum, standard building finish. As indicated on plans.       5. Hardware Manufactured by Schlage, latchset (L-series 03A. Style: Lever) in brass.(Lockset not included u.o.n.) As indicated on plans.       6. Suspended Ceiling System USG Donn Fineline grid system. 2’X2” module size Armstrong Tegular Cortega, Minatone 2X2 No. 704A, White. Throughout u.o.n.       7. Lighting 2’X4’ parabolume fixture (18 cell) with accent Recessed incadescent light fixtures as indicated on plan. 1 each per 110 usable sq. ft.       8. Wall Finishes Smooth wall gyp. board painted with light roller finish. Building standard 2 coats or paint to cover, Kelley Moore or Fuller O’Brien or equal, flat latex or latex eggshell enamel.   Throughout u.o.n.                                           9. Window Covering Mini-blinds Building standard, Riviera #310 Sand. Throughout u.o.n.       10. Vinyl Tiles VCT: Azrock or equal As indicated on plans. -------------------------------------------------------------------------------- 11. Electrical Power Duplex power receptacles: Wall mounted Typical Office Conference Room Open Office Area- Ceiling J-Box or base feed to electrified furniture partition. 2 duplex receptacles 3 duplex receptacles. As indicated on plans.         12. Telephone/Data Combination telephone and data receptacle, note all data receptacles shall be double gang size. Ring and pull wire – wall mounted. Typical Office and Conference Room. Open Office Area 1 receptacle As indicated on plans.                                           13. Glass Glass sidelight adjacent to door. 2’-0’ wide location shown on space plan.       14. HVAC System Existing variable volume system, or package units, with economizer cycle. Throughout u.o.n.       15. Fire Sprinkler Building standard, semi recessed pendant heads designed for normal office use (light hazard), chrome or white escutcheon. Throughout u.o.n. -------------------------------------------------------------------------------- MENLO OAKS CORPORATE CENTER Schedule 1 GENERAL BUILDING SPECIFICATIONS Page 2 of 2 TOILET CORES June 30, 1998     1. Wall Finishes/Ceiling Smooth wall gypsum board with light roller finish. Two coats of paint to cover, Kelley Moore or Fuller O’Brien or equal, eggshell enamel. Ceiling height shall be 9’-0’. 2. Wall Finishes – Wet Walls Ceramic tile. 3. Flooring Ceramic tile flooring. 4. Toilet Partitions Ceiling hung with plastic laminate finish. 5. Fixtures Water closets and urinals shall be wall mounted with flushometer valves. 6. Accessories Bobrick semirecessed, brushed stainless steel finish. Provide floor drain at each toilet room. 7. Lavatories Plastic laminate counters with bullnosed edges, covered splash and wall supported at each end. Vitreous china lavatory, counter mounted. 8. Lighting Incandescent or fluorescent downlights and eggcrate soffitt lighting above lavatory. -------------------------------------------------------------------------------- EXHIBIT D COMMENCEMENT DATE MEMORANDUM         E*TRADE GROUP, INC., a Delaware corporation (“Tenant”), and MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), entered into a Lease (the “ Lease”) dated August   ,1998. Pursuant to the Lease, Landlord leases to Tenant and Tenant leases from Landlord space in Menlo Oaks Corporate Center in Menlo Park, California. Capitalized terms used herein and not defined herein shall have the same meanings as in the Lease.         Tenant hereby acknowledges and certifies to Landlord as follows:         (1)  Landlord delivered possession of the Premises to Tenant on ______,1998;         (2)  The Commencement Date occurred on                      ,1998;         (3)  The Term will expire on                ; and         (4)  Tenant has accepted and is currently in possession of the Premises.         IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this            day of                 ,           . “Tenant” E*TRADE GROUP, INC., a Delaware corporation By: Name: Its: By: Name: Its: -------------------------------------------------------------------------------- EXHIBIT E RULES AND REGULATIONS         1.  The sidewalks, driveways, entrances, lobbies, stairways and public corridors shall be used only as a means of ingress and egress and shall remain unobstructed at all times. The entrance and exit doors of all buildings and suites are to be kept closed at all times except as required for orderly passage. Loitering in any part of the Building or the Project or obstruction of any means of ingress or egress to the Project or any building within the Project is not permitted.         2.  Plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no rubbish, newspapers, trash or other inappropriate substances of any kind shall be deposited therein. Personal articles, equipment and clothing shall not be left in restrooms, showers, locker rooms or Common Areas except and unless such articles are stored properly within a locker, and in no circumstance shall such articles remain overnight. Landlord may remove and dispose, at Tenant’s expense, of any articles or property improperly stored or left in restroom, showers, locker rooms or other Common Areas.         3.  Walls, floors, windows, doors and ceilings shall not be defaced in any way and no one shall be permitted to mark, drive nails or screws or drill into, paint, or in any way mar any Building surface, except that pictures, certificates, licenses and similar items normally used in Tenant’s business may be carefully attached to the walls by Tenant in a manner to be prescribed by Landlord. Upon removal of such items by Tenant any damage to the walls or other surfaces shall be repaired by Tenant. No article may be attached to or hung from ceilings, ceiling grids or light fixtures. Tenant is required to protect carpet within its Premises from damage by the use of chair mats or other means below desks and work stations, and by the use of moisture barriers under plants.         4.  No awning, shade, sign, advertisement, notice or other article shall be inscribed, coated, painted, displayed or affixed on, in or to any window, door or wall, or any other part of the outside or inside of the Building or Premises without the prior written consent of Landlord. No window displays or other public displays shall be permitted without the prior written consent of Landlord. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside of the Premises. All tenant identification in the or on public corridor, lobby or other Common Area walls or doors will be installed by Landlord for Tenant with the cost borne by Tenant. No lettering or signs will be permitted on public corridor, lobby or other Common Area walls or doors except the name of Tenant, with the size, type and color of letters and the manner of attachment, style of display and location thereof to be p rescribed by Landlord. The directory of the Building will be provided exclusively for the identification and location of tenants in the Building, and Landlord reserves the right to exclude all other information therefrom. All requests for listing on the Building directory shall be submitted to the office of Landlord in writing. Landlord reserves the right to approve all listing requests. Any change requested by Tenant of Landlord of the name or names posted on directory, after initial posting, will be at the expense of Tenant.         5.  The weight, size and position of all safes and other unusually densely weighted or heavy objects used or placed in the Building shall be subject to approval by Landlord prior to installation and shall, in all cases, be supported and braced as prescribed by Landlord and as otherwise required by law. The repair of any damage done to the Building or property therein by the installation, removal or maintenance of such safes or other unusually heavy objects shall be paid for by Tenant. Tenant shall bear the cost of any consultant services employed by Landlord in evaluating the placement, location or bracing of unusually heavy items.         6.  No improper or unusually loud noises, vibrations or odors are permitted inside or outside the Building. No person shall be permitted to interfere in any way with other tenants in the Project or those having business with them. No person will be permitted to bring or keep within the Building any animal, cycle or vehicle (whether motor driven or otherwise) except with the prior written consent of Landlord. Bicycles of Tenant and its employees, agents and invitees shall be stored only in designated bicycle racks outside of Buildings and in no other location. No person shall dispose of bash, refuse, cigarettes or other substances of any kind any place inside or outside of the Building except in the appropriate refuse containers provided therefor. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of alcohol or drugs or who shall do any act or violation of these rules and regulations.         7.  All keying of office doors, and all reprogramming of Security Access Cards will be at the expense of Tenant. Tenant shall not re-key any door without making prior arrangements with Landlord. --------------------------------------------------------------------------------         8.  Tenant will not install or use any window coverings except those provided by Landlord, nor shall Tenant use any part of the Building or Phase, other than the Premises, for storage or for any other activity which would detract from the appearance of the Building or the Project or interfere in any way with the use, or enjoyment, of the Building, Phase or Project, by other Tenants. No storage, staging, display or placing of any material, product or equipment outside of Tenant’s Premises is permitted except as may be expressly approved in writing by Landlord.         9.  Any Tenant or agent, employee or invites thereof using the Premises after the Building has closed or on non-business days shall lock any entrance doors to the Building used immediately after entering or leaving the Building. No device may be employed to prop or hold open any Building entrance or suite entrance door without the prior written consent of Landlord. No door or passageway may be obstructed.         10.  The Building shall be open 7:00 a.m. to 6:00 p.m., Monday through Friday (holidays excepted). The hours during which the Building is open may be different than the Business Hours for the Building.         11.  Tenant and Tenant’s employees, agents, invitees, etc., shall not use more than Tenant’s allocated share of the Building parking as provided in the Lease. Automobile parking shall only be in designated areas. Parking shall be nose in only (backing into parking stalls is prohibited), and entirely within painted parking spaces. Overnight parking and parking by Tenant or Tenant’s agents or employees within areas marked visitor is prohibited. Landlord reserves the right to designate exclusive parking for tenants and visitors of the Project, and to require identification of Tenant’s and Tenant’s employees’ vehicles. Vehicles owned or operated by Tenant and its employees, invitees and agents which are parked improperly shall be subject to tow at Tenant’s expense. The servicing or repairing of vehicles on the Lot is prohibited. Tenant and its employees, agents and invitees shall obey all traffic signs in the Project. The vehicle speed limit within the Project is fifteen miles per hour (15 mph). Notwithstanding the foregoing, Tenant may park one (1) van in the Phase overnight.         12.  All equipment of any electrical or mechanical nature shall be placed and maintained by Tenant in settings approved by Landlord and installed so as to absorb or prevent any vibration, noise, interference or annoyance to Landlord and others, and shall not overload any circuit, nor draw more power than has been previously allocated to Tenant.         13.  No air conditioning, heating unit, antenna, electrical panel, alarm, phone system or other similar apparatus shall be installed or used by any Tenant without the prior written consent of Landlord. No modification of any building electrical, mechanical, plumbing or security system is permitted without the prior written consent of Landlord. Tenant is responsible for the proper maintenance and servicing of fire extinguishers and fire protection equipment within the Premises.         14.  Tenant and its employees, agents and invitees may not dispose of any refuse or other waste material except within trash containers for the Building of which the Premises are a part, and then only in compliance with applicable law and regulations. Tenants may not place any articles within a trash enclosure other than within a trash bin. Tenants may not place any cardboard boxes within trash containers unless such boxes have been flattened. The cost of storage, handling, hauling and dumping of Tenant’s trash in excess of quantities incident to similar office parks located in Menlo Park and Palo Alto shall be borne by Tenant. Tenant shall be responsible for closing and securing trash enclosure gates after Tenant or its agents, employees or invitees use the trash enclosure.         15.  No hand trucks may be used in the Building Common Areas except those equipped with rubber tires and rubber side guards. Tenants shall not employ any elevator within any Building for the moving of products, equipment or other non-personnel purposes without first installing proper protective elevator pads (to be provided by Landlord).         16.  Tenant shall notify Landlord immediately of any plumbing blockage, leak, electrical or equipment malfunction, broken Building glass, fire or other damage to the Premises or the Building.         17.  Landlord shall have the right, exercisable without notice or without liability to Tenant, to change the name and address of the Building and to modify these Rules and Regulations.         18.  Tenant shall protect dock areas and pavements from damage due to trucks and trailers.         19.  Tenant shall not store trucks or trailers in the Project, nor park trucks or trailers in the automobile parking areas, traffic aisles, walkways or the public streets adjacent to the Project. --------------------------------------------------------------------------------         20.  Tenant is encouraged to participate in local waste recycling programs when feasible.         21.  Tenant shall employ warm spectrum fluorescent lights in ceiling fixtures wherever feasible.         22.  Tenant shall employ water conservation measures in connection with Tenant’s use of water.         23.  Tenant shall coordinate with RIDES and SAMTRANS in making carpool, vanpool and transit information available to employees. Tenant shall establish an on-site location for the sale of SAMTRANS and CALTRANS transit tickets.         24.  Tenant shall employ vanpool and carpool parking spaces only for the purposes indicated.         25.  Tenant is encouraged to establish flextime and/or staggered working hours for employees.         26.  Tenant is encouraged to implement an employment program for local residents and to coordinate skill enhancement with local job training centers.         27.  Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building are prohibited, and each tenant shall cooperate to prevent same.         28.  Tenant shall be deemed to have read these Rules and Regulations and agrees to abide by these Rules and Regulations as a covenant of its lease of the Premises. Tenant shall inform all of Tenant’s employees, agents and invitees of these Rules and Regulations and shall be responsible for the observance of all of these Rules and Regulations by Tenant’s employees, agents and invitees.         29.  Capitalized terms used in these Rules and Regulations and not defined herein shall have the meanings set forth in each tenant’s lease of space in Menlo Oaks Corporate Center. -------------------------------------------------------------------------------- EXHIBIT F-1 FIRST EXPANSION OPTION SPACE Increment of Space No. Suite/Building Approximate Rentable Square Footage FEOS Current Lease Expiration Date 1 4600 Bohannon Drive (See Exhibit 1) 10,985 rsf November 20, 1999   2 4600 Bohannon Drive (See Exhibit 1) 14,193 rsf January 31, 2000 -------------------------------------------------------------------------------- EXHIBIT F-2 SECOND EXPANSION OPTION SPACE Increment of Space No. Suite/Building Approximate Rentable Square Footage SEOS Current Lease Expiration Date 1. 4600 Bohannon Drive (See Exhibit 1) 19,946 rsf October 27, 2001    2. 4700 Bohannon Drive (entire building) See Exhibit 2 62,920 rsf October 27, 2001 -------------------------------------------------------------------------------- Exhibit 1 [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- Exhibit 1 [FLOOR PLAN APPEARS HERE] -------------------------------------------------------------------------------- Exhibit 2 [MAP APPEARS HERE] -------------------------------------------------------------------------------- Exhibit G October 30, 1985 (Revised April 22, 1987) (Revised March 22, 1988) MENLO OAKS CORPORATE CENTER On-Building Signage criteria         1.  “on building signs” shall be limited to a maximum of two signs per building and shall be limited to one per elevation.         2.  Signage will be restricted to company logo or the spelling out of the company name.         3.  The size of the signage will not exceed 42” in height or 15’ in length. The total square footage of the area of the outside boundaries of the signage will not exceed twenty-two (22) square feet.         4.  Signs may be constructed of plastic or metal and are to be firmly attached to the building concrete. The connection will be reviewed by an engineer.         5.  Signs may not protrude more than 6” from face of building concrete.         6.  Signage may be illuminated by internal backlit procedures which result in silhouette letters or logo (commonly thought of as “halo” effect around the signage). Translucent backlit signs will be discouraged. Lighting from the ground will also be discouraged. There are to be no exposed conduits or electrical appurtenances on the building facade.         7.  Signage design, lettering style and color are subject to review and approval of the building owner. -------------------------------------------------------------------------------- EXHIBIT 10.8 SECOND AMENDMENT TO LEASE (4500 BOHANNON DRIVE)         THIS SECOND AMENDMENT TO LEASE (this “Amendment”) dated as of March 17 ,1999, is entered into between MENLO OAKS PARTNERS, L.P., a Delaware limited partnership (“Landlord”), and E*TRADE GROUP, INC., a Delaware corporation (“Tenant”).         THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts, understandings and intentions:         A.  Landlord and Tenant previously entered into that certain Menlo Oaks Corporate Center Standard Business Lease (4500 Bohannon Drive) dated as of August 18, 1998, as amended by that certain letter agreement dated January 18, 1999 (as amended, the “Lease”), pursuant to which Landlord leased to Tenant approximately sixty-two thousand nine hundred twenty (62,920) rentable square feet of space (the “Premises”) within the building known as 4500 Bohannon Drive, Menlo Park, California (the “4500 Bohannon Building”), as more particularly described in the Lease. The capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings given to such terms in the Lease.         B.  Pursuant to Section 26.1 of the Lease, Tenant has an option to lease from Landlord (i) approximately ten thousand nine hundred eighty-five (10,985) rentable square feet of additional space (the “First Increment Expansion Space”) within the building known as 4600 Bohannon Drive, Menlo Park, California (the “4600 Bohannon Building”), and (ii) approximately fourteen thousand one hundred ninety-three (14,193) rentable square feet of additional space (the “Second Increment Expansion Space”) in the 4600 Bohannon Building. The First Increment Expansion Space and the Second Increment Expansion Space (collectively, the “Expansion Space” ) is more particularly described in the Lease. The Expansion Space is referred to in the Lease as the “First Expansion Option Space.”         C.  Tenant has exercised the First Expansion Option with respect to both the First Increment Expansion Space and the Second Increment Expansion Space. In connection therewith, Landlord and Tenant are amending the Lease to, among other things, extend the Term, expand the size of the Premises to include the Expansion Space, and increase both the Base Rent and the percentage of Operating Expenses and Impositions for which Tenant is responsible under the Lease, as provided herein.         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the parties, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:         1.  First Increment Expansion Space.               1.1.  Expansion of Premises. Effective as of the date on which Landlord delivers possession of the First Increment Expansion Space to Tenant in the condition set forth in Section 1.7 below (the “First Increment Effective Date”), the Premises shall be expanded to include, in addition to the space presently leased to Tenant under the Lease, the First Increment Expansion Space. Landlord and Tenant agree that for all purposes under the Lease, the Rentable Area of the First Increment Expansion Space shall be deemed to be the rentable square footage of the First Increment Expansion Space as stated in Recital B of this Amendment.               1.2.  Definitions. Effective as of the First Increment Effective Date, the following terms contained in the Lease shall have the meanings set forth below:                      1.2.1.  Premises. The term “Premises” as used in the Lease shall refer to the existing Premises, the First Increment Expansion Space and the Second Increment Expansion Space (to the extent the Second Increment Effective Date has occurred prior to the First Increment Effective Date).                      1.2.2.  Building. The term “Building” as used in the Lease shall refer to both the 4500 Bohannon Building and the 4600 Bohannon Building.                      1.2.3.  Building Common Areas. The term “Building Common Areas” as used in the Lease shall mean (i) the areas and facilities within the 4500 Bohannon Building provided and designated by -------------------------------------------------------------------------------- Landlord for the general use, convenience or benefit of Tenant and other tenants of the 4500 Bohannon Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the 4500 Bohannon Building) and (ii) the areas and facilities within the 4600 Bohannon Building provided and designated by Landlord for the general use, convenience or benefit of Tenant and other tenants of the 4600 Bohannon Building (e.g., common stairwells, stairways, hallways, shafts, elevators, restrooms, janitorial telephone and electrical closets, pipes, ducts, conduits, wires and appurtenant fixtures servicing the 4600 Bohannon Building).                      1.2.4.  Tenant’s Building Percentage Share. The term “Tenant’s Building Percentage Share” as used in the Lease shall mean (i) one hundred percent with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the operation of the 4500 Bohannon Building and (ii) a percentage equal to the Rentable Area of the Premises in the 4600 Bohannon Building divided by the Rentable Area of the 4600 Bohannon Building with respect to Operating Expenses amid other costs and expenses attributable to or incurred in connection with the operation of the 4600 Bohannon Building. If the Rentable Area of the Premises or the Rentable Area of either the 4500 Bohannon Building or the 4600 Bohannon Building is changed, then (i) Tenant’s Building Percentage Share with respect to the 4500 Bohannon Building sha ll be adjusted to a percentage equal to the Rentable Area of the Premises in the 4500 Bohannon Building divided by the Rentable Area of the 4500 Bohannon Building and (ii) Tenant’s Building Percentage Share with respect to the 4600 Bohannon Building shall be adjusted to a percentage equal to the Rentable Area of the Premises in the 4600 Bohannon Building divided by the Rentable Area of the 4600 Bohannon Building.                      1.2.5.  Rent. The term “Rent” shall mean Base Rent, Additional Rent, First Increment Base Rent (defined in Section 1.3), Second Increment Base Rent (defined in Section 2.3) and all other amounts payable by Tenant under the Lease.                      1.2.6.  Base Rent. For purposes of Sections 6.2(e), 7.2, 12.4, 13.2, 14.1, 16.1, 19.12, 25.2(a) and (b) and 25.4 of the Lease, the term “Base Rent” shall mean both the Base Rent, the First Increment Base Rent and the Second Increment Base Rent.               1.3.  First Increment Base Rent. In addition to Tenant’s obligation to pay to Landlord the Base Rent described in Section 4.1 of the Lease, Tenant shall pay to Landlord base rent with respect to Tenant’s lease of the First Increment Expansion Space in the amount of Thirty-Four Thousand Nine Hundred Sixty-One and 14/100 Dollars ($34,961.14) per month (the “First Increment Base Rent”). The First Increment Base Rent shall be increased on November 15, 2000, and on each November 15 thereafter during the Term by three and one-half percent (3.5%), regardless of whether the First Increment Effective Date has occurred. Tenant’ s obligation to pay to Landlord the First Increment Base Rent shall commence on the forty-fifth (45th) day after First Increment Effective Date (hereinafter referred to as the “First Increment Rent Commencement Date”) and continue thereafter duri ng the Term. Tenant shall pay to Landlord the First Increment Base Rent in advance, on the First Increment Rent Commencement Date and on the first day of each calendar month thereafter, together with Tenant’s payment to Landlord of the Base Rent described in Section 4.1 of the Lease, without deduction, abatement or setoff whatsoever. If the First Increment Rent Commencement Date or the last day of the Term is other than the first or last day of a calendar month, respectively, then the First Increment Base Rent for the partial calendar month in which the First Increment Rent Commencement Date or the end of the Term occurs shall be prorated on a per diem basis, based on the number of days in such calendar month.               1.4.  Tenant’s Share. Effective as of the First Increment Effective Date, the percentages listed below shall be adjusted as follows:                      1.4.1.  Tenant’s Phase Percentage Share. Tenant’s Phase Percentage Share shall be equal to the sum of (i) Tenant’s Phase Percentage Share immediately prior to the First Increment Effective Date and (ii) six and 38/100ths percent (6.38%), subject to further adjustments in accordance with Section 1.13 of the Lease.                      1.4.2.  Tenant’s Project Percentage Share. Tenant’s Project Percentage Share shall be equal to the sum of (i) Tenant’s Project Percentage Share immediately prior to the First Increment Effective Date and (ii) two and 93/100ths percent (2.93%), subject to further adjustments in accordance with Section 1.14 of the Lease. --------------------------------------------------------------------------------               1.5.  Term. Effective as of the First Increment Effective Date, the Term shall be extended until the last day of the tenth (10th) year after the later of (i) the First Increment Effective Date or (ii) the Second Increment Effective Date (defined in Section 2.1), subject to extension pursuant to Section 26.1 (e) of the Lease.               1.6.  Parking. Effective as of the First Increment Effective Date, the percentage of the available parking spaces in the Phase that Tenant is entitled to use on a non-exclusive basis shall be equal to the sum of (i) the percentage of available parking spaces in the Phase that Tenant is entitled to use immediately prior to the First Increment Effective Date and (ii) six and 38/100ths percent (6.38%).               1.7.  Delivery. Landlord shall use commercially reasonable efforts to recover possession of the First Increment Expansion Space from the existing tenant (the “First Increment Existing Tenant”) following the expiration of the First Increment Existing Tenant’s lease of the First Increment Expansion Space (hereinafter referred to as the “First Increment Existing Lease” ). If the First Increment Existing Tenant fails to surrender possession of the First Increment Expansion Space to Landlord within fourteen (14) days after the expiration of the First Increment Existing Lease, Landlord shall file an unlawful detainer action against the First Increment Existing Tenant for recovery of possession of the First Increment Expansion Space and prosecute the action with reasonable diligence until possession of the First Increment Expansion Space if obtained. Landlord shall deliver pos session of the First Increment Expansion Space to Tenant in a broom clean condition, with all building systems in working order and the roof in water-tight condition. Except as provided above, Tenant shall accept delivery of the First Increment Expansion Space in its “as is” condition as of the First Increment Effective Date, without any representation or warranty of any kind from Landlord.         2.  Second Increment Expansion Space.               2.1.  Expansion of Premises. Effective as of the date on which Landlord delivers possession of the Second Increment Expansion Space to Tenant in the condition set forth in Section 2.6 below (the “Second Increment Effective Date”), the Premises shall be expanded to include, in addition to the space then leased to Tenant under the Lease, the Second Increment Expansion Space. Landlord and Tenant agree that for all purposes under the Lease, the Rentable Area of the Second Increment Expansion Space shall be deemed to be the rentable square footage of the Second Increment Expansion Space as stated in Recital B of this Amendment.               2.2.  Definitions. Effective as of the Second Increment Effective Date, the following terms contained in the Lease shall have the meanings set forth below:                      2.2.1.  Premises. The term “Premises” as used in the Lease shall refer to the existing Premises (to the extent the First Increment Effective Date has occurred prior to the Second Increment Effective Date), the First Increment Expansion Space and the Second Increment Expansion Space.                      2.2.2.  Tenant’s Building Percentage Share. The term “Tenant’s Building Percentage Share” as used in the Lease shall mean (i) one hundred percent with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the operation of the 4500 Bohannon Building and (ii) a percentage equal to the Rentable Area of the Premises in the 4600 Bohannon Building divided by the Rentable Area of the 4600 Bohannon Building with respect to Operating Expenses and other costs and expenses attributable to or incurred in connection with the operation of the 4600 Bohannon Building. If the Rentable Area of the Premises or the Rentable Area of either the 4500 Bohannon Building or the 4600 Bohannon Building is changed, then (i) Tenant’s Building Percentage Share with respect to the 4500 Bohannon Building shal l be adjusted to a percentage equal to the Rentable Area of the Premises in the 4500 Bohannon Building divided by the Rentable Area of the 4500 Bohannon Building and (ii) Tenant’s Building Percentage Share with respect to the 4600 Bohannon Building shall be adjusted to a percentage equal to the Rentable Area of the Premises in the 4600 Bohannon Building divided by the Rentable Area of the 4600 Bohannon Building.                      2.2.3.  Rent. The term “Rent” shall mean Base Rent, Additional Rent, First Increment Base Rent (defined in Section 1.3), Second Increment Base Rent (defined in Section 2.3) and all other amounts payable by Tenant under the Lease.                      2.2.4.  Base Rent. For purposes of Sections 6.2(e), 7.2, 12.4, 13.2, 14.1, 16.1, 19.12, 25.2(a) and (b) and 25.4 of the Lease, the term “Base Rent” shall mean both the Base Rent, the First Increment Base Rent and the Second Increment Base Rent. --------------------------------------------------------------------------------                      2.2.5.  Second Increment Base Rent. In addition to Tenant’s obligation to pay to Landlord the Base Rent described in Section 4.1 of the Lease, Tenant shall pay to Landlord base rent with respect to Tenant’s lease of the Second Increment Expansion Space in the amount of Forty-Five Thousand One Hundred Seventy-One Dollars ($45,171.00) per month (the “Second Increment Base Rent”). The Second Increment Base Rent shall be increased on November 15, 2000, and on each November 15 thereafter during the Term by three and one-half percent (3.5%), regardless of whether the Second Increment Effective Date has occurred. Tenant’s obligation to pay to Landlord the Second Increment Base Rent shall commence on the forty-fifth (45th) day after Second Increment Effective Date (hereinafter referred to as the “Second Increment Rent Commencement Date”) and continues thereafter during the Tenn. Tenant shall pay to Landlord the Second Increment Base Rent in advance, on the Second Increment Rent Commencement Date and, thereafter, on the first day of each calendar month, together with Tenant’s payment to Landlord of the Base Rent described in Section 4.1 of the Lease, without deduction, abatement or setoff whatsoever. If the Second Increment Rent Commencement Date or the last day of the Term is other than the first or last day of a calendar month, respectively, then the Second Increment Base Rent for the partial calendar month in which the Second Increment Rent Commencement Date or the end of the Term occurs shall be prorated on a per diem basis, based on the number of days in such calendar month.               2.3.  Tenant’s Share. Effective as of the Second Increment Effective Date, the percentages listed below shall be adjusted as follows:                      2.3.1.  Tenant’s Phase Percentage Share. Tenant’s Phase Percentage Share shall be equal to the sum of (i) Tenant’s Phase Percentage Share immediately prior to the Second Increment Effective Date and (ii) eight and 25/100ths percent (8.25%), subject to further adjustments in accordance with Section 1.13 of the Lease.                      2.3.2.  Tenant’s Project Percentage Share. Tenant’s Project Percentage Share shall be equal to the sum of (i) Tenant’s Project Percentage Share immediately prior to the Second Increment Effective Date and (ii) three and 6/10ths percent (3.6%), subject to further adjustments in accordance with Section 1,14 of the Lease.               2.4.  Term. Effective as of the Second Increment Effective Date, the Term shall be extended until the last day of the tenth (10th) year after the later of (i) the First Increment Effective Date or (ii) the Second Increment Effective Date, subject to extension pursuant to Section 26.2(e) of the Lease.               2.5.  Parking. Effective as of the Second Increment Effective Date, the percentage of the available parking spaces in the Phase that Tenant is entitled to use on a non-exclusive basis shall be equal to the sum of (i) the percentage of available parking spaces in the Phase that Tenant is entitled to use immediately prior to the Second Increment Effective Date and (ii) eight and 25/100ths percent (8.25%).               2.6.  Delivery. Landlord shall use commercially reasonable efforts to recover possession of the Second Increment Expansion Space from the existing tenant (the “Second Increment Existing Tenant”) following the expiration of the Second Increment Existing Tenant’s lease of the Second Increment Expansion Space (hereinafter referred to as the “Second Increment Existing Lease”). If the Second Increment Existing Tenant fails to surrender possession of the Second Increment Expansion Space to Landlord within fourteen (14) days after the expiration of the Second Increment Existing Lease, Landlord shall file an unlawful detainer action against the Second Increment Existing Tenant for recovery of possession of the Second Increment Expansion Space and prosecute the action with reasonable diligence until possession of the Second Increment Expansion Space if obtained. Landlord shall deliver possession of the Second Increment Expansion Space to Tenant in a broom clean condition, with all building systems in working order and the roof in water-tight condition. Except as provided above, Tenant shall accept delivery of the Second Increment Expansion Space in its “as is” condition as of the Second Increment Effective Date, without any representation or warranty of any kind from Landlord.         3.  Security Deposit. Concurrently with the execution of this Amendment, Tenant shall deliver to Landlord an additional security deposit (the “Additional Security Deposit”) in the amount of One Hundred Nine Thousand Two Hundred Eleven and 69/100 Dollars ($109,211.69). The Additional Security Deposit shall be combined with the Security Deposit and secure the performance of all of Tenant’s obligations under the Lease. Tenant shall not be entitled to interest on the Additional Security Deposit. From and after the date of this Amendment, the term “Security Deposit” as used in the Lease shall mean both the original Security Deposit and the Additional Security Deposit. --------------------------------------------------------------------------------         4.  Signage. Notwithstanding anything to the contrary contained in the Lease, Tenant may not install, construct or place any exterior signage on the 4600 Bohannon Building.         5.  Tenant Improvement Allowance. Landlord shall not be required to pay to Tenant any tenant improvement allowance or inducement in connection with or as a result of Tenant’s lease of the Expansion Space.         6.  Entire Agreement. This Amendment represents the entire understanding between Landlord and Tenant concerning the subject matter hereof, and there are no understandings or agreements between them relating to the Lease, the Premises or the Expansion Space not set forth in writing and signed by the parties hereto. No party hereto has relied upon any representation, warranty or understanding not set forth herein, either oral or written, as an inducement to enter into this Amendment.         7.  Continuing Obligations. Except as expressly set forth to the contrary in this Amendment, the Lease remains unmodified and in full force and effect. To the extent of any conflict between the terms of this Amendment and the terms of the Lease, the terms of this Amendment shall control.         IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.      “Landlord” MENLO OAKS PARTNERS, L.P., a Delaware limited partnership   By:   AM Limited Partners, a California limited partnership, its General Partner             By:   Amarok Menlo, Inc., a California corporation, its General Partner             By:   /s/ J.Marty Brill, Jr.      --------------------------------------------------------------------------------      J. Marty Brill, Jr. President      “Tenant” E*TRADE GROUP, INC. a Delaware corporation   By:   /s/ Robert Clegg      --------------------------------------------------------------------------------      Name: Robert Clegg Its: Vice President Corp Services        By:   /s/ Jerry Dark      --------------------------------------------------------------------------------      Name: Jerry Dark Its: Vice President, Corp Resources -------------------------------------------------------------------------------- January 18, 1999 VIA FACSIMILE E*Trade Group, Inc. 2400 Geng Road Palo Alto, CA 94303 Attn: Mr. Robert Clegg         Re: Lease of 4500 Bohannon Drive, Menlo Park, California Dear Robert:               Reference is made to that certain Menlo Oaks Corporate Center Standard Business Lease (4500 Bohannon Drive) (the “Lease”) dated as of August 18, 1998, by and between Menlo Oaks Partners, L.P., a Delaware limited partnership (“Landlord”), and E*Trade Group, Inc., a Delaware corporation (“Tenant”). Capitalized terms used herein and not defined herein shall have the meanings set forth in the lease.               This letter (this “Letter Agreement”) shall evidence Landlord’s and Tenant’s amendment of the Lease as follows:               1.  Preliminary Plans. Landlord hereby approves Tenant’s Preliminary Plans described in Exhibit 1, attached hereto.               2.  Restoration/Modification Obligation. Tenant shall deliver to Landlord for Landlord’s review and approval Tenant’s proposed plans and specifications (the “Modification Work Plans”) for the restoration and modification work described in Exhibit 2, attached hereto (hereinafter referred to as the “Modification Work”), not later than one hundred twenty (120) days prior to the expiration of the Term; provided, however, if the Lease is terminated prior to the expiration of the Term, then Tenant shall deliver to Landlord for Landlord’s review and approval the Modification Work Plans within ninety (90) days after the termination of the Lease. Landlord shall not unreasonably withhold its approval of the Modification Work Plans. Tenant shall complete the Modification Work by the expiration of the Term; provided, however, if the Lease is terminated prior to th e expiration of the Term, Tenant shall commence the Modification Work within ten (10) days after Landlord approves the Modification Work Plans and complete the Modification Work within ninety (90) days after the termination of the Lease.               3.  Additional Deposit. Within ten (10) days after the execution of this Letter Agreement, Tenant shall deliver to Landlord an additional deposit (the “Additional Deposit”) in the amount of Three Hundred Thousand Dollars ($300,000.00). The Additional Deposit shall secure Tenant’s obligations under this Letter Agreement, including Tenant’s obligation to perform the Modification Work.                      a.  Delivery of Letter of Credit. In lieu of depositing the Additional Deposit in cash, Tenant may deliver to Landlord a clean, irrevocable and unconditional letter of credit (the “LC”) in compliance with the terms, provisions and requirements of this Section 3, in the amount of the Additional Deposit and issued by a major California financial institution reasonably acceptable to Landlord.                      b.  Term and Renewal of Letter of Credit. The LC shall be for a term of one (1) year and shall be automatically renewed each year for an additional twelve (12) months from the date of expiration of the LC through the ninetieth (90th) day after the expiration or earlier termination of the Lease. Tenant shall renew, extend or replace the LC as necessary and deliver written evidence thereof to Landlord at least thirty (30) days prior to the expiration date of the LC so that a valid LC which complies with each requirement of this Section 3 is in effect during the entire period required hereby. If Tenant fails to so renew, extend or replace the LC and deliver such written evidence to Landlord, and such failure Continues for a period of five (5) days after the date such evidence is due to Landlord, Landlord shall be entitled to immediately draw the entire am ount of the LC, and hold such sum as security deposit for Tenant’s faithful performance of its obligations under this Letter Agreement. If Landlord draws down on the LC pursuant to this Section 3.b as a result of Tenant’s failure to renew, extend or replace the LC and deliver such written notice to Landlord, then Tenant shall have the option of delivering to Landlord a substitute LC which meets all of the requirements set forth in this Section 3 in exchange for Landlord returning to Tenant the portion of the Additional Deposit held by Landlord in cash. -------------------------------------------------------------------------------- E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 2                      c.  Amount of Draw on Letter of Credit. Upon the occurrence of a default by Tenant under this Letter Agreement, Landlord shall be entitled to obtain payment under the LC, in such amount as may be required to satisfy Tenant’s outstanding obligations under this Letter Agreement and shall apply such amount to said obligations. Specifically, Landlord shall be entitled to obtain partial draws pursuant to the LC in the amounts that Tenant is in default.                      d.  Manner of Presentment. Landlord is authorized to draw, for the account of Tenant, the amounts allowable pursuant to this Section 3 by a draft, which shall be payable at sight, accompanied by a statement signed by Landlord that (a) Landlord is entitled to draw on the amount set forth in said draft pursuant to this Letter Agreement, or (b) Landlord is entitled to draw on the full amount of the LC as a result of a failure by Tenant to renew, extend or replace the LC pursuant to the terms of this Letter Agreement. Payment of the draft shall be made in the manner agreed upon by the issuing bank, but Tenant hereby consents to such payment in the manner as Landlord may designate in the draft.                      e.  Return of Additional Deposit. Provided and on the condition that Tenant has performed all of Tenant’s Modification Work, Landlord shall return the Additional Deposit to Tenant within ninety (90) days after the expiration or earlier termination of the Lease. If Landlord sells or otherwise transfers Landlord’s rights or interest under the Lease, Landlord shall deliver the Additional Deposit to the transferee whereupon Landlord shall be released from any further liability to Tenant with respect to the Additional Deposit.               4.  Failure to Timely Perform the Modification Work. If Tenant fails to deliver to Landlord the Modification Work Plans, commence construction of the Modification Work or complete the Modification Work within the time periods or by the dates required pursuant to Section 2 above, then Landlord, by written notice to Tenant, may, but shall not be obligated to, either (i) perform the Modification Work and apply the Additional Deposit toward the cost of performing the Modification Work or (ii) elect not to perform the Modification Work and retain for Landlord’s account all or a portion of the Additional Deposit in an amount equal to the estimated cost of performing the Modification Work, as reasonably determined by Landlord. If the cost of completing the Modification Work or exceeds the amount of the Additional Deposit, Tenant shall pay such excess amount to Landlord within ten (10) days after Landlord’s written request therefor.               5.  Landlord’s Election. Notwithstanding anything to the contrary contained in this Letter Agreement, Landlord may elect for Tenant not to perform the Modification Work by written notice to Tenant not later than (i) one hundred eighty (180) days prior to the expiration of the Term or (ii) if the Lease is terminated prior to the expiration of the Term, within ten (10) days after the termination of the Lease. If Landlord elects for Tenant not to perform the Modification Work, Landlord shall return the Additional Deposit to Tenant.               6.  Tenant Improvement Allowance.                      a.  Basic Lease Information. The provisions titled “Additional Allowance” and “ Adjustment for Overage” under the heading “Tenant Improvements” in the Basic Lease Information are hereby deleted.                      b.  Section 4.1 of Work Letter. The first sentence of Section 4.1 of the Work Letter attached as Exhibit C to the Lease is hereby deleted and replaced by the following:         “Landlord shall pay to Tenant upon the terms and conditions set forth in this Section 4 the amount of Three Hundred Fourteen Thousand Six Hundred Dollars ($314,600.00) as a tenant improvement allowance (the “Tenant Improvement Allowance”) toward the cost of designing, constructing and installing the Tenant Improvements in the Building.”                      c.  Section 4.2 of Work Letter. Section 4.2 of the Work Letter is hereby deleted in its entirety.               7.  Commencement of Tenant Improvement Work. The date in Section 3.4.6 of the Work Letter shall be changed to February 1, 1999. -------------------------------------------------------------------------------- E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 3               8.  Condition Precedent. The effectiveness of this Letter Agreement and the obligations of Landlord and Tenant hereunder are conditioned upon the execution by Landlord and Tenant of a separate letter agreement of even date herewith amending that certain Menlo Oaks Corporate Center Standard Business Lease (4200 Bohannon Drive) dated as of August 18, 1998, by and between Landlord, as landlord, and Tenant, as tenant.               9.  Counterparts. This Letter Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall constitute one (1) and the same instrument. This Letter Agreement shall become binding when (i) the condition precedent set forth in Section 8 herein is met and (ii) any one (1) or more counterparts hereof, individually or taken together, shall bear the signatures of Landlord and Tenant.               10.  Conflicts. To the extent that any of the terms contained in this Letter Agreement conflict with the Lease, the terms contained in this Letter Agreement shall control. E*Trade Group, Inc. January 18, 1999 Attn: Mr. Robert Clegg Page 4 Except as modified hereby, the Lease is unmodified and in full force and effect.               Please execute this Letter Agreement in the space below (and return the same to me) to evidence your agreement to the foregoing.      Very truly yours,                  MENLO OAKS PARTNERS, L.P., a Delaware limited partnership        By:   AM Limited Partners, a California limited           partnership, its General Partner        By:   Amarok Menlo, Inc., a California           corporation, its General Partner --------------------------------------------------------------------------------          By:   /s/ J. Marty Brill, Jr.      --------------------------------------------------------------------------------      Name: J. Marty Brill, Jr. Its: President          By:   /s/ John B. Harrington      --------------------------------------------------------------------------------      Name: John B. Harrington Its: Vice President/Secretary AGREED AND ACCEPTED: E*TRADE GROUP, INC., a Delaware corporation      By:  /s/ Robert Clegg      --------------------------------------------------------------------------------              Name: Robert Clegg         Its: Vice President           By:  /s/ Len Purkis      --------------------------------------------------------------------------------              Name: Len Purkis         Its: Chief Financial Officer      -------------------------------------------------------------------------------- EXHIBIT 1 PRELIMINARY PLANS The term “Preliminary Plans” shall refer to the plans listed below prepared by Studios Architecture. Sheet No. Title Date A0.00 Cover Sheet 10/30/98 A1.11 Building 4500-First Floor Demo Plan 10/30/98 A1.12 Building 4500-Second Floor Demo Plan 10/30/98 A2.11 Building 4500-First Floor Plan 10/30/98 A2.12 Building 4500-Second Floor Plan 10/30/98 A6.11 Building 4500-First Floor R.C.P. 10/30/98 A6.12 Building 4500-Second Floor R.C.P. 10/30/98 -------------------------------------------------------------------------------- EXHIBIT 2 RESTORATION CONDITION SPECIFICATIONS All citations to “Sheets” refer to the Preliminary Plans. Item Modification Work Required   Restrooms located on first floor of Building Tenant shall demolish the restrooms constructed by Tenant on the first floor and reconstruct the restrooms in the location where the first floor restrooms are located as of the date of the Lease. The finishes within the restrooms shall be the same as used by Tenant in constructing the first floor restrooms as shown on the Preliminary Plans, subject to Landlord’s review and approval of such finishes which are to be specified by Tenant’s Architect in the Modification Work Plans.   Training room Tenant shall convert the training room constructed on the first floor of the Building to general purpose office space, compatible with (and with finishes similar to) other general office space within the Building. The general purpose office space shall include, but not be limited to, electrical distribution and mechanical systems in quantities compatible with (and similar to) other general office space within the Building as reasonably determined by Landlord.   Museum Tenant shall convert the museum constructed on the first floor of the Building, and the floor area occupied by the first floor restroom constructed by Tenant (and to be demolished as described above), to general purpose office space, compatible with (and with finishes similar to) other general office space within the Building. The general purpose office space shall include, but not be limited to, electrical distribution and mechanical systems in quantities compatible with (and similar to) other general office space within the Building as reasonably determined by Landlord.   Ceiling systems The reflected ceiling plan of the Preliminary Plans indicates that portions of the ceiling existing as of the date of the Lease are to be removed and, following completion of Tenant’s work in the Premises, there shall be no suspended ceiling system in these areas but instead the underside of the structure of the second floor, or roof, as the case may be, shall be exposed. In such areas, Tenant shall install a suspended ceiling system to match the adjacent ceiling system, subject to Landlord’s review and approval of such system to be specified in the Modification Work Plans, and which shall be installed with a uniform and level grid, as if all of such areas were finished with the ceiling system at the time of Tenant’s construction activities. The finishes, including but not limited to mechanical systems, lighting and other electrical distribution shall conform to other general office space within the Building as reasonably determined by Landlord. -------------------------------------------------------------------------------- Gypsum board ceiling system The reflected ceiling plan of the Preliminary Plans indicates that portions of the ceiling existing as of the date of the Lease are to be removed and, following completion of Tenant’s work in the Premises, in certain areas including the training room on the first floor, and accent areas between grid line B and D on the second floor, gypsum board ceiling will be installed. In such areas, Tenant shall remove the gypsum board ceiling and install a suspended ceiling system to match the adjacent ceiling system specified in the Modification Work Plans, and which ceiling system shall be installed with a uniform and level grid, as if all of such areas were finished with the ceiling system at the time of Tenant’s construction activities. The finishes, including but not limited to mechanical systems, lighting and other electrical distribution shall conform to other general office space within the Building as reasonably determined by Landlord.   Building infrastructure Six (6) doors with flames in good condition, six (6) doors with frames including integral side lights in good condition and VAV boxes that are demolished by Tenant, shall be palletized and delivered to Landlord’s designated storage area.   Lobby The fire rated condition of the lobby will be restored and the gypsum board finishes to the stairway (excluding the handrail/guardrail), the finishes to the stairway landing columns, gypsum board ceiling, and wall finishes will be restored including but not limited to mechanical systems, lighting and other electrical distribution as reasonably determined by Landlord.   Fire Pole The fire pole that is being installed at the first and second floor of the building will be removed and the affected areas, including but not limited to repair of the penetration in the second floor, shall be restored to general purpose office as reasonably determined by Landlord.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.2—1997 Directors Stock Option Plan T.J.T., INC. 1997 DIRECTORS STOCK OPTION PLAN ADOPTED ON NOVEMBER 18, 1997 and AMENDED ON FEBRUARY 22, 2000 ARTICLE 1: ESTABLISHMENT AND PURPOSE. 1.1   Establishment. T.J.T., Inc., a Washington corporation (the "Company") hereby establishes the T.J.T., Inc. 1997 Stock Option Plan (the "Plan") effective as of November 18, 1997. 1.2   Purpose. The purpose of the Plan is to provide a means by which each director of the Company who is not otherwise employed on a full-time basis by the Company or of any affiliate of the Company (each such person being hereinafter referred to as a "Non-Employee Director") will be given an opportunity to purchase stock of the Company.     1.2.1   The Plan is intended to strengthen the mutuality of interests between the Non-Employee Directors and the Company's shareholders and is designed to serve these purposes by offering stock options, thereby providing a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.     1.2.2   The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended from time to time (the "Code").     1.2.3   The Company, by means of the Plan, seeks to retain the services of persons now serving as Non-Employee Directors of the Company, to secure and retain the services of persons capable of serving in such capacity, and to provide incentives for such persons to exert maximum efforts for the success of the Company. ARTICLE 2: ADMINISTRATION. 2.1   The Plan shall be administered by the Board of Directors of the Company (the "Board") unless and until the Board delegates administration to a committee, as provided in subparagraph 2.2. 2.2   The Board may delegate administration of the Plan to a committee of not fewer than two (2) members of the Board (the "Committee"). If administration is delegated to a Committee, the Committee shall have full power and authority to administer the Plan in its sole discretion. Decisions of the Committee or any delegate as permitted by the Plan shall be final, conclusive, and binding on all participants. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan. The costs and expenses of administering the Plan shall be borne by the Company. ARTICLE 3: SHARES SUBJECT TO THE PLAN.   The shares which may be made subject to awards under the Directors Plan shall be shares of common stock, which may be either authorized and unissued shares, or reacquired shares. The shares that may be sold pursuant to options granted under the Directors Plan shall not exceed in the aggregate two hundred thousand (200,000) shares of the Company's common stock. If any option granted under the Directors Plan shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under such option shall again become available for the Directors Plan.         35 -------------------------------------------------------------------------------- ARTICLE 4: ELIGIBILITY.   Options shall be granted only to Non-Employee Directors of the Company. ARTICLE 5: NON-DISCRETIONARY GRANTS. 5.1   On November 18, 1997, each person who is then a Non-Employee Director or a Non-Employee Director nominee shall be granted an option to purchase five thousand (5,000) shares of common stock of the Company on the terms and conditions set forth herein. 5.2   Each person who is, after February 24, 1998, elected for the first time to be a Non-Employee Director shall, upon the date of his initial election to be a Non-Employee Director by the Board or stockholders of the Company, be granted an option to purchase five thousand (5,000) shares of common stock of the Company on the terms and conditions set forth herein. 5.3   In addition to the foregoing, the executive committee of the Board of Directors may, with approval of the Board of Directors, grant additional options to Non-Employee Directors from time to time. ARTICLE 6: OPTIONS.   Each option granted under the Plan shall be in the form of a non-qualified option. Options shall be subject to the terms and conditions set forth in Article 5 and this Article 6, and award agreements governing options shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Board or Committee shall deem desirable. 6.1   The term of each option commences on the date it is granted and, unless sooner terminated as set forth herein, expires on the date ("Expiration Date") ten (10) years from the date of grant. If the optionee's service as a Director or subsequent services as an employee of or consultant to the Company terminates for any reason or for no reason, the option shall terminate on the earlier of the Expiration Date or the date three (3) months following the date of termination of service; provided, however, that if such termination of services is due to the optionee's death, the option shall terminate on the earlier of the Expiration Date or eighteen (18) months following the date of the optionee's death. In any and all circumstances, an option may be exercised following termination of the optionee's service as a Director of the Company only as to that number of shares as to which it was exercisable on the date of termination of such service under the provisions of subparagraph 6.5. 6.2   The exercise price of each option shall be 100 percent of the Fair Market Value of the stock subject to such option on the date such option is granted. "Fair Market Value" means, as of any date, the value of the common stock of the Company determined as follows:     6.2.1   If the common stock is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in common stock) on the last market trading day prior to the date of determination, as reporting in the Wall Street Journal or such other source as the Board deems reliable;     6.2.2   If the common stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of common stock shall be the mean between the bid and asked price for the common stock on the last market trading day prior to the date of determination, as reported in the Wall Street Journal or such other source as the Board deems reliable;         36 --------------------------------------------------------------------------------     6.2.3   In the absence of an established market for the common stock, the Fair Market Value shall be determined in good faith by the Board. 6.3   The optionee may elect to make payment of the exercise price under one of the following alternatives:     6.3.1   Payment of the exercise price per share in cash at the time of exercise;     6.3.2   Provided that at the time of the exercise the Company's common stock is publicly traded and quoted regularly in the Wall Street Journal, payment by delivery of shares of common stock of the Company already owned by the optionee, held for the period required to avoid a charge to the Company's reported earnings, and owned free and clear of any liens, claims, encumbrances or security interest, which common stock shall be valued at Fair Market Value on the date preceding the date of exercise; or     6.3.3   Payment by a combination of the methods of payment specified in subparagraphs 6.3.1 and 6.3.2 above.     Notwithstanding the foregoing, any option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which results in the receipt of cash (or check) by the Company prior to the issuance of shares of the Company's common stock. 6.4   An option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the option is granted only by such person or by his guardian or legal representative. The person to whom the option is granted may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the optionee, shall thereafter be entitled to exercise the option. 6.5   20 percent of the shares subject to the options granted pursuant to subparagraph 5.1 of this Plan shall become exercisable immediately. The remaining 80 percent of the shares subject to such options shall become exercisable in installments over a period of four (4) years from the date of grant at the rate of 20 percent per year in four (4) equal installments commencing on November 18, 1997, provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or as an employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment. Any option granted pursuant to subparagraph 5.2 of this Plan shall have 20% of the shares become immediately exercisable, with the remaining 80% of the shares becoming exercisable over a period of four (4) years from the date of grant at the rate of 20 percent per year in four (4) equal installments commencing on the first anniversary of the date of grant of the option, provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or as an employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment. 6.6   The Company may require any optionee, or any person to whom an option is transferred under subparagraph 6.4, as a condition of exercising any such option: (i) to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the shares issued upon the exercise of the option have been registered under a then-currently effective registration statement of the Company under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.         37 -------------------------------------------------------------------------------- 6.7   Notwithstanding anything to the contrary contained herein, an option may not be exercised unless the shares issuable upon exercise of such option are then registered under the Securities Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. 6.8   Each award agreement regarding options granted under this Plan shall include a provision that as of a Change in Control Date an exercisable option shall become fully and immediately vested. For purposes of this Plan, Change in Control means:     6.8.1   The acquisition by any person of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of 20 percent or more of the combined voting power of the then outstanding shares that can be voted ("Voting Securities"); provided, however, that for purposes of this paragraph 6.8.1 the following acquisitions of Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction that complies with clauses (i), (ii), and (iii) of paragraph 6.8.3 of this definition of Change of Control; or     6.8.2   During any period of twelve (12) consecutive calendar months, individuals who at the beginning of such period constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a director during the period whose election, or nomination for election, by the Company's shareholders was approved by a vote of at least a majority of the directors then constituting the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or     6.8.3   Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination") in each case, unless, following such Business Combination, (i) all or substantially all of the individuals or entities who were the beneficial owners of the Voting Securities outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the Voting Securities, (ii) no Person (excluding any employee benefit plan, or related trust, of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or         38 --------------------------------------------------------------------------------     6.8.4   Approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company. 6.9   For purposes of this Plan, Change in Control Date means the first date following the grant date on which a change of control has occurred. ARTICLE 7: COVENANTS OF THE COMPANY. 7.1   During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such options. 7.2   The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the options granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan' or any stock issued or issuable pursuant to any such option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such options. ARTICLE 8: USE OF PROCEEDS FROM STOCK.   Proceeds from the sale of stock pursuant to options granted under the Plan shall constitute general funds of the Company. ARTICLE 9: MISCELLANEOUS. 9.1   Neither an optionee nor any person to whom an option is transferred under subparagraph 6.4 shall be deemed to be the holder of, or to have any rights of a holder with respect to, any shares subject to such options unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms. 9.2   Throughout the term of any option granted pursuant to the Plan, the Company shall make available to the holder of such option, not later than one hundred twenty (120) days after the close of each of the Company's fiscal years during the option term, upon request, such financial and other information regarding the Company as comprises the annual report to the stockholders of the Company provided for in the Bylaws of the Company and such other information regarding the Company as the holder of such option may reasonably request. 9.3   Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-Employee Director any right to continue in the service of the Company or any Affiliate or shall affect any right of the Company, its Board or stockholders or any Affiliate to terminate the service of any Non-Employee Director with or without cause. 9.4   No Non-Employee Director, individually or as a member of a group, and no beneficiary or other person claiming under or through him, shall have any right, title or interest in or to any option reserved for the purposes of the Plan except as to such shares of common stock, if any, as shall have been reserved for him pursuant to an option granted to him.         39 -------------------------------------------------------------------------------- 9.5   In connection with each option made pursuant to the Plan, it shall be a condition precedent to the Company's obligation to issue or transfer shares to a Non-Employee Director, or to evidence the removal of any restrictions on transfer, that such Non-Employee Director make arrangements satisfactory to the Company to insure that the amount of any federal or other withholding tax required to be withheld with respect to such sale or transfer, or such removal or lapse, is made available to the Company for timely payment of such tax. ARTICLE 10: ADJUSTMENTS UPON CHANGES IN STOCK. 10.1   If any change is made in the stock subject to the Plan, or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding options will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options. 10.2   In the event of: (1) a merger or consolidation in which the Company is not the surviving corporation; (2) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (3) any other capital reorganization in which more than 50 percent of the shares of the Company entitled to vote are exchanged, any surviving corporation, other than the Company, shall assume any options outstanding under the Plan or shall substitute similar options for those outstanding under the Plan or, if the Company is the surviving corporation, such options shall continue in full force and effect. ARTICLE 11: AMENDMENT OF THE PLAN. 11.1   The Board at any time, and from time-to-time, may amend the Plan, provided, however, that the Board shall not amend the plan more than once every six (6) months, with respect to the provisions of the Plan which relate to the amount, price and timing of grants, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. Except as provided in paragraph 10 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company within twelve (12) months before or after the adoption of the amendment, where the amendment will:     11.1.1   Increase the number of shares which may be issued under the Plan.     11.1.2   Modify the requirement as to eligibility for participation in the Plan (to the extent such modification requires stockholder approval in order for the Plan to comply with the requirements of Rule 16b-3); or     11.1.3   Modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to comply with the requirements of Rule 1 6b-3. 11.2   Rights and obligations under any option granted before any amendment of the Plan shall not be altered or impaired by such amendment unless (i) the Company requests the consent of the person to whom the option was granted and (ii) such person consents in writing. ARTICLE 12: TERMINATION OR SUSPENSION OF THE PLAN. 12.1   The Board may suspend or terminate the Directors Plan at any time. Unless sooner terminated, the Directors Plan shall terminate on February 22, 2010, or 10 years from the date the option is granted, whichever is later. No options may be granted under the Directors Plan while the Directors Plan is suspended or after it is terminated.         40 -------------------------------------------------------------------------------- 12.2   Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted. 12.3   The Plan shall terminate upon the occurrence of any of the events described in Section 10.2 above. ARTICLE 13: EFFECTIVE DATE OF PLAN; CONDITION OF EXERCISE. 13.1   The Plan shall become effective upon adoption by the Board of Directors, subject to the condition subsequent that the Plan is approved by the stockholders of the Company. 13.2   No option granted under the Plan shall be exercised or exercisable unless and until the condition of subparagraph 13.1 above has been met. 41 -------------------------------------------------------------------------------- QuickLinks T.J.T., INC. 1997 DIRECTORS STOCK OPTION PLAN

SECOND AMENDMENT TO THE CONNECTICUT NATURAL GAS CORPORATION DEFERRED COMPENSATION PLAN TRUST AGREEMENT THIS AMENDMENT is made and entered into as of the 25th day of April, 2000, by and between CONNECTICUT NATURAL GAS CORPORATION, a Connecticut corporation with its principal office in Hartford, Connecticut (hereinafter referred to as "CNG") and PUTNAM FIDUCIARY TRUST COMPANY (hereinafter referred to as the "Trustee"). W I T N E S S E T H: WHEREAS, by Agreement dated ____________, 1999 (the "Agreement") CNG and the Trustee entered into an Agreement entitled Connecticut Natural Gas Corporation Deferred Compensation Plan Trust Agreement; and WHEREAS, the parties reserved the right to amend the Agreement in Section 12(a) thereof, subject to the conditions set forth therein; and WHEREAS, CNG wishes to amend the Agreement in the particulars set forth below; NOW, THEREFORE, the CNG and the Trustee agree to amend the Agreement, as heretofore amended by the First Amendment thereto, as follows effective immediately prior to the effective date of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co.: 1. By deleting Section 5(c) and inserting in lieu thereof the following: "(c) The Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Energy East Corporation or successor thereto, including common stock thereof, as directed by the Employer." 2. Except as herein above modified and amended, the Agreement, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Second Amendment to be duly executed and respective corporate seals to be hereunto affixed as of the date first above written. ATTEST: CONNECTICUT NATURAL GAS CORPORATION S/ Jeffrey A. Hall                       By S/ Jean S. McCarthy                                   Its Vice President, Human Resources               ATTEST: PUTNAM FIDUCIARY TRUST COMPANY         S/ Carol E. Peters                       By S/ Tina Campell                                       Its Senior Vice President                            STATE OF CONNECTICUT )                                           SS. HARTFORD COUNTY OF HARTFORD ) Personally appeared Jean S. McCarthy, Vice President Human Resources of Connecticut Natural Gas Corporation, signer of the foregoing instrument, and acknowledged the same to be his her free act and deed as such ___________________, and the free act and deed of said corporation, before me. Daisy Q. Mendez                       Commissioner of the Superior Court    Notary Public                            My Commission Expires:  June 30, 2004 COMMONWEALTH OF MASSACHUSETTS)                                                                              )SS. COUNTY OF NORFOLK                                 ) Personally appeared Tina A. Campbell, Senior Vice President of Putnam Fiduciary Trust Company, signer of the foregoing instrument, and acknowledged the same to be his free act and deed as such ___________________, and the free act and deed of said corporation, before me. Carol E. Peters                      Notary Public                       My Commission Expires: 2/23/07

Exhibit 10.13 Employment Agreement AMENDED AND RESTATED Agreement effective July 14, 2000, between MapInfo Corporation, One Global View, Troy, New York 12180 ("MapInfo" or "Company"), and John C. Cavalier, an individual residing at 42 East Ridge Road, Loudonville, New York 12211 ("Cavalier"). RECITALS 1)     The parties previously entered into a three year Employment Agreement effective November 1, 1998, (hereafter "Previous Employment Agreement") wherein Cavalier was to continue as President/Chief Executive Officer of the Company; and 2)     As a matter of succession planning, Cavalier has relinquished the office of President, and has agreed to relinquish the position of Chief Executive Officer in accordance with the terms of this Agreement; and 3)     It is contemplated that Cavalier shall, upon ceasing to occupy the CEO position, become Co-chairman of the Board to serve at the pleasure of the Board; and 4)     The parties wish to set forth the terms and conditions of the continued employment of Cavalier, it is hereby agreed as follows: 1.0     EMPLOYMENT 1.1     MapInfo agrees to continue to employ Cavalier to November 1, 2001 (the "FIRST Contract Expiration Date"), as follows: 1.1.1     Cavalier shall continue to occupy his present position as CEO until December 31, 2000.; and 1.1.2     Effective January 1, 2001, Cavaliershall become Co-Chairman of the MapInfo Board of Directors, and hold that position for so long as he is so designated by the Board ; and 1.1.3     Regardless of his position, there shall be no change in Cavalier's present base salary through October 31, 2001, nor the terms and conditions under which Company options were previously granted to Cavalier, and he cannot be terminated except for Cause. 1.2     Cavalier agrees to (a) continue to aid in managing the operations of MapInfo reporting to the Board of Directors of MapInfo for so long as he is CEO; (b) to continue to serve as a member of the MapInfo Board of Directors for so long as he is designated for reelection by the Board and elected by the shareholders, (c) to perform such other services as shall from time to time be reasonably assigned to him by the Board of Directors, and (d) to diligently and competently devote his entire business time, skill and attention to such services. 2.0     COMPENSATION AND BENEFITS      2.1     The Company shall continue to pay to Cavalier through October 31, 2001, his present base salary of $275,000 per annum, in accordance with the standard payroll practices of the Company.        2.2     The Company shall continue to pay to Cavalier incentive compensation through Q1 of December 31, 2000, only, based on the Previous Employment Agreement formula which provides that an additional one-half of annual base salary may be earned, payable quarterly, for achieving targeted Company and personal objectives.      2.3     The Company shall reimburse Cavalier for all reasonable out-of-pocket expenses incurred in connection with the performance of his duties hereunder, payable in accordance with the standard expense account procedures of MapInfo.      2.4     Cavalier shall be entitled to participate on the same basis, subject to the same qualifications, as other employees of the Company in any disability, pension, life insurance, health insurance, hospitalization and other fringe benefit plans in effect with respect to other employees of the Company, in accordance with the written terms of said plans which shall be controlling.      2.5     The Company shall purchase such additional medical, disability, life insurance and/or other fringe benefit programs of Cavalier's choosing up to a maximum amount of $ 35,000 per annum. Additionally the Company requires, and shall pay all expenses of, an annual physical for Cavalier at the Mayo Clinic, to the extent such expenses are not covered by the Company's existing health insurance plan. The income tax implications of all of this compensation shall be the responsibility of Cavalier. 3.0     EARLY TERMINATION Definitions for purposes of this Agreement:      "Cause " shall be defined and limited to (i) the willful and continued failure by Cavalier to substantially perform his duties hereunder (other than any such failure resulting from Cavalier's incapacity due to physical or mental illness), or (ii) conviction for any crime other than simple offenses or traffic offenses or misdemeanors that could not relate to performance or harm the Company in any way; or (iii) breach of Cavalier's fiduciary responsibilities to the Company; or (iv) conduct reflecting moral turpitude; or (v) commission of fraud or gross misconduct in Cavalier's dealings with or on behalf of the Company; or (vi) breach of any duty of confidentiality owned the Company.      "Change in Control of the Company" shall mean an acquisition (directly or indirectly) resulting in more than 50% of the Company's voting stock or assets being acquired by one or more entities that thereby gain management control of the Company. This section shall govern in case of any conflict between the wording of this Agreement and the wording of the plan under which any options were granted to Cavalier.      "Good Reason" shall mean a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten (10) days after Cavalier has given written notice of such noncompliance to the Company.      "Notice of Termination" shall mean a written notice to the other party that Cavalier is either terminating or to be terminated for one of the reasons set forth in this Agreement.      3.1     Cavalier's employment hereunder may be terminated prior to the Agreement Expiration Date only under any one of the following circumstances: 3.1.1     the death of Cavalier; 3.1.2     a mental, physical or other disability or condition of Cavalier which renders him incapable of performing his obligations under this Agreement for a period of three (3) consecutive months; 3.1.3     by Cavalier for either (i) Good Reason or (ii) a Change in Control of the Company; 3.1.4     by the Company for Cause.      3.2     Any termination of Cavalier's employment by the Company or by Cavalier shall be communicated by written Notice of Termination to the other party hereto.      3.3     "Date of Termination" shall mean: 3.3.1     if Cavalier's employment is terminated by his death, the date of his death; 3.3.2     if Cavalier's employment is terminated by reason of the event specified in subsection 3.1.2 above, thirty (30) days after Notice of Termination is given (provided that Cavalier shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period); 3.3.3      if Cavalier's employment is terminated for Cause pursuant to subsection 3.1.4. above, the date the Notice of Termination is given or later if so specified in such Notice of Termination; and 3.3.4      if Cavalier's employment is terminated for any other reason, the date on which a Notice of Termination is given.      3.4     If within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date fixed, either by arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction. 4.0     COMPENSATION UPON EARLY TERMINATION OR DISABILITY.      4.1     During any period that Cavalier fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("disability period"), he shall continue to receive his full salary at the rate then in effect for such period until his employment is terminated pursuant to section 31.2 above, provided that payments so made to Cavalier during the disability period shall be reduced by the sum of the amounts, if any, payable to Cavalier at or prior to the time of any such payment under disability benefit plans of the Company, and which were not previously applied to reduce any such payment.      4.2.     If Cavalier's employment is terminated by his death, the Company shall have no further payment obligations to Cavalier other than those arising from his employment prior to his death.      4.3     If Cavalier's employment shall be terminated for Cause, the Company shall pay Cavalier his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and any incentive compensation earned under Section 2.2 through the Date of Termination, and the Company shall have no further obligations to Cavalier under this Agreement.      4.4     If Cavalier shall terminate his employment by resigning for other than Good Reason, the Company shall pay Cavalier his full salary through the Date of Termination at that rate in effect when the Notice of Termination is given, and any incentive compensation earned under Section 2 as of the Date of Termination.      4.5     If Cavalier's employment shall be terminated by MapInfo for reasons other than pursuant to Sections 3.1.1, 3.1.2 or 3.1.4 hereof or if Cavalier shall terminate his employment pursuant to Section 3.1.2, then 4.5.1     the Company shall pay to Cavalier, in a lump sum at the option of Cavalier and then within fourteen (14) days following the Date of Termination, his full salary due to the end of the contract period, October 31, 2001, and any unpaid incentive compensation earned under Section 2.2 as of the Date of Termination; and 4.5.2     the Company shall continue Cavalier's health and dental insurance coverage for the one year period following the Date of Termination on the same terms as provided to other MapInfo employees.      4.6     As provided in Section 6.7 of the Previous Employment Agreement, upon any Change in Control of the Company, all unexpired and unvested options of Cavalier to purchase common stock of the Company shall become exercisable immediately as of the date of such Change in Control, for such period of time and upon such terms as are provided in the Plan under which the options were granted. 5.0      EMPLOYMENT & COMPENSATION FROM SUBSEQUENT TO OCTOBER 31, 2001      5.1     Subsequent to October 31, 2001, Cavalier shall continue as Co-chairman of the Board subject to the pleasure of the Board, and as an employee of the Company, subject to the pleasure of the Company.      5.2     Regardless of his position subsequent to October 31, 2001, for so long as Cavalier is Co-Chairman or otherwise continued as an employee of the Company, he shall be paid based on an annual salary of $137,500 (one-half his present base salary).      5.3     As long as he is employed by the Company, Cavalier shall be entitled to participate on the same basis, subject to the same qualifications, as other employees of the Company in any disability, pension, life insurance, health insurance, hospitalization and other fringe benefit plans in effect with respect to other employees of the Company, in accordance with the written terms of said plans which shall be controlling.   6.0     INTELLECTUAL PROPERTY, CONFIDENTIAL INFORMATION AND NON-COMPETITION Cavalier reaffirms his previously executed attached Employee Intellectual Property, Confidential Information and Non-Competition Agreement. 7.0     IRREPARABLE INJURY      7.1      Both parties hereto recognize that the services to be rendered by Cavalier during the term of his employment are special, unique and of extraordinary character, and Cavalier acknowledges that any violation by him of Section 3 of this Agreement may cause the Company irreparable injury.      7.2     In the event of a breach or threatened breach by Cavalier of the provisions of said Section 6, MapInfo shall be entitled to an injunction restraining Cavalier from violating the terms thereof, and from providing any confidential information to any person, firm, corporation, association or other entity, whether or not Cavalier is then employed by, or an officer, director, or owner thereof.      7.3     Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including recovery of damages from Cavalier. 8.0     NOTICES All communications and notices hereunder shall be in writing and either personally delivered or mailed to the party at the address set forth above. Notices to MapInfo shall be addressed to the attention of the Chairman with a copy to the Executive Vice President/CFO. 9.0     ENTIRE AGREEMENT, NO WAIVER      9.1     This Agreement and the agreements referred to herein constitute the entire understanding between that parties and supersede all prior agreements or understandings between the parties except as to matters that that may be ongoing, such as but not limited to the forgiveness of debt agreed to in the initial Employment Agreement between the parties.      9.2 No waiver or modification of the terms hereof shall be valid unless in writing signed by both parties hereto and only to the extent therein set forth. 10.0     SUCCESSORS.      10.1     The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Cavalier, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.      10.2     Failure of the Company (or any successor to its business and/or assets) to obtain such agreement prior to the effectiveness of any such succession shall, at Cavalier's option to treat it as such, be a breach of this Agreement, except that for the purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 11.0     ENTIRE AGREEMENT, NO WAIVER This Agreement constitutes the entire understanding between that parties and supersedes all prior agreements or understandings between the parties. No waiver or modification of the terms hereof shall be valid unless in writing signed by both parties hereto and only to the extent therein set forth. 12.0     ARBITRATION      12.1     Except as otherwise provided in Section 4.0 above, any dispute or claim relating to or arising out of the employment of the Company, whether based on contract or tort or otherwise, but not including statutory claims, shall be subject to final and binding arbitration in the State of New York in accordance with the applicable commercial arbitration rules of the American Arbitration Association in effect at the time the claim or dispute arose      12.2     The arbitrators shall have jurisdiction to determine any such claim, and may grant any relief authorized by law for such claim with their decision based on and supported by written findings of fact and conclusions of law      12.3     Any claim or dispute subject to arbitration shall be deemed waived, and shall be forever barred, if arbitration is not initiated within twelve (12) months of the date the claim or dispute first arose. 13.0     GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the choice of law provisions thereof, and any action relating to this Agreement shall be brought in Supreme Court, Albany or Rensselaer County, New York. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date and year first written above.                                                 MAPINFO CORPORATION   /s/ John C. Cavalier                                         BY:      /s/ Michael D. Marvin           JOHN C. CAVALIER                                    Chairman of the Board   DATE SIGNED:                                                       DATE SIGNED:-

EXHIBIT 10.2   Supplemental Agreement No. 17 to Purchase Agreement No. 1951 between The Boeing Company and Continental Airlines, Inc. Relating to Boeing Model 737 Aircraft   THIS SUPPLEMENTAL AGREEMENT, entered into as of May 16, 2000, by and between THE BOEING COMPANY, a Delaware corporation with its principal office in Seattle, Washington, (Boeing) and Continental Airlines, Inc., a Delaware corporation with its principal office in Houston, Texas (Buyer); WHEREAS, the parties hereto entered into Purchase Agreement No. 1951 dated July 23, 1996 (the Agreement), as amended and supplemented, relating to Boeing Model 737-500, 737-600, 737-700, 737-800, and 737-900 aircraft (the Aircraft); and WHEREAS, Buyer has requested to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] WHEREAS, Buyer has requested to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and WHEREAS, Boeing and Buyer have mutually agreed to revise the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and WHEREAS, Boeing and Buyer have mutually agreed that the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and WHEREAS, Boeing and Buyer have mutually agreed to amend the Agreement to incorporate the effect of these and certain other changes;     NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Agreement as follows:   1. Table of Contents and Articles: 1.1 Remove and replace, in its entirety, the "Table of Contents", with the Table of Contents attached hereto, to reflect the changes made by this Supplemental Agreement No. 17. 1.2 Remove and replace, in its entirety, page 14-1 of Article "ARTICLE 14. Contractual Notices and Requests", with the "ARTICLE 14. Contractual Notices and Requests" attached hereto, to reflect the changes to the contractual notification addresses and names. 1.3 Remove and replace, in its entirely, page T-3 of Table 1 entitled "Aircraft Deliveries and Descriptions" that relates to Model 737-800 Aircraft with new page T-3 attached hereto for the Model 737-800 Aircraft reflecting the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Letter Agreements: 2.1 Remove and replace, in its entirety, Letter Agreement 1951-3R9, "Option Aircraft - Model 737-824 Aircraft" with Letter Agreement 1951-3R10, "Option Aircraft - Model 737-824 Aircraft", attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2.2 Remove and replace, in its entirety, Letter Agreement 1951-9R7, "Option Aircraft - Model 737-724 Aircraft" with Letter Agreement 1951-9R8, "Option Aircraft - Model 737-724 Aircraft", attached hereto, to reflect the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2.3 Remove and replace, in its entirety, Letter Agreement 1951-12, "Option Aircraft - Model 737-924 Aircraft" with Letter Agreement 1951-12R1, "Option Aircraft - Model 737-924 Aircraft", attached hereto, to reflect changes to the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]       The Agreement will be deemed to be supplemented to the extent herein provided as of the date hereof and as so supplemented will continue in full force and effect.   EXECUTED IN DUPLICATE as of the day and year first written above.   THE BOEING COMPANY Continental Airlines, Inc.       By: /s/ H. H. Hart   By: /s/ Gerald Laderman____   Its: Attorney-In-Fact   Its: Senior Vice President-Finance TABLE OF CONTENTS Page SA Number Number ARTICLES 1. Subject Matter of Sale 1-1 SA 5 2. Delivery, Title and Risk of Loss 2-1 3. Price of Aircraft 3-1 SA 5 4. Taxes 4-1 5. Payment 5-1 6. Excusable Delay 6-1 7. Changes to the Detail Specification 7-1 SA 5 8. Federal Aviation Requirements and Certificates and and Export License 8-1 SA 5 9. Representatives, Inspection, Flights and Test Data 9-1 10. Assignment, Resale or Lease 10-1 11. Termination for Certain Events 11-1 12. Product Assurance; Disclaimer and Release; Exclusion of Liabilities; Customer Support; Indemnification and Insurance 12-1 13. Buyer Furnished Equipment and Spare Parts 13-1 14. Contractual Notices and Requests 14-1 SA 17 15. Miscellaneous 15-1   TABLE OF CONTENTS Page SA Number Number TABLES 1. Aircraft Deliveries and Descriptions - 737-500 T-1 SA 3 Aircraft Deliveries and Descriptions - 737-700 T-2 SA 13 Aircraft Deliveries and Descriptions - 737-800 T-3 SA 17 Aircraft Deliveries and Descriptions - 737-600 T-4 SA 4 Aircraft Deliveries and Descriptions - 737-900 T-5 SA 5   EXHIBITS A-1 Aircraft Configuration - Model 737-724 SA 2 A-2 Aircraft Configuration - Model 737-824 SA 2 A-3 Aircraft Configuration - Model 737-624 SA 1 A-4 Aircraft Configuration - Model 737-524 SA 3 A-5 Aircraft Configuration - Model 737-924 SA 5 B Product Assurance Document SA 1 C Customer Support Document - Code Two - Major Model Differences SA 1 C1 Customer Support Document - Code Three - Minor Model Differences SA 1 D Aircraft Price Adjustments - New Generation Aircraft (1995 Base Price) SA 1 D1 Airframe and Engine Price Adjustments - Current Generation Aircraft SA 1 D2 Aircraft Price Adjustments - New Generation Aircraft (1997 Base Price) SA 5 E Buyer Furnished Equipment Provisions Document SA 5 F Defined Terms Document SA 5   TABLE OF CONTENTS SA Number LETTER AGREEMENTS 1951-1 Not Used 1951-2R3 Seller Purchased Equipment SA 5 1951-3R10 Option Aircraft-Model 737-824 Aircraft SA 17 1951-4R1 Waiver of Aircraft Demonstration SA 1 1951-5R2 Promotional Support - New Generation Aircraft SA 5 1951-6 Configuration Matters 1951-7R1 Spares Initial Provisioning SA 1 1951-8R2 Escalation Sharing - New Generation Aircraft SA 4 1951-9R8 Option Aircraft-Model 737-724 Aircraft SA 17 1951-11R1 Escalation Sharing-Current Generation Aircraft SA 4 1951-12R1 Option Aircraft - Model 737-924 Aircraft SA 17 1951-13 Configuration Matters - Model 737-924 SA 5 TABLE OF CONTENTS   SA Number RESTRICTED LETTER AGREEMENTS   6-1162-MMF-295 Performance Guarantees - Model 737-724 Aircraft 6-1162-MMF-296 Performance Guarantees - Model 737-824 Aircraft 6-1162-MMF-308R3 Disclosure of Confidential Information SA 5 6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED SA 1 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED SA 5 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-MMF-312R1 Special Purchase Agreement Provisions SA 1 6-1162-MMF-319 Special Provisions Relating to the Rescheduled Aircraft 6-1162-MMF-378R1 Performance Guarantees - Model 737-524 Aircraft SA 3 6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED SA 2 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-GOC-131R2 Special Matters SA 5 6-1162-DMH-365 Performance Guarantees - Model 737-924 Aircraft SA 5     6-1162-DMH-624 [CONFIDENTIAL MATERIAL OMITTED SA 8 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-DMH-680 Delivery Delay Resolution Program................................ SA 9 6-1162-DMH-1020 [CONFIDENTIAL MATERIAL OMITTED SA 14 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-DMH-1035 [CONFIDENTIAL MATERIAL OMITTED SA 15 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-DMH-1054 [CONFIDENTIAL MATERIAL OMITTED SA 16 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] TABLE OF CONTENTS   SUPPLEMENTAL AGREEMENTS DATED AS OF: Supplemental Agreement No. 1 October 10,1996 Supplemental Agreement No. 2 March 5, 1997 Supplemental Agreement No. 3 July 17, 1997 Supplemental Agreement No. 4 October 10,1997 Supplemental Agreement No. 5 May 21,1998 Supplemental Agreement No. 6 July 30,1998 Supplemental Agreement No. 7 November 12,1998 Supplemental Agreement No. 8 December 7,1998 Supplemental Agreement No. 9 February 18,1999 Supplemental Agreement No. 10 March 19,1999 Supplemental Agreement No. 11 May 14,1999 Supplemental Agreement No. 12 July 2,1999 Supplemental Agreement No. 13 October 13,1999 Supplemental Agreement No. 14 December 13,1999 Supplemental Agreement No. 15 January 13,2000 Supplemental Agreement No. 16 March 17,2000 Supplemental Agreement No. 17 May 16, 2000     ARTICLE 14. Contractual Notices and Requests. All notices and requests relating to this Agreement will be in English, and may be transmitted by any customary means of written communication addressed as follows: Buyer: Continental Airlines, Inc. 1600 Smith Street HQSFN Houston, Texas 77002 Attention: Sr. V.P. Finance Boeing: Boeing Commercial Airplane Group P.O. Box 3707 Seattle, Washington 98124-2207 U.S.A. Attention: Vice President - Contracts Mail Stop 21-34 or to such other address as specified elsewhere herein or as otherwise directed in writing by either party. The effective date of any such notice or request will be the date on which it is received by the addressee. Table 1 to Purchase Agreement 1951 Aircraft Deliveries and Descriptions Model 737-800 Aircraft CFM56-7B26 Engines Detail Specification No. D6-38808-43 dated Exhibit A-2   [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALTREATMENT] 1951-3R10 May 16, 2000   Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002   Subject: Letter Agreement No. 1951-3R10 to Purchase Agreement No. 1951 - Option Aircraft - Model 737-824 Aircraft   Ladies and Gentlemen: This Letter Agreement amends Purchase Agreement No. 1951 dated July 23, 1996 (the Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer) relating to Model 737-824 aircraft (the Aircraft). This Letter Agreement supersedes and replaces in its entirety Letter Agreement 1951-3R9 dated March 17, 2000. All terms used and not defined herein shall have the same meaning as in the Agreement. In consideration of Buyer's purchase of the Aircraft, Boeing hereby agrees to manufacture and sell up to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] additional Model 737-824 Aircraft (the Option Aircraft) to Buyer, on the same terms and conditions set forth in the Agreement, except as otherwise described in Attachment A hereto, and subject to the terms and conditions set forth below. 1. Delivery. The Option Aircraft will be delivered to Buyer during or before the months set forth in the following schedule: Month and Year Number of of Delivery   Option Aircraft [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3. Option Aircraft Deposit. In consideration of Boeing's grant to Buyer of options to purchase the Option Aircraft as set forth herein, Buyer will pay a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] for each Option Aircraft (the Option Deposit) on the date of this Letter Agreement. In the event Buyer exercises an option herein for an Option Aircraft, the amount of the Option Deposit for such Option A In the event that Buyer does not exercise its option to purchase a particular Option Aircraft pursuant to the terms and conditions set forth herein, Boeing shall be entitled to retain the Option Deposit for such Option Aircraft. 4. Option Exercise. To exercise its option to purchase the Option Aircraft, Buyer shall give written notice thereof to Boeing on or before the first business day of the month in each Option Exercise Date shown below: Option Aircraft Option Exercise Date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 5. Contract Terms. Within thirty (30) days after Buyer exercises an option to purchase Option Aircraft pursuant to paragraph 4 above, Boeing and Buyer will use their best reasonable efforts to enter into a supplemental agreement amending the Agreement to add the applicable Option Aircraft to the Agreement as a firm Aircraft (the Option Aircraft Supplemental Agreement). In the event the parties have not entered into such an Option Aircraft Supplemental Agreement within the time period contemplated herein, either party shall have the right, exercisable by written or telegraphic notice given to the other within ten (10) days after such period, to cancel the purchase of such Option Aircraft. 6. Cancellation of Option to Purchase. Either Boeing or Buyer may cancel the option to purchase an Option Aircraft if any of the following events are not accomplished by the respective dates contemplated in this Letter Agreement, or in the Agreement, as the case may be: (i) purchase of the Aircraft under the Agreement for any reason not attributable to the cancelling party; (ii) payment by Buyer of the Option Deposit with respect to such Option Aircraft pursuant to paragraph 3 herein; or (iii) exercise of the option to purchase such Option Aircraft pursuant to the terms hereof. Any cancellation of an option to purchase by Boeing which is based on the termination of the purchase of an Aircraft under the Agreement shall be on a one-for-one basis, for each Aircraft so terminated. Cancellation of an option to purchase provided by this letter agreement shall be caused by either party giving written notice to the other within ten (10) days after the respective date in question. Upon receipt of such notice, all rights and obligations of the parties with respect to an Option Aircraft for which the option to purchase has been cancelled shall thereupon terminate. Boeing shall promptly refund to Buyer, without interest, any payments received from Buyer with respect to the affected Option Aircraft. Boeing shall be entitled to retain the Option Deposit unless cancellation is attributable to Boeing's fault, in which case the Option Deposit shall also be returned to Buyer without interest. 7. Applicability. Except as otherwise specifically provided, limited or excluded herein, all Option Aircraft that are added to the Agreement by an Option Aircraft Supplemental Agreement as firm Aircraft shall benefit from all the applicable terms, conditions and provisions of the Agreement.   If the foregoing accurately reflects your understanding of the matters treated herein, please so indicate by signature below. Very truly yours, THE BOEING COMPANY     By    /s/ H. H. Hart        Its     Attorney In Fact      ACCEPTED AND AGREED TO this Date: May 16, 2000 CONTINENTAL AIRLINES, INC.,     By    /s/ Gerald Laderman        Its Senior Vice President - Finance       Attachment Model 737-824 Aircraft 1. Option Aircraft Description and Changes. 1.1 Aircraft Description. The Option Aircraft are described by Boeing Detail Specification D6-38808, Revision E, dated September 15, 1995, as amended and revised pursuant to the Agreement. 1.2 Changes. The Option Aircraft Detail Specification shall be revised to include: (1) Changes applicable to the basic Model 737-800 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of an Option Aircraft Supplemental Agreement. (2) Changes mutually agreed upon. (3) Changes required to obtain a Standard Certificate of Airworthiness. 1.3 Effect of Changes. Changes to the Detail Specification pursuant to the provisions of the clauses above shall include the effects of such changes upon Option Aircraft weight, balance, design and performance. 2. Price Description. 2.1 Price Adjustments. 2.1.1 Base Price Adjustments. The base aircraft price (pursuant to Article 3 of the Agreement) of the Option Aircraft will be adjusted to Boeing's and the engine manufacturer's then-current prices as of the date of execution of the Option Aircraft Supplemental Agreement. 2.1.2 Special Features. The price for special features incorporated in the Option Aircraft Detail Specification will be adjusted to Boeing's then-current prices for such features as of the date of execution of the Option Aircraft Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2.1.3 Escalation Adjustments. The base airframe and special features price will be escalated according to the applicable airframe and engine manufacturer escalation provisions contained in Exhibit D of the Agreement. Buyer agrees that the engine escalation provisions will be adjusted if they are changed by the engine manufacturer prior to signing the Option Aircraft Supplemental Agreement. In such case, the then-current engine escalation provisions in effect at the time of execution of the Option Aircraft Supplemental Agreement will be incorporated into such agreement. 2.1.4 Price Adjustments for Changes. Boeing may adjust the basic price and the advance payment base prices for any changes mutually agreed upon by Buyer and Boeing subsequent to the date that Buyer and Boeing enter into the Option Aircraft Supplemental Agreement. 2.1.5 BFE to SPE. An estimate of the total price for items of Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE) pursuant to the Detail Specification is included in the Option Aircraft price build-up. The purchase price of the Option Aircraft will be adjusted by the price charged to Boeing for such items plus 10% of such price. 3. Advance Payments. 3.1 Buyer shall pay to Boeing advance payments for the Option Aircraft pursuant to the schedule for payment of advance payments provided in the Purchase Agreement. 1951-9R8 May 16, 2000   Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002   Subject: Letter Agreement No. 1951-9R8 to Purchase Agreement No. 1951 - Option Aircraft - Model 737-724 Aircraft   Ladies and Gentlemen: This Letter Agreement amends Purchase Agreement No. 1951 dated July 23, 1996(the Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer) relating to Model 737-724 aircraft (the Aircraft). This Letter Agreement supersedes and replaces in its entirety Letter Agreement 1951-9R7 dated March 17, 2000. All terms used and not defined herein shall have the same meaning as in the Agreement. In consideration of Buyer's purchase of the Aircraft, Boeing hereby agrees to manufacture and sell up to - [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] additional Model 737-724 Aircraft (the Option Aircraft) to Buyer, on the same terms and conditions set forth in the Agreement, except as otherwise described in Attachment A hereto, and subject to the terms and conditions set forth below. 1. Delivery. The Option Aircraft will be delivered to Buyer during or before the months set forth in the following schedule: Month and Year Number of of Delivery   Option Aircraft [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]     3. Option Aircraft Deposit. In consideration of Boeing's grant to Buyer of options to purchase the Option Aircraft as set forth herein, Buyer will pay a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] for each Option Aircraft (the Option Deposit) on the date of this Letter Agreement. In the event Buyer exercises an option herein for an Option Aircraft, the amount of the Option Deposit for such Option Ai In the event that Buyer does not exercise its option to purchase a particular Option Aircraft pursuant to the terms and conditions set forth herein, Boeing shall be entitled to retain the Option Deposit for such Option Aircraft. 4. Option Exercise. To exercise its option to purchase the Option Aircraft, Buyer shall give written notice thereof to Boeing on or before the first business day of the month in each Option Exercise Date shown below: Option Aircraft Option Exercise Date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 5. Contract Terms. Within thirty (30) days after Buyer exercises an option to purchase Option Aircraft pursuant to paragraph 4 above, Boeing and Buyer will use their best reasonable efforts to enter into a supplemental agreement amending the Agreement to add the applicable Option Aircraft to the Agreement as a firm Aircraft (the Option Aircraft Supplemental Agreement). In the event the parties have not entered into such an Option Aircraft Supplemental Agreement within the time period contemplated herein, either party shall have the right, exercisable by written or telegraphic notice given to the other within ten (10) days after such period, to cancel the purchase of such Option Aircraft. 6. Cancellation of Option to Purchase. Either Boeing or Buyer may cancel the option to purchase an Option Aircraft if any of the following events are not accomplished by the respective dates contemplated in this Letter Agreement, or in the Agreement, as the case may be: (i) purchase of the Aircraft under the Agreement for any reason not attributable to the cancelling party; (ii) payment by Buyer of the Option Deposit with respect to such Option Aircraft pursuant to paragraph 3 herein; or (iii) exercise of the option to purchase such Option Aircraft pursuant to the terms hereof. Any cancellation of an option to purchase by Boeing which is based on the termination of the purchase of an Aircraft under the Agreement shall be on a one-for-one basis, for each Aircraft so terminated. Cancellation of an option to purchase provided by this letter agreement shall be caused by either party giving written notice to the other within ten (10) days after the respective date in question. Upon receipt of such notice, all rights and obligations of the parties with respect to an Option Aircraft for which the option to purchase has been cancelled shall thereupon terminate. Boeing shall promptly refund to Buyer, without interest, any payments received from Buyer with respect to the affected Option Aircraft. Boeing shall be entitled to retain the Option Deposit unless cancellation is attributable to Boeing's fault, in which case the Option Deposit shall also be returned to Buyer without interest. 7. Applicability. Except as otherwise specifically provided, limited or excluded herein, all Option Aircraft that are added to the Agreement by an Option Aircraft Supplemental Agreement as firm Aircraft shall benefit from all the applicable terms, conditions and provisions of the Agreement. If the foregoing accurately reflects your understanding of the matters treated herein, please so indicate by signature below. Very truly yours, THE BOEING COMPANY By  /s/ H. H. Hart          Its  Attorney-In-Fact       ACCEPTED AND AGREED TO this Date: May 16, 2000 CONTINENTAL AIRLINES, INC., By  /s/ Gerald Laderman      Its  Senior Vice President - Finance  Attachment Model 737-724 Aircraft 1. Option Aircraft Description and Changes. 1.1 Aircraft Description. The Option Aircraft are described by Boeing Detail Specification D6-38808-42, dated as of January 6, 1997, as amended and revised pursuant to the Agreement. 1.2 Changes. The Option Aircraft Detail Specification shall be revised to include: (1) Changes applicable to the basic Model 737-700 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of an Option Aircraft Supplemental Agreement. (2) Changes mutually agreed upon. (3) Changes required to obtain a Standard Certificate of Airworthiness. 1.3 Effect of Changes. Changes to the Detail Specification pursuant to the provisions of the clauses above shall include the effects of such changes upon Option Aircraft weight, balance, design and performance. 2. Price Description. 2.1 Price Adjustments. 2.1.1 Base Price Adjustments. The base aircraft price (pursuant to Article 3 of the Agreement) of the Option Aircraft will be adjusted to Boeing's and the engine manufacturer's then-current prices as of the date of execution of the Option Aircraft Supplemental Agreement. 2.1.2 Special Features. The price for special features incorporated in the Option Aircraft Detail Specification will be adjusted to Boeing's then-current prices for such features as of the date of execution of the Option Aircraft Supplemental Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]   2.1.3 Escalation Adjustments. The base airframe and special features price will be escalated according to the applicable airframe and engine manufacturer escalation provisions contained in Exhibit D of the Agreement. Buyer agrees that the engine escalation provisions will be adjusted if they are changed by the engine manufacturer prior to signing the Option Aircraft Supplemental Agreement. In such case, the then-current engine escalation provisions in effect at the time of execution of the Option Aircraft Supplemental Agreement will be incorporated into such agreement. 2.1.4 Price Adjustments for Changes. Boeing may adjust the basic price and the advance payment base prices for any changes mutually agreed upon by Buyer and Boeing subsequent to the date that Buyer and Boeing enter into the Option Aircraft Supplemental Agreement. 2.1.5 BFE to SPE. An estimate of the total price for items of Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE) pursuant to the Detail Specification is included in the Option Aircraft price build-up. The purchase price of the Option Aircraft will be adjusted by the price charged to Boeing for such items plus 10% of such price. 3. Advance Payments. 3.1 Buyer shall pay to Boeing advance payments for the Option Aircraft pursuant to the schedule for payment of advance payments provided in the Agreement. 1951-12R1 May 16, 2000   Continental Airlines, Inc. 1600 Smith Street Houston, TX 77002   Subject: Option Aircraft - Model 737-924 Aircraft Reference: Purchase Agreement No. 1951 dated July 23, 1996 (the Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer) relating to Model 737-900 aircraft (the Aircraft)     Ladies and Gentlemen: This Letter Agreement amends and supplements the Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 1951-12 dated May 21, 1998. Boeing agrees to manufacture and sell to Buyer up to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] additional Model 737-900 aircraft as Option Aircraft, on the same terms and conditions set forth in the Agreement, subject to the terms and conditions set forth below. The delivery months, number of aircraft, Advance Payment Base Price per aircraft and advance payment schedule are listed in the tter Agreement (the Attachment). 1. Aircraft Description and Changes 1.1 Aircraft Description: The Option Aircraft are described by the Detail Specification listed in the Attachment. 1.2 Changes: The Detail Specification will be revised to include: (i) Changes applicable to the basic Model 737 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of the supplemental agreement to purchase the Option Aircraft; (ii) Changes required to obtain required regulatory certificates; and (iii)Changes mutually agreed upon. 1.3 Effect of Changes: Changes to the Detail Specification pursuant to the provisions of the clauses above shall include the effects of such changes upon Option Aircraft weight, balance, design and performance. 2. Price 2.1 The pricing elements of the Option Aircraft are listed in the Attachment. 2.2 Price Adjustments. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3. Payment. 3.1 Buyer will pay a deposit to Boeing in the amount shown in the Attachment for each Option Aircraft (Deposit), on the date of this Letter Agreement. If Buyer exercises an option, the Deposit applicable to such aircraft will be credited against the first advance payment due for such aircraft. If Buyer does not exercise an option, Boeing will retain the Deposit. 3.2 Following option exercise, advance payments in the amounts and at the times listed in the Attachment will be payable for the Option Aircraft. The remainder of the Aircraft Price for the Option Aircraft will be paid at the time of delivery. 4. Option Exercise. 4.1 To exercise its option to purchase the Option Aircraft, Buyer shall give written notice thereof to Boeing on or before the first business day of the month in each Option Exercise Date shown below: Option Aircraft Option Exercise Date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 4.2 If Boeing must make production decisions which are dependent on Buyer exercising an option earlier than the Option Exercise Date, Boeing may accelerate the Option Exercise Date subject to Buyer's agreement. If Boeing and Buyer fail to agree to a revised Option Exercise Date, either party may terminate the option and Boeing will refund to Buyer, without interest, any Deposit and advance payments received by Boeing with respect to the terminated Aircraft. 5. Contract Terms. Boeing and Buyer will use their best efforts to reach a definitive agreement for the purchase of an Option Aircraft, including the terms and conditions contained in this Letter Agreement, in a supplemental agreement to the Agreement, and other terms and conditions as may be agreed upon. In the event the parties have not entered into a supplemental agreement within 30 days following option exercise, either party may terminate the purchase of such Option Aircraft by giving written notice to the other 8. Applicability. Except as otherwise specifically provided, limited or excluded herein, all Option Aircraft that are added to the Agreement by an Option Aircraft supplemental agreement as firm Aircraft shall benefit from all the applicable terms, conditions and provisions of the Agreement. Very truly yours, THE BOEING COMPANY By   /s/ H. H. Hart                     Its           Attorney-In-Fact            ACCEPTED AND AGREED TO this Date: May 16,2000 CONTINENTAL AIRLINES, INC. By   /s/ Gerald Laderman                Its    Senior Vice President - Finance    Attachment Attachment to Letter Agreement 1951-12 Option Aircraft Delivery, Description, Price and Advance Payments   Airframe Model/MTGW: 737-900 164,000 Detail Specification: D6-39127 Rev. Orig. Engine Model: CFM56-7B26 Price Base Year: Jul-97 Airframe Base Price: Optional Features: Airframe and Engine Escalation Data: Sub-Total of Airframe and Features: Base Year Index (ECI): Engine Price (Per Aircraft): Base Year Index (ICI): Aircraft Basic Price (excluding BFE/SPE): Buyer Furnished Equipment (BFE) Estimate: Seller Purchased Equipment (SPE) Estimate: Refundable Deposit per Aircraft at Proposal Acceptance: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

Exhibit 10.11 RETENTION AGREEMENT This Agreement is entered into effective July 6, 1999, by and between JDS Uniphase Inc. (the "Company") and Jozef Strauss ("Employee"). I. For the purposes of this Agreement, the following definitions apply: (a) "Cause" means: i. willful malfeasance by Employee, which has a material adverse effect on the Company; ii. substantial and continuing willful refusal by Employee to perform duties ordinarily performed by an employee in the same position and having similar duties as Employee; iii. conviction of Employee for an indictable offense which has a material adverse effect on the Company's goodwill if Employee is retained as an employee of the Company; iv. willful failure by Employee to comply with material policies and procedures of the Company. (b) "Change of Control" means the occurrence of one or more of the following with respect to the Company or with respect to JDS Uniphase Corporation: i. the acquisition by any person (or related group of persons), whether by tender or exchange offer made directly to the shareholders, open market purchases or any other transaction or series of transactions, of shares of the Company or of Common Stock, as the case may be, possessing sufficient voting power in the aggregate to elect an absolute majority of the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be; ii. a merger or consolidation in which the Company or JDS Uniphase Corporation, as the case may be, is not the surviving entity, except for a transaction in which securities representing more than fifty percent (50%) of the total combined voting power of the surviving entity are held by persons who held shares of the Company or Common Stock as the case may be, immediately prior to such merger or consolidation and the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger or consolidation constitute a majority of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately after such merger or consolidation; iii. any reverse merger in which the Company or JDS Uniphase Corporation, as the case may be, is the surviving entity but in which either securities representing more than fifty (50%) of the total combined voting power of the outstanding securities of the Company or of JDS Uniphase Corporation, as the case may be, are transferred or issued to holders different from those who held such securities immediately prior to such merger or those members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger do not constitute a majority of the Board of Directors immediately after such merger; or the sale, transfer or other disposition of all or substantially all of the assets of the Company or of JDS Uniphase Corporation, as the case may be; but any such event in respect of the Company that does not result in any change in the beneficial ownership of the Company by JDS Uniphase Corporation is deemed not to be a Change of Control. (c) "Common Stock" means the aggregate of: a. the issued and outstanding $.001 par value, Common Stock of JDS Uniphase Corporation; and, b. the issued and outstanding exchangeable shares in the capital of 3506967 Canada Inc. (the name of which has been or will be changed to JDS Uniphase Canada Ltd.), an indirect subsidiary of JDS Uniphase Corporation; (d) "Good Reason" means: i. a material reduction in Employee's salary without Employee's prior written consent; ii. a material adverse change in Employee's position, duties or responsibilities without Employee's prior written consent; iii. an actual change in Employee's principal work location by more than 50 kilometers without Employee's prior written consent; iv. failure by the Company to obtain from any successor company the assumption of the Company's obligations under this Agreement; or v. resignation by the Executive for any reason within six months of a Change of Control; (e) "Disabled" means a mental or physical disability, illness or injury, evidenced by medical reports from a duly qualified medical practitioner, which renders the Employee unable to perform the essential duties of his or her position, and "Disability" has a corresponding meaning. (f) "Effective Date" means: i. in the event the Company terminates the employment of Employee, the date designated by the Company as the last day of Employee's employment; ii. in the event the Employee resigns his or her employment with the Company, the date designated by the Company as the effective date of resignation; iii. in the event the Employee dies, the date of death; iv. in the event the Employee becomes Disabled, the date designated by the Company as the last day of Employee's employment. 2. This Agreement expires five years from the date hereof (the "Expiry Date"). 3. If at any time up to and including the Expiry Date: a. the employment of the Employee is terminated without Cause; b. Employee dies; c. the employment of the Employee ceases due to Disability; or d. Employee resigns his or her employment with the Company for Good Reason, then in addition to Employee's entitlement to salary, benefits and unused paid vacation, all as accrued to the Effective Date, on providing to the Company a full and final release in form and substance acceptable to the Company, acting reasonably, i. Employee shall receive and accept payment of a sum equivalent to three year's salary (calculated based on the salary rate in effect at the Effective Date), plus three year's bonus (calculated based on the average of the bonus awarded to Employee in each of the previous three years of employment with the Company) less any amounts to which Employee is otherwise entitled under any statutory and/or Company long or short term disability plan, in full and final satisfaction of any statutory, contractual or common law entitlements which Employee has or could have as a result of the cessation of employment (which sum shall be subject to applicable statutory deductions); and ii. Employee's right, title and entitlement to any unvested options or any other securities or similar incentives which have been granted or issued to employee in existence as of the Effective Date, shall vest immediately with Employee, free from any restrictions, provided that all such securities shall continue to be exercisable (if applicable) for 90 days from the Effective Date or until the time that such securities would have otherwise expired (if applicable) whichever is earlier. 4. Employee and the Company acknowledge and agree that this Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario, Canada. If either party takes any legal proceedings of any nature in respect of this Agreement, such proceedings must be commenced in the Regional Municipality of Ottawa-Carleton, in the Province of Ontario, Canada, and are to be governed by the applicable statutory or civil procedural rules of Ontario. Employee and the Company agree that they hereby attorn to the jurisdiction of the Ontario Courts. 5. This Agreement constitutes the entire Agreement between the parties as to Employee's rights and entitlements upon the cessation of the employment relationship between them, where such cessation occurs on or before the Expiry Date. Employee and the Company each agree and acknowledge that no promises or representations have been made to or by the other, and that there are no terms or understandings relating to this Agreement, other than those expressly set out in this written documents. The foregoing does not limit any obhgation the Employee would otherwise have under any proprietary, invention or similar agreement or under any incentive plan in which the Employee is a participant. 6. Employee and the Company each specifically agree and acknowledge that they each waive recourse to any remedies in tort, and further agree and acknowledge their intent that all rights and habilities pertaining to the cessation of the employment relationship between them, where such cessation occurs on or before the Expiry Date, be as set out in this Agreement (or in any subsequent modification of this Agreement, provided that the modification is in writing and signed by both parties). 7. Employee and the Company acknowledge that they have received, or have been provided with sufficient opportunity to receive, independent legal advice prior to executing this Agreement.   JDS Uniphase Inc.   By:      /s/ Michael C. Phillips     --------------------------------------------------------------------------------   Name:  Michael C. Phillips   Title:  Vice President   /s/ Konstantin Kotzeff Witness /s/ Jozef Straus Jozef Straus -------------------------------------------------------------------------------- AGREEMENT REGARDING CHANGE OF CONTROL This Agreement is entered into effective July 6, 1999 by and between JDS Uniphase Inc., (the "Company"), and Jozef Strauss ("Executive"). RECITALS Executive is employed by the Company and is a valued officer of the Company. As an inducement to Executive to remain in the employ of the Company, the Company wishes to provide for certain rights in favour of Executive to exercise options to purchase shares of Common Stock (as defined below) held by Executive upon a Change of Control (as defined below) of the Company upon the terms herein provided. NOW THEREFORE, in consideration of the foregoing and the mutual promises herein contained, the parties agree as follows: AGREEMENT Section 1. Definitions For purposes of this Agreement, the following definitions shall apply: "Change of Control" means the occurrence of one or more of the following with respect to the Company or with respect to JDS Uniphase Corporation: i. the acquisition by any person (or related group of persons), whether by tender or exchange offer made directly to the shareholders, open market purchases or any other transaction or series of transactions, of shares of the Company or of Common Stock, as the case may be, possessing sufficient voting power in the aggregate to elect an absolute majority of the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case maybe; ii. a merger or consolidation in which the Company or JDS Uniphase Corporation, as the case may be, is not the surviving entity, except for a transaction in which securities representing more than fifty percent (50%) of the total combined voting power of the surviving entity are held by persons who held shares of the Company or Common Stock, as the case may be, immediately prior to such merger or consolidation and the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger or consolidation constitute a majority of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately after such merger or consolidation; iii. any reverse merger in which the Company or JDS Uniphase Corporation, as the case may be, is the surviving entity but in which either securities representing more than fifty (50%) of the total combined voting power of the outstanding securities of the Company or of JDS Uniphase Corporation, as the case may be, are transferred or issued to holders different from those who held such securities immediately prior to such merger or those members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger do not constitute a majority of the Board of Directors immediately after such merger; or iv. the sale, transfer or other disposition of all or substantially all of the assets of the Company or of JDS Uniphase Corporation, as the case may be; but any such event in respect of the Company that does not result in any change in the beneficial ownership of the Company by JDS Uniphase Corporation is deemed not to be a Change of Control. "Closing Date" means the date of the first closing of the transaction constituting a Change of Control. "Common Stock" means the aggregate of: (a) the issued and outstanding $.001 par value, common stock of JDS Uniphase Corporation; and, (b) the issued and outstanding exchangeable shares in the capital of 3506967 Canada Inc. (the name of which has been or will be changed to JDS Uniphase Canada Ltd.), an indirect subsidiary of JDS Uniphase Corporation; "Executive's Stock Options" shall mean any options to purchase Common Stock held by Executive that have been issued to Executive by the Company or by JDS Uniphase Corporation prior to a Closing Date. Section 2. Acceleration of Options on a Change in Control The Company agrees that the right of Executive to exercise the Executive's Stock Options shall be accelerated as of the Closing Date of a Change of Control so that Executive's Stock Options shall become fully exercisable as of the Closing Date as to all shares of the Common Stock subject thereto and, subject to the terms of this Section 2, remain exercisable thereafter in accordance with their terms. The foregoing acceleration of the right of Executive to exercise Executive's Stock Options shall apply notwithstanding any contrary terms in any stock option plan pursuant to which such Options are granted or any stock option agreement executed by the Company or by JDS Uniphase Corporation with respect to Executive's Stock Options, including, without limitation, any stock option plan terms that are adopted or any stock option agreement executed after the date hereof. Such acceleration of the exercisability of the Executive's Stock Options shall apply and occur without further action on the part of the Company, its Board of Directors, stockholders. Executive or any other party. As a condition to an acceleration of the Executive's Stock Options as provided in this Section 2, Executive agrees that Executive's Stock Options shall terminate as of the Closing Date to the extent unexercised as of such Closing Date if the terms and conditions of such Change of Control require that all employee stock options terminate as of such Closing Date. In no event shall this Section 2 be interpreted to cause the Executive's Stock Options to be exercisable for a greater number of shares of Common Stock than were subject to the Executive's Stock Options immediately prior to the Closing Date. Section 3. No Employment Agreement Except as previously herein provided. Executive and the Company each acknowledge and agree that this Agreement does not provide for the terms and conditions of Executive's employment with the Company and does not require or obligate Executive to provide services to the Company or the Company to continue to employ Executive. Section 4. Notices All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to the Company at: JDS Uniphase Inc. 570 West Hunt Club Road Nepean Ontario K2G 5W8 Or to the Executive at: 691 Hillcrest Avenue Ottawa, ON K2A 2N2 Notice of change of address shall be effective only when done in accordance with this Section. Section 5. Successors This Agreement shall be binding upon and shall inure to the benefit of the parties >hereto and their respective heirs, executors, administrators, successors and assigns. Section 6. Ontario Law The laws of the Province of Ontario shall govern the interpretation, performance and enforcement of this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.   JDS Uniphase Inc.   By:      /s/ Michael C. Phillips     --------------------------------------------------------------------------------   Name:  Michael C. Phillips   Title:  Vice President   /s/ Konstantin Kotzeff Witness /s/ Jozef Strauss Jozef Strauss --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit (10)A AGREEMENT     THIS AGREEMENT is made effective as of the 8th day of June, 2000 by and among TARGET CORPORATION, a Minnesota corporation ("Company") and LARRY V. GILPIN ("Executive"). RECITALS     A.  Executive is employed by the Company; and     B.  The Company and Executive wish to sever the Company's and Executive's relationship as employer and employee respectively, on the terms and conditions thereafter set forth; and     C.  The Company maintains an Income Continuance Policy (the "ICP") for which Executive is eligible, the terms and provisions of which Executive has been subject to and is familiar with; and     D.  The Company delivered Notice of Termination to Executive on May 15, 2000.     E.  The ICP requires a release in writing from Executive; and     F.  Executive acknowledges he has been advised and encouraged to review this Agreement with an attorney and is fully aware of the potential rights and remedies he may have as a result of the severance; and     G.  Executive and the Company wish to memorialize herein the resolution and settlement of all their respective rights, remedies and obligations whatsoever, flowing from Executive's employment and relationship with the Company and the severance and termination of that employment and relationship.     H.  Capitalized terms used, but not defined, in this Agreement shall have the definitions ascribed to them in the ICP.      1.  Employment Severance Date.  Executive's Effective Date of Termination for ICP purposes is June 3, 2000. Executive shall perform duties assigned to him by the Company through June 3, 2000, when the employer-employee relationship of Executive and the Company shall be severed and terminated (the "Employment Severance Date"). Executive's final day on the premises of the Company shall be May 19, 2000. After the Employment Severance Date, Executive shall be considered to be retired from his employment with the Company. As a retired officer of the Company, he shall be entitled to all benefits normally afforded to other retired executives as currently exist or as otherwise modified in the future.      2.  Salary.  Executive shall be paid his regular salary for services rendered as an employee under paragraph 1 hereof through June 3, 2000, subject to all required and voluntary withholdings. Such payments will otherwise be made in accordance with the Company's standard payroll practices as in effect at the time of payment.      3.  Income Continuance Payments.  Executive shall be entitled to income continuance payments aggregating $2,500,512, which shall be paid in fifty-two (52) consecutive biweekly payments pursuant to and subject to the terms and conditions of the ICP, the first payment commencing on the first regular payroll date after the later of (i) the expiration of the revocation period described in Section 23 of this Agreement or (ii) June 2, 2000. The gross amount of each biweekly payment, subject to the terms and conditions of the ICP, shall be $48,086.77. The biweekly amounts shall be reduced for taxes and other amounts required to be withheld by the Company.      4.  Vacation Pay.  The Company shall pay to Executive any unused accrued vacation due Executive as of the Employment Severance Date, subject to all required withholdings.      5.  Health Insurance.  Executive may continue to participate in the Company's medical and dental programs to the extent, if any, permitted by the Company's medical and dental plans (the "Plans"). In -------------------------------------------------------------------------------- order to continue such coverage, Executive must maintain continuous coverage under the Plans and pay 102% of the full cost of such Plans. Executive acknowledges that the Company may modify its premium structure, the terms of the Plans and the coverages of the Plans, including the termination of all or part of any Plan. All insurance coverage shall terminate at the earlier of 18 months from the Employment Severance Date or when the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), permits terminations.      6.  Life Insurance.  Executive may take his universal life insurance policy, if any, with him after the Employment Severance Date. In order to continue such policy, he will be required to make all payments with respect to the policy.      7.  Pension Plan - Savings Plan.  Executive's rights, if any, under the Company's Pension Plan and the Target Corporation 401(k) Plan will be determined under the terms of such plans as amended from time to time.      8.  Deferred Compensation Plan.  Executive shall be paid his deferred benefits, if any, under the Target Corporation Deferred Compensation Plan Senior Management Group and the Target Corporation SMG Executive Deferred Compensation Plan pursuant to the terms of such plans as amended from time to time.      9.  Excess Pension Plan.  Executive will be paid his benefits, if any, under the Target Corporation Excess Pension Plan pursuant to the terms of such plan as amended from time to time.     10.  Stock Plan.  Executive's rights under the Dayton Hudson Corporation Executive Long Term Incentive Plans of 1981 and 1999 (collectively, the "LTIP") will be determined under the terms of such plans on the Employment Severance Date. Executive acknowledges that the extension of option exercise periods under Section 6.1(b)(iii) of the LTIP, requires the consent of the Compensation Committee of the Board of Directors. Executive further acknowledges that such consent is in the sole discretion of such Committee. The Company will recommend that the Compensation Committee extend Executive's outstanding stock options such that they shall continue to vest and may be exercised for a period of five years from the Employment Severance Date or ten years and one day after the date of grant of the option, whichever occurs first; provided, however, that such extension will be contingent upon Executive's compliance with the terms of this Agreement and Executive's stock options may be terminated earlier as provided in paragraph 17 of this Agreement.     11.  Other Benefits.       On or before the Employment Severance Date, Executive may purchase his company car for a price equal to the value of such car as carried on Target Stores' books at the time of such purchase.     The Company shall reimburse the Executive for financial counseling expenses incurred as of June 3, 2000 under the Financial Counseling Expense Reimbursement perquisite for financial counseling expenses incurred prior to the Employment Severance Date. Eligibility of expenses shall be determined in accordance with the Company's standard policy for reimbursement of such expenses to its officer group.     Except as set forth in this Agreement or as required by law, Executive is entitled to no other employee benefits, fringe benefits or compensation, including, without limitation, any payment from the Company pursuant to its Short-Term Incentive Plan for fiscal year 2000 performance.     12.  No Recruiting.  Executive agrees, unless he has a written agreement signed by the an authorized officer of the Company allowing Executive to recruit persons named in that agreement, the execution of which agreement shall be in the sole discretion of the such officer, that Executive will not recruit for employment, directly or indirectly, any employee of the Company or any subsidiary of the Company, until the later of the dates upon which Executive has the right to (i) receive payments pursuant to paragraph 3 of this Agreement, or (ii) exercise stock options under the LTIP.     13.  Consultation and Cooperation.  Following the Employment Severance Date, the Company may request that Executive consult or cooperate with the Company (including, without limitation, serving as a -------------------------------------------------------------------------------- witness or testifying on the Company's behalf without subpoena), and Executive agrees to be available at mutually agreeable times to perform such duties and provide such cooperation in connection with various business and legal matters in which Executive was involved or has knowledge as result of Executive's employment with the Company. In so consulting or cooperating, Executive shall be reimbursed his reasonable out-of-pocket expenses and he shall not be nor represent to anyone that he is an agent of the Company, unless expressly authorized in writing to do so by an authorized officer of the Company.     14.  Directly Competitive Employment.  For purposes of Section II.G of the ICP and paragraph 17 of this Agreement, "Directly Competitive Employment" shall be employment with Best Buy, Wal-Mart, Kohl's, or any entity that controls, is controlled by or is under common control with any of these companies. For purposes of this paragraph 14, "control", "controls" or "controlled by" shall mean having a majority ownership interest or majority voting interest in the other company.     15.  Confidentiality.  Executive understands and agrees that the existence and terms of this Agreement are confidential and are not to be disclosed by Executive to anyone other than Executive's spouse, attorney, financial advisor, tax advisor (each of whom must agree to keep it confidential) or pursuant to court order.     Executive represents and warrants that prior to signing this Agreement he has not disclosed the terms of this Agreement or any information regarding the negotiations or discussions regarding this Agreement to anyone other than his spouse, attorney, financial advisor or tax advisor (each of whom has agreed to keep such information confidential).     Executive recognizes and acknowledges that confidential information of various kinds; including, but not limited to the Company's or any of its subsidiaries' (i) employee and personnel data and information, (ii) present, past and future strategies, plans, and proposals (including, but not limited to, customer, merchandising, marketing and store operation strategies), (iii) financial information, and (iv) present, past and future personnel and labor relations strategies, plans, practices, policies, training programs and goals, are valuable, special and unique assets of the Company. Executive will not, during or after Executive's employment with the Company, disclose or use, or cause or permit to be disclosed or used, any such information, to or by any person, firm, corporation, association or other entity for any reason or purpose other than for the sole benefit of the Company.     Executive represents that he has not removed and will not remove any of the Company's property from the Company's premises. This includes, but is not limited to, business records, manuals, customer lists and records, business forms, personnel lists, information, plans, training materials, and records, information regarding suppliers and vendors, marketing and strategy plans, contracts, contract information, correspondence, computer tapes and diskettes, data processing and other computer reports, and business files.     16.  Detrimental Conduct.  Executive agrees that he will not directly or indirectly in any manner by word or action defame or slander the Company, any subsidiary of the Company, or any of their management or affiliates, or state or utter an untruth or misstatement of fact that affects any of its or their reputations.     17.  Termination of Benefits.  In addition to other remedies available to the Company, in the event Executive breaches any of his obligations under this Agreement, then (i) the Company shall be relieved of all liability and obligation to make any payments under this Agreement, (ii) all of Executive's stock options and rights to receive performance shares and restricted stock shall terminate immediately and (iii) the Company may demand the return of any payments theretofore paid to Executive under paragraph 3. In addition, all of Executive's stock options and rights to receive performance shares and restricted stock shall terminate immediately if Executive engages in "Directly Competitive Employment" as defined in paragraph 14 of this Agreement. Even if payments and benefits are terminated pursuant to this paragraph, -------------------------------------------------------------------------------- Executive's obligations under paragraphs 12, 13, 14, 15 and 16 hereof, and the release set forth in paragraph 18 hereof shall remain in full force and effect.     18.  Release.       A.  DEFINITIONS. All words used in this release are intended to have their plain meanings in ordinary English. Specific terms in this release have the following meanings:     1)  "Executive" includes Executive and anyone who has or obtains any legal rights or claims through Executive.     2)  "Company" includes, as appropriate, any company related to the Company in the present or past, any entity providing insurance to the Company in the present or past, any present or past employee benefit plan sponsored by the Company, the Company's present or past officers, directors, employees and agents and any person who acted on behalf of the Company or on instructions from the Company.     3)  "Executive Claims" means all of the rights Executive has now to any relief of any kind from the Company, whether or not Executive knows about the rights or claims, including without limitation:     a.  All claims Executive has now arising out of his employment with the Company and his employment termination and all claims that arise out of or that relate to statements or actions of the Company; including, but not limited to, claims relating to breach of contract; unpaid compensation or benefits; breach of the covenant of good faith and fair dealing; promissory or equitable estoppel; breach of fiduciary duty; violation of the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Section 1981 of the Civil Rights Act of 1866, the Equal Pay Act of 1963, the Family and Medical Leave Act, the Americans with Disabilities Act, the Minnesota Human Rights Act and other federal, state, and local civil rights or discrimination laws; violation of the Employee Retirement Income Security Act of 1974; violation of the National Labor Relations Act; harassment; retaliation or reprisal; constructive discharge; invasion of privacy; violation of public policy; Executive's conduct as a "whistleblower"; fraud or misrepresentation; defamation; intentional or negligent infliction of emotional distress; negligence; interference with contractual or business relationships; interference with prospective economic advantage; wrongful termination of employment; assault; battery; unlawful employment practices, including all claims or causes of action in tort or contract;1 and any other conduct prohibited under any federal, state or local statute, ordinance or regulation; and -------------------------------------------------------------------------------- 1Any references to government statutes include any amendments to such statutes.     b.  All claims for attorneys' fees and costs and other litigation expenses.     B.  AGREEMENT TO RELEASE EMPLOYEE CLAIMS. In consideration of the Company having entered into this Agreement, Executive agrees to give up all Executive Claims against the Company as described above. Executive will not bring any lawsuits or make any other demands against the Company based on Executive Claims. The consideration represented by this Agreement exceeds any earned wages or other amounts due and owing to Executive and represents full and fair consideration to Executive for the release of Executive Claims. The Company does not owe Executive anything in addition to what Executive is specifically entitled to pursuant to the terms of this Agreement.     C.  ADDITIONAL AGREEMENTS AND UNDERSTANDINGS. Even though the Company has agreed to the terms and conditions of this Agreement to obtain Executive's release of Executive Claims, the Company does not admit that it may be responsible or legally obligated to Executive. In fact, the Company denies that it is responsible or legally obligated for Executive Claims or that it has engaged in any wrongdoing. --------------------------------------------------------------------------------     19.  Miscellaneous.  This Agreement shall be binding upon the Company and its successors and assigns and Executive, his heirs, executors, successors and assigns. This Agreement embodies the entire Agreement and understandings between the Company and Executive, and supersedes all prior agreements and understandings (oral or written) between them relating to the subject matter hereof. The terms of this Agreement may only be modified by an agreement in writing signed by Executive and an authorized officer of the Company.     20.  Construction and Applicable Law.  The ICP is intended to be a welfare benefit plan subject to the applicable requirements of ERISA. The ICP and this Agreement shall be administered and construed consistently with that intent. They shall also be construed and administered according to the laws of the State of Minnesota to the extent such laws are not preempted by laws of the United States of America. All controversies, disputes, and claims arising hereunder shall be submitted to the United States District Court for the District of Minnesota.     21.  Severability.  Invalidation of any provision contained in this Agreement, or of the application thereof to any party, by judgment or court order shall in no way affect any of the other provisions hereof or the application thereof to any other party or circumstance and the same shall remain in full force and effect, unless enforcement of this Agreement as so invalidated would be unreasonable or grossly inequitable under all the circumstances or would frustrate the purposes of this Agreement.     22.  Relationship to Income Continuance Plan.  This Agreement is entered into for the purpose of implementing the ICP. The terms of this Agreement are intended to be construed in concert with the terms of the ICP. To the extent there is conflict between the terms of this Agreement and the terms of the ICP, the terms of this Agreement shall prevail.     23.  Revocation.  Executive understands that he may revoke (that is cancel) the release set forth in paragraph 18, if he does so within 15 calendar days of signing this Agreement. Such revocation must be made in a written statement that is hand delivered or post marked within 15 calendar days of the date Executive signs this Agreement and must be addressed to the Corporate Secretary, Target Corporation, 777 Nicollet Mall, Minneapolis, Minnesota 55402. Executive understands that if he mails such a revocation, mailing by certified mail, return receipt requested, is recommended to show proof of mailing.     24.  Remedies.  In the event of a breach or threatened breach by Executive of the provisions of paragraphs 12, 13, 14, 15 or 16 of this Agreement, Company shall be entitled to an injunction restraining Executive from breaching, in whole or in part, any of his duties, obligations, or covenants in those paragraphs. Executive acknowledges that such remedy is appropriate. Nothing in this Agreement shall be construed as prohibiting Company from pursuing any other remedy or remedies available to it for such breach or threatened breach, including but not limited to the other remedies specifically provided for in this Agreement and the recovery of damages, together with costs and attorney's fees. -------------------------------------------------------------------------------- Please read carefully before signing •Executive acknowledges that he has been advised and encouraged to consult with an attorney prior to signing this Agreement. •In agreeing to sign this Agreement, Executive acknowledges that he has not relied on any statements or explanations made by the Company or its attorneys. •Executive acknowledges that he has been given 21 days (or more) to consider whether to sign this Agreement. Executive acknowledges that if he signs this Agreement before the end of the 21 day period, it was Executive's personal, voluntary decision to do so. •Executive understands that this Agreement shall not become effective or enforceable until the revocation period has expired. No payment shall be made to Executive until after the revocation period has expired. •Executive understands that if he revokes this Agreement it will terminate and he will not receive any benefits under this Agreement including, without limitation, the payments set forth in paragraph 3 and the option extension described in paragraph 10.     IN WITNESS WHEREOF the parties have hereto executed this Agreement.     TARGET CORPORATION   Date: 6/8/00       By:       /s/                     -------------------------------------------------------------------------------- James T. Hale     Title:   Executive Vice President & General Counsel   Date: 6/13/00               /s/                          -------------------------------------------------------------------------------- LARRY V. GILPIN -------------------------------------------------------------------------------- QUICKLINKS AGREEMENT

EXHIBIT 2.2 ASSIGNMENT OF OPERATING RIGHTS This Assignment entered into by and between GLADSTONE ENERGY, INC., a Delaware corporation, with offices at 3500 Oak Lawn, Suite 590, LB 49, Dallas, Texas 75219, hereinafter referred to as "Assignor", and EXCO RESOURCES, INC., a Texas corporation, with offices at 5735 Pineland, Suite 235, Dallas, TX 75231, hereinafter referred to as "Assignee". W I T N E S S E T H: Assignor, for $10.00 cash and other valuable consideration, the receipt of which is acknowledged, does hereby assign, transfer and convey unto Assignee, its successors and assigns, the following: (i) all of Assignor's undivided 37.5% interest in the operating rights in the Mesaverde Formation in and under the leases and lands specifically described under A below, (ii) all of Assignor's undivided 37.5% interest in the operating rights in the Chacra Formation in and under the leases and lands specifically described in B below, and (iii) all of Assignor's undivided 37.5% interest in and to each of the related properties, rights and interests described in C below:          A. MESAVERDE FORMATION OPERATING RIGHTS         Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3-A   Lease No. SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" No. 2A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 078480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico            B. CHACRA FORMATION OPERATING RIGHTS         Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3A   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less in San Juan County, New Mexico         Well Name: Federal "E" No. 2-A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 0768480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico            C. RELATED PROPERTIES, RIGHTS AND INTERESTS   (1) All wells (whether producing, non-producing, shut-in, abandoned or temporarily abandoned and whether oil wells, gas wells, saltwater disposal wells, injection wells or water wells) located on the leases and lands described in A and B above, together with all of the personal property and equipment used or obtained in connection with such wells, including, but not limited to, all casing, pipe, tubing, rods, separators, well-head and in-hole equipment, tanks, motors, fixtures and other such personal property and equipment;         (2) All permits, licenses, orders, pooling or unitization orders and agreements, communitization agreements, operating agreements, exploration agreements, farmin or farmout agreements, letter agreements, processing, transportation or lease agreements, and other contracts and agreements which, and only insofar as the same cover, relate or pertain to the leases, lands, and wells described in A, B and C. (1) above; and         (3) All rights-of-way, easements, servitudes, surface leases, treating facilities, pipelines and gathering systems which cover, relate or pertain to the leases and the wells described in A, B and C. (1) above, or which may be necessary or convenient to be used in connection therewith; all of the foregoing, together with all appurtenances and additions thereto, and reversionary and carried interests therein, being herein collectively called the "Subject Properties". TO HAVE AND TO HOLD the Subject Properties to Assignee, its successors and assigns, subject, however, to the following: This Assignment of Operating Rights shall cover and relate to said leases and any modifications or extensions thereof insofar as said extensions or modifications pertain to the formations and lands specifically described above. The interests herein assigned and conveyed are subject to their proportionate 37.5% share of the royalties provided for in the leases described above and the outstanding overriding royalties under said leases which, when taken together, equal 25% of 8/8 of the oil and gas produced, saved and marketed from the operating rights described above. Assignor and Assignee agree to comply with all the provisions of Section 202 (1) to (7), inclusive, of Executive Order 11246 (30 F.R. 12319) which are hereby incorporated by reference. The interests herein assigned are subject to all the terms and covenants, conditions and provisions of: (i) the Assignment of Operating Rights and Working Interest dated June 16, 1972, from Atlantic Richfield Company to R. C. Wynn covering the operating rights in the leases and lands described above; and (ii) that certain Operating Agreement dated August 12, 1980, executed by and among AAA Operating Company, Inc., as Operator, and Gladstone Resources, Inc., et al, as Non-Operator, covering the above described leases, lands and operating rights. The interests herein assigned are subject to all the terms and covenants, conditions and provisions of that certain Purchase and Sale Agreement dated effective August 1, 2000 by and between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Buyer, hereinafter called the "PSA". NOTWITHSTANDING any provision in this instrument or the PSA to the contrary, any warranties of title of Assignor made herein shall be only as against persons claiming by, through or under Assignor, and not otherwise. IN WITNESS WHEREOF , this Assignment of Operating Rights is executed on the dates of the acknowledgements hereto, effective however, on the 1st day of August, 2000 at 7:00 a.m. San Juan County, New Mexico time. ASSIGNOR ATTEST:                                                        GLADSTONE ENERGY, INC.     /s/ Sheila Irons                                              By: /s/ Johnathan M. Hill                     Secretary                                                                 Johnathan M. Hill, President     ASSIGNEE ATTEST:                                                         EXCO RESOURCES, INC.      /s/ Richard E. Miller                                    By:           /s/ Ted W. Eubank                    Richard E. Miller, Secretary                                  Ted W. Eubank, President     ACKNOWLEDGEMENTS STATE OF TEXAS COUNTY OF DALLAS The foregoing instrument was acknowledged before me this    10th    day of October, 2000, by Johnathan M. Hill, as President of Gladstone Energy, Inc. on behalf of said corporation.   (SEAL)                                                  /s/ Notary                                                                                                                      Notary Public     STATE OF TEXAS COUNTY OF DALLAS The foregoing instrument was acknowledged before me this    10th     day of October, 2000, by Ted W. Eubank, as President of EXCO Energy, Inc. on behalf of said corporation.   (SEAL)                                                  /s/ Notary                                                                                                                      Notary Public

Exhibit 10.1 LOAN AGREEMENT DATED AS OF OCTOBER 31, 2000 among Recoton Corporation, InterAct Accessories, Inc., Recoton Audio Corporation, AAMP of Florida, Inc., and Recoton Home Audio, Inc., as Borrowers, and The Other Loan Parties Party Hereto and The Lenders Party Hereto, HELLER FINANCIAL, INC., as Administrative Agent, Senior Agent and as a Lender and GENERAL ELECTRIC CAPITAL CORPORATION as Collateral Agent, Syndication Agent and as a Lender TABLE OF CONTENTS Page SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 2   1.1 Certain Defined Terms 2 SECTION 2. LOANS AND COLLATERAL 2   2.1 Loans 2   (A)(1) Term Loan A 2   (A)(2) Term Loan B 2   (A)(3) Term Loan C 3   (B) Revolving Loan 4   (C) Eligible Collateral 5   (D) Borrowing Mechanics 9   (E) Notes 9   (F) Letters of Credit 10   (G) Other Letter of Credit Provisions 11   (H) Availability of a Lender's Pro Rata Share 13   2.2 Interest 14   (A) Rate of Interest 14   (B) Computation and Payment of Interest 14   (C) Interest Laws 15   (D) Conversion or Continuation 15   2.3 Fees 16   (A) Unused Line Fee 16   (B) Letter of Credit Fees 16   (C) Prepayment Fee 17   (D) Audit Fees 17   (E) Other Charges and Expenses 17   (F) Administrative Agent's Fee 18   (G) Collateral Agent's Fee 18   2.4 Payments and Prepayments 18   (A) Manner and Time of Payment 18   (B) Mandatory Prepayments 18   (C) Voluntary Prepayments and Repayments 21   (D) Payments on Business Days 21   2.5 Term of this Agreement 21   2.6 Statements 22   2.7 Yield Protection 22   (A) Capital Adequacy and Other Adjustments 22   (B) Increased LIBOR Funding Costs 22   2.8 Taxes 23   (A) No Deductions 23   (B) Changes in Tax Laws 23   (C) Foreign Lenders 24   2.9 Required Termination and Prepayment 24   2.10 Optional Prepayment/Replacement of Lenders 25   2.11 Compensation 26   2.12 Booking of LIBOR Loans 26   2.13 Assumptions Concerning Funding of LIBOR Loans 26   2.14 Joint and Several Liability of Borrowers 26   2.15 Recoton as Agent for Borrowers 29   2.16 Currency 30 SECTION 3. CONDITIONS TO LOANS 30 SECTION 4. LOAN PARTIES' REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS 30   4.1 Organization, Powers, Capitalization 30   (A) Organization and Powers 30   (B) Capitalization 31   4.2 Authorization of Borrowing, No Conflict 31   4.3 Financial Condition 32   4.4 Indebtedness and Liabilities 32   4.5 Title to Properties; Liens 32   4.6 Litigation; Adverse Facts 32   4.7 Payment of Taxes 33   4.8 Performance of Agreements 33   4.9 Employee Benefit Plans 33   4.10 Broker's Fees 34   4.11 Environmental Matters 34   4.12 Solvency 35   4.13 Disclosure 36   4.14 Insurance 36   4.15 Compliance with Laws 37   4.16 Employee Matters 37   4.17 Governmental Regulation 37   4.18 Currency Controls 37   4.19 Access to Accountants and Management 37   4.20 Inspection 38   4.21 Collateral Records 38   4.22 Collection of Accounts and Payments 38   4.23 Amendment of Schedules 39   4.24 Customer and Trade Relations 39   4.25 Subordinated Debt 39 SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS 39   5.1 Financial Statements and Other Reports 40   5.2 Endorsement 40   5.3 Maintenance of Properties 40   5.4 Compliance with Laws 40   5.5 Further Assurances 40   5.6 Mortgages; Title Insurance; Surveys 41   (A) Title Insurance 41   (B) Surveys 41   5.7 Use of Proceeds and Margin Security 41   5.8 Bailee 41   5.9 Year 2000 42   5.10 Environmental Matters 42   5.11 Required Minimum Excess Availability 43   5.12 Recoton Germany 43 SECTION 6. FINANCIAL COVENANTS 43 SECTION 7. NEGATIVE COVENANTS 44   7.1 Indebtedness and Liabilities 44   7.2 Guaranties 45   7.3 Transfers, Liens and Related Matters 46   (A) Transfers 46   (B) Liens 47   (C) No Negative Pledges 47   (D) No Restrictions on Subsidiary Distributions to Borrowers 47   7.4 Investments and Loans 48   7.5 Restricted Junior Payments 49   7.6 Restriction on Fundamental Changes 50   7.7 Changes Relating to Subordinated Debt 51   7.8 Transactions with Affiliates 51   7.9 Conduct of Business 51   7.10 Tax Consolidations 51   7.11 Subsidiaries 51   7.12 Fiscal Year; Tax Designation 52   7.13 Press Release; Public Offering Materials 52   7.14 Bank Accounts 52   7.15 Sale-Leasebacks 52   7.16 Cancellation of Indebtedness 52   7.17 Inactive Subsidiaries 52   7.18 Parity with Senior Lender 52 SECTION 8. DEFAULT, RIGHTS AND REMEDIES 53   8.1 Event of Default 53     (A) Payment 53   (B) Default in Other Agreements 53   (C) Breach of Certain Provisions 53   (D) Breach of Warranty 53   (E) Other Defaults Under Loan Documents 53   (F) Change in Control 53   (G) Involuntary Bankruptcy; Appointment of Receiver, etc. 54   (H) Voluntary Bankruptcy; Appointment of Receiver, etc. 54   (I) Liens 54   (J) Judgment and Attachments 55   (K) Dissolution 55   (L) Solvency 55   (M) Injunction 55   (N) Invalidity of Loan Documents 55   (O) Failure of Security 55   (P) Damage, Strike, Casualty 55   (Q) Licenses and Permits 56   (R) Forfeiture 56   (S) Currency Controls 56   (T) Environmental Matters 56   (U) Default Under German Facility 56   (V) Recoton Germany 56   (W) Employee Benefit Plans 57   (X) Foreign Exchange 57   (Y) Resignation of Borrowers' Accountants 57   (Z) Income Tax Act 57   8.2 Suspension of Commitments 57   8.3 Acceleration 57   8.4 Remedies 58   8.5 Appointment of Attorney-in-Fact 59   8.6 Limitation on Duty of Agents with Respect to Collateral 60   8.7 Application of Proceeds 60   8.8 Waivers; Non-Exclusive Remedies 60 SECTION 9. AGENTS 61   9.1 Agents 61   (A) Appointment 61   (B) Nature of Duties 61   (C) Rights, Exculpation, Etc. 62   (D) Reliance 62   (E) Indemnification 63   (F) Heller and GECC Individually 63   (G) Successor Agent 63   (H) Collateral Matters 64   (I) Agency for Perfection 65   (J) Exercise of Remedies 66   9.2 Notice of Default 66   9.3 Action by Administrative Agent and Senior Agent 66   9.4 Amendments, Waivers and Consents 67   9.5 Assignments and Participations in Loans 68   9.6 Set Off and Sharing of Payments 70   9.7 Disbursement of Funds 71   9.8 Settlements, Payments and Information 71   (A) Revolving Advances and Payments; Fee Payments 71   (B) Term Loan Principal Payments 73   (C) Return of Payments 73   9.9 Discretionary Advances 73 SECTION 10. MISCELLANEOUS 74   10.1 Expenses and Attorneys' Fees 74   10.2 Indemnity 74   10.3 Notices 75   10.4 Survival of Representations and Warranties and Certain Agreements 77   10.5 Indulgence Not Waiver 77   10.6 Marshaling; Payments Set Aside 77   10.7 Entire Agreement 77   10.8 Severability 77   10.9 Lenders' Obligations Several; Independent Nature of Lenders' Rights 78   10.10 Headings 78   10.11 Applicable Law 78   10.12 Successors and Assigns 78   10.13 No Fiduciary Relationship; No Duty; Limitation of Liabilities 78   10.14 Consent to Jurisdiction 79   10.15 Waiver of Jury Trial 80   10.16 Construction 80   10.17 Counterparts; Effectiveness 80   10.18 Confidentiality 80   10.19 Judgment Currency 81 SECTION 11. DEFINITIONS AND ACCOUNTING TERMS 81   11.1 Certain Defined Terms 81   11.2 Accounting Terms 105   11.3 Other Definitional Provisions 105 LOAN AGREEMENT            This LOAN AGREEMENT (“Agreement”) is dated as of October 31, 2000 and entered into among RECOTON CORPORATION, a New York corporation (“Recoton”), INTERACT ACCESSORIES, INC., a Delaware corporation (“InterAct”), RECOTON AUDIO CORPORATION, a Delaware corporation (“Audio”), AAMP OF FLORIDA, INC., a Florida corporation (“AAMP”), and RECOTON HOME AUDIO, INC., a California corporation (“RHAI”); Recoton, InterAct, Audio, AAMP and RHAI are sometimes referred individually as “Borrower” and collectively, as “Borrowers”), the Guarantors (capitalized terms used in these Recitals without definition shall have the respective meanings assigned in Section 11 hereof) listed on the signature pages hereof, the financial institution(s) listed on the signature pages hereof, and their respective successors and Eligible Assignees (each individually a “Lender” and collectively “Lenders”) and HELLER FINANCIAL, INC., a Delaware corporation (in its individual capacity, “Heller”), for itself as a Lender and as Administrative Agent and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual capacity, “GECC”) for itself as a Lender and as Collateral Agent and as Syndication Agent. The Administrative Agent, Senior Agent and the Collateral Agent are sometimes referred to herein as the “Agents”.            WHEREAS, Borrowers desire that Lenders extend certain credit facilities to the Borrowers hereunder of up to $235,000,000, the proceeds of which will be used, among other things, to (i) pay certain existing indebtedness and (ii) provide financing for working capital and other general corporate purposes, all subject to the terms and conditions contained herein; and            WHEREAS, the Borrowers and the Subordinated Creditors are entering into a Credit Agreement dated as of the date hereof (the “Subordinated Credit Agreement”) pursuant to which the Subordinated Creditors are extending credit in the principal amount of $15,000,000, the proceeds of which will be used to pay certain existing indebtedness;            WHEREAS, to secure each Borrower’s obligations under the Loan Documents and the Subordinated Debt Documents, each Borrower is granting to the Senior Agent, for benefit of the Benefitted Persons, a security interest in and lien upon substantially all of each Borrower’s real and personal property; and            WHEREAS, the Guarantors are willing to guaranty all of the obligations of Borrowers to Agents and Lenders under the Loan Documents and to grant to Senior Agent, for benefit of the Benefitted Persons, a security interest in substantially all of each Guarantor’s real and personal property as provided herein to secure such guaranty;            NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Agents and Lenders agree as follows:   SECTION 1. DEFINITIONS AND ACCOUNTING TERMS            1.1 Certain Defined Terms. The capitalized terms and the accounting terms used in this Agreement shall have the meanings set forth in Section 11 of this Agreement.   SECTION 2. LOANS AND COLLATERAL            2.1 Loans.                      (A)(1) Term Loan A            “Scheduled Installment” of Term Loan A means, for each date set forth below, the amount set forth opposite such date. Date Scheduled Installment ---- --------------------- December 31, 2000 $500,000 March 31, 2001 $500,000 June 30, 2001 $500,000 September 30, 2001 $500,000 December 31, 2001 $500,000 March 31, 2002 $500,000 June 30, 2002 $500,000 September 30, 2002 $500,000 December 31, 2002 $500,000 March 31, 2003 $500,000 June 30, 2003 $500,000 October 31, 2003 $14,500,000            In any event the final Scheduled Installment of Term Loan A shall be in an amount sufficient to repay all amounts owing by Borrowers hereunder with respect to Term Loan A.                      (A)(2) Term Loan B. Each Term Loan B Lender, severally, agrees to lend to Borrowers on the Closing Date its Pro Rata Share of Term Loan B which is in the aggregate amount of $15,000,000. Term Loan B shall be funded in one drawing. Amounts borrowed under this subsection 2.1(A)(2) and repaid or prepaid may not be reborrowed. Borrowers shall make principal payments in the amounts of the applicable Scheduled Installments of Term Loan B (or such lesser principal amount of Term Loan B as shall then be outstanding) on the dates set forth below.            “Scheduled Installment” of Term Loan B means, for each date set forth below, the amount set forth opposite such date. Date Scheduled Installment ---- --------------------- December 31, 2000 $1,875,000 March 31, 2001 $1,875,000 June 30, 2001 $1,875,000 September 30, 2001 $1,875,000 December 31, 2001 $1,875,000 March 31, 2002 $1,875,000 June 30, 2002 $1,875,000 October 31, 2002 $1,875,000            In any event the final Scheduled Installment of Term Loan B shall be in an amount sufficient to repay all amounts owing by Borrowers hereunder with respect to Term Loan B.                      (A)(3) Term Loan C. Each Term Loan C Lender, severally, agrees to lend to Borrowers on the Closing Date its Pro Rata Share of Term Loan C which is in the aggregate amount of $15,000,000. Term Loan C shall be funded in one drawing; it being understood however, that as to each Term Loan C Lender that is also a Subordinated Creditor such funding shall be made in an amount equal to such Term Loan C Lender's Commitment by the satisfaction of an equivalent amount of the existing debt owed by Recoton to such Term Loan C Lender. Amounts borrowed under this subsection 2.1(A)(3) and repaid or prepaid may not be reborrowed. Borrowers shall make principal payments in the amounts of the applicable Scheduled Installments of Term Loan C (or such lesser principal amount of Term Loan C as shall then be outstanding) on the dates set forth below.            On the second anniversary of the Closing Date, Borrowers shall repay the principal amount of Term Loan C, in the amount by which the Maximum Revolving Loan Amount exceeds the Revolving Loan by more than $45,000,000; provided that in calculating such repayment the accounts payables have been paid in the ordinary course of business consistent with historical customary payment practices (the foregoing calculation being “Term Loan C Repayment Restriction”). The Administrative Borrower shall deliver to the Administrative Agent a written statement (the “Repayment Certification”) certified by the chief financial officer of the Administrative Borrower five Business Days prior to making such Scheduled Installment, (i) setting forth in reasonable detail the basis for calculating the amounts by which the Maximum Revolving Loan Amount exceeds the Revolving Loan on the date of payment of the Scheduled Installment and (ii) stating that the accounts payables have been paid in the ordinary course of business consistent with historical customary payment practices, which written statement shall be in form and substance satisfactory to the Administrative Agent. If Borrowers can not repay the full principal amount of the Term Loan C on the second anniversary of the Closing Date as a result of the application of the Term Loan C Repayment Restriction, then Borrowers shall repay the remaining outstanding principal amount of Term Loan C, if any, in twelve equal monthly installments until paid in full commencing on the last day of the first month after the second anniversary of the Closing Date; provided, however, that to the extent that the Borrowers cannot repay the full amount of an installment when due as a result of the application of the Term Loan C Repayment Restriction (the amount not able to be paid being referred to as the “Shortfall”) then the Shortfall shall be carried forward and added to the immediately succeeding Scheduled Installment. Each Scheduled Installment (other than the final installment) shall be subject to the Term Loan C Repayment Restriction and to the delivery of a Repayment Certification. The final Scheduled Installment shall be due and payable on October 31, 2003.            “Scheduled Installment” of Term Loan C means (i) the principal amounts of Term Loan C payable on the second anniversary of the Closing Date pursuant to the previous paragraph and, if applicable, (ii) the twelve equal installments described in the last sentence of the previous paragraph. In any event the final installment of Term Loan C shall be in an amount sufficient to repay all amounts owing by Borrowers hereunder with respect to Term Loan C.                      (B) Revolving Loan. Each Revolving Loan Lender, severally, agrees to lend to Borrowers from time to time its Pro Rata Share of each Revolving Advance. The aggregate amount of all Revolving Loan Commitments shall not exceed at any time $185,000,000 as reduced by subsections 2.4(B)(5), 2.4(B)(6) and 2.4(C). Amounts borrowed under this subsection 2.1(B) may be repaid and reborrowed at any time prior to the earlier of (i) the termination of the Revolving Loan Commitment pursuant to subsection 8.3 or (ii) the Termination Date. Except as provided in subsections 2.4(A) and 9.9, no Revolving Loan Lender shall have any obligation to make a Revolving Advance to the extent such Revolving Advance would cause the Revolving Loan (after giving effect to any immediate application of the proceeds thereof) to exceed the Maximum Revolving Loan Amount.                                (1) "Maximum Revolving Loan Amount" means, as of any date of determination, the lesser of (a) the Revolving Loan Commitment(s) of all Revolving Loan Lenders less the Letter of Credit Reserve and (b) the Borrowing Base less the Letter of Credit Reserve.                                (2) "Borrowing Base" means, as of any date of determination, an amount equal to the sum of, in each case, less reserves, such reserves including, but not limited to, those set forth in Exhibit B-2, as Administrative Agent, in its reasonable credit judgment elects to establish unless otherwise directed by the Requisite Lenders: (a) up to 80% of Eligible Accounts, (b) up to 65% of Eligible Inventory; (c) up to 65% of Letter of Credit Inventory (as defined below), (d) up to an additional 5% of each of Eligible Inventory and Letter of Credit Inventory during the “In-Season Period” (as defined below) and (e) 100% of the letter of credit, if any, provided by Recoton Germany as set forth in subsection 5.12; provided that Administrative Agent, in its reasonable credit judgment, can decrease the advance rates from time to time, and provided further that notwithstanding the foregoing, in no event shall, at any time (i) the aggregate borrowing availability against (b), (c) and (d) in this subsection 2.1B(2) exceed $130,000,000 and (ii) the borrowing availability against (d) in this subsection 2.1B(2), exceed $10,000,000.                      "Letter of Credit Inventory" means Eligible Inventory ordered but not received, the payment for which is to be made under documentary Lender Letters of Credit less duty and freight due with respect to the Letter of Credit Inventory.                      "In-Season Period" means a period of up to five consecutive months during any calendar year period, provided that (i) there can only be one In-Season Period during any calendar year period, (ii) an In-Season Period shall automatically end on December 31 of such calendar year if it has not all ready ended, (iii) 120 days must elapse subsequent to the end of an In-Season Period before a new In- Season Period may commence and (iv) Administrative Borrower shall give the Administrative Agent at least five Business Days' prior written notice of the commencement of any such In-Season Period.                      (C) Eligible Collateral.                      "Eligible Accounts" means, as at any date of determination, the aggregate of all Accounts of Borrowers, Recoton Canada and Recone that Administrative Agent, in its reasonable credit judgment, deems to be eligible for borrowing purposes. Without limiting the generality of the foregoing, the Administrative Agent may determine that the following Accounts are not Eligible Accounts:                                (1) Accounts which, at the date of issuance of the respective invoice therefor, were payable more than 61 days after the date of issuance; provided, that up to $15,000,000 of Accounts shall not be excluded pursuant to this clause (1) to the extent such Accounts were payable more than 61 days after the date of issuance but no longer than120 days after the date of issuance;                                (2) Accounts which remain unpaid for more than 60 days after the due date specified in the original invoice or for more than 90 days after invoice date if no due date was specified;                                (3) In addition to the Accounts excluded under clause (2) above, Accounts (including invoices, credits, charge-backs and on account payments) which remain unpaid for more than 60 days after the due date specified in the original invoice or for more than 90 days after invoice date if no due date was specified with respect to which the account debtor’s account balance is a credit balance but only to the extent of such credit balance;                                (4) Accounts due from an account debtor whose principal place of business is located outside the United States of America or Canada unless such Account is (a) covered by credit insurance in form and substance acceptable to the Senior Agent and which insurance names the Senior Agent, on behalf of the Benefitted Persons, as loss payee and additional insured or (b) backed by a letter of credit, in form and substance acceptable to Senior Agent and issued or confirmed by a bank that is organized under the laws of the United States of America or a State thereof or a Schedule I Canadian bank, that is acceptable to Senior Agent; provided that such letter of credit has been delivered to Senior Agent as additional Collateral; provided that, notwithstanding the foregoing, any Accounts under this clause (4) that do not comply with the provisions of clauses (a) or (b) herein shall be considered Eligible Accounts to the extent they comply with the other provisions of this definition of Eligible Accounts and provided that they do not exceed, in the aggregate, $1,000,000;                                (5) Accounts due from an account debtor which Administrative Agent has notified Borrowers does not have a satisfactory credit standing;                                (6) Accounts in excess of an aggregate face amount of $3,000,000 with respect to which the account debtor is (i) the United States of America, any state or any municipality, or any department, agency or instrumentality thereof, unless Borrowers and Recone have, with respect to such Accounts, complied with the Federal Assignment of Claims Act of 1940 as amended (31 U.S.C. Section 3727 et seq) or any applicable statute or municipal ordinance of similar purpose and effect or (ii) Canada, unless Borrowers and Recoton Canada have complied with the Financial Administration Act (Canada) or any applicable provincial or territorial statute or municipal ordinance of similar purpose and effect;                                (7) Accounts with respect to which the account debtor is an Affiliate of a Borrower or a director, officer, agent, stockholder (other than a stockholder of not more than 10% of the capital stock of Recoton) or employee of any Borrower or any of its Affiliates;                                (8) Accounts due from an account debtor if more than 50% of the aggregate Dollar amount of invoices of such account debtor have at the time remained unpaid for more than 60 days after due date or 90 days after the invoice date if no due date was specified;                                (9) Accounts which are less than 60 days past due or less than 90 days from the invoice date if no due date was specified with respect to which there is any unresolved dispute (including, but not limited to, charge-backs) net of any credits for returned merchandise less than 60 days past due or less than 90 days from the invoice date if no due date was specified;                                (10) Accounts evidenced by an "instrument" or "chattel paper" (as defined in the UCC or the PPSA, as applicable) not in the possession of Senior Agent, or its agents, on behalf of the Benefitted Persons;                                (11) subject to the Accounts permitted under clauses (4) and (6), Accounts with respect to which Senior Agent or its trustee or its agents, on behalf of the Benefitted Persons, does not have a valid, first priority and fully perfected security interest;                                (12) Accounts subject to any Lien except those in favor of Senior Agent, on behalf of the Benefitted Persons and except for prior claims that are unregistered and that secure amounts not yet due and payable;                                (13) Accounts with respect to which the account debtor is the subject of any bankruptcy or insolvency proceeding;                                (14) Accounts due from an account debtor to the extent that the Dollar amount of such Accounts exceed in the aggregate an amount equal to 10% of the aggregate of all Accounts at said date (the “Concentration Limitation”); provided that, notwithstanding the foregoing, the Account debtors listed on Schedule 2.1(C)(i) shall have the Concentration Limitations set forth in such Schedule.                                (15) Accounts with respect to which the account debtor's obligation to pay is conditional or subject to a repurchase obligation or right to return or with respect to which the goods or services giving rise to such Account have not been delivered (or performed, as applicable) and accepted by such account debtor, including progress billings, bill and hold sales, guarantied sales, sale or return transactions, sales on approval or consignment sales;                                (16) Accounts with respect to which the account debtor is located in any state or province denying creditors access to its courts in the absence of a Notice of Business Activities Report or other similar filing, unless the applicable Borrower has either qualified as a foreign corporation authorized to transact business in such state or province or has filed a Notice of Business Activities Report or similar filing with the applicable state or provincial agency or is otherwise qualified to carry on business therein for the then current year;                                (17) Accounts with respect to which the account debtor is a creditor (represented as a liability on Borrowers’, Recoton Canada’s or Recone’s, as applicable, financial statements) of any Borrower, Recoton Canada or Recone, provided, however, that any such Account shall only be ineligible as to that portion of such Account which is less than or equal to the amount owed by any Borrower, Recoton Canada or Recone to such Person; and                                (18) Accounts not owned by a Borrower, Recoton Canada or Recone.                      "Eligible Inventory" means, as at any date of determination, the value (determined at the lower of cost or market on an average cost basis) of all Inventory owned by Borrowers or Recoton Canada and located in the United States of America and Canada and Inventory in transit to Borrowers or Recoton Canada that the Administrative Agent in its reasonable credit judgment deems to be eligible for borrowing purposes. With respect to Inventory in transit to Borrowers or Recoton Canada, only such Inventory for which (a) the Administrative Agent or the customs house broker, as agent for the Administrative Agent or the freight forwarders, as agent for the Administrative Agent, as the case may be, are in possession of a complete set of negotiable bills of lading endorsed "to the order of" (i) Senior Agent, for the benefit of the Benefitted Persons or (ii) Recoton, as the case may be, (b) such Inventory is covered by marine cargo insurance on terms and amounts satisfactory to Administrative Agent and to which the Administrative Agent has been named additional insured and loss payee, (c) procedures for the clearance at customs satisfactory to the Administrative Agent have been put in place and (d) such Inventory is in transit to a location owned by a Borrower or Recoton Canada or subject to a Collateral Access Agreement and such location is set forth in Schedule 2.1(C)(ii) or otherwise acceptable to the Senior Agent, shall qualify in any case as "Eligible Inventory". Without limiting the generality of the foregoing, the Administrative Agent may determine that the following are not Eligible Inventory: (a) work-in-process (other than unpackaged finished goods); (b) finished goods which do not meet the specifications of the Borrowers' or Recoton Canada's customers' purchase order for such goods; (c) Inventory which Administrative Agent determines is unacceptable for borrowing purposes due to age, quality, type and/or category; (d) packaging, shipping materials or supplies consumed in Borrowers' or Recoton Canada's business; (e) Inventory with respect to which Senior Agent, on behalf of the Benefitted Persons, does not have a valid, first priority and fully perfected security interest except for claims that are unregistered and that secure amounts which are not yet due and payable; (f) Inventory with respect to which there exists any Lien in favor of any Person other than Senior Agent, on behalf of the Benefitted Persons; (g) Inventory produced in violation of the Fair Labor Standards Act and subject to the so-called "hot goods" provisions contained in Title 29 U.S.C. 215 (a)(i) or any replacement statute; (h) Inventory located at any location other than those identified pursuant to Section 5.8 of each Security Agreement; (i) repossessed goods or goods which have been returned as defective by the buyer; (j) Inventory of a type not held for sale in the ordinary course of Borrowers' or Recoton Canada's business; (k) Inventory which breaches any of the representations or warranties pertaining to Inventory set forth herein and in the Security Agreements; (l) goods placed on consignment; (m) Inventory covered by a negotiable document of title, unless such document has been delivered to Administrative Agent or its trustee or agent with all necessary endorsements, free and clear of all Liens except those in favor of Senior Agent on behalf of the Benefitted Persons; and (n) Inventory located in locations not owned by Borrowers or Recoton Canada and for which Senior Agent does not have an executed Collateral Access Agreement. For purposes of the definition of Eligible Inventory, Letter of Credit Inventory shall be excluded to avoid duplication.                      All Eligible Accounts and Eligible Inventory valued or carried in Canadian dollars shall be converted to US Dollars at the rate quoted on Page BOFC on Reuters Monitor Screen at 12:00 p.m. on the Business Day immediately prior to that on which a Borrowing Base Certificate is required to be delivered to Administrative Agent or as more frequently requested or determined by Administrative Agent based on the volatility of exchange rates.                      (D) Borrowing Mechanics. (1) LIBOR Loans made on any Funding Date shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of such amount. (2) On any day when any Borrower desires a Revolving Advance under this subsection 2.1, Administrative Borrower shall give Administrative Agent telephonic notice of the proposed borrowing by 12:00 p.m. Chicago time on the Funding Date of a Base Rate Loan and three Business Days in advance of the Funding Date of a LIBOR Loan, which notice shall specify the proposed Funding Date (which shall be a Business Day), whether such Loans shall consist of Base Rate Loans or LIBOR Loans, and, for LIBOR Loans, the Interest Period applicable thereto. Loans made on the Closing Date initially shall be made as Base Rate Loans. Any such telephonic notice shall be confirmed with a Notice of Borrowing on the same day. Neither Administrative Agent nor Lenders shall incur any liability to any Borrower for acting upon any telephonic notice or Notice of Borrowing Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of a Borrower or for otherwise acting in good faith under this subsection 2.1(D). Neither Administrative Agent nor Revolving Loan Lenders will be required to make any Revolving Advance pursuant to any telephonic notice unless Administrative Agent has also received the most recent Monthly Borrowing Base Certificate and Semi-Monthly Borrowing Base Certificate and all other documents required under Section 3 and the Reporting Rider hereof by 12:00 p.m. Chicago time. Each Revolving Advance shall be deposited by wire transfer in immediately available funds in such account as Borrowers may from time to time designate to Administrative Agent in writing. The becoming due of any amount required to be paid under this Agreement or any of the other Loan Documents as principal, Lender Letter of Credit reimbursement obligation, accrued interest and fees shall be deemed irrevocably to be an automatic request by Borrowers for a Revolving Advance, which shall be a Base Rate Loan on the due date of, and in the amount required to pay (as set forth on Administrative Agent's books and records), such principal, Lender Letter of Credit reimbursement obligation, accrued interest and fees.                      (E) Notes. The Borrowers shall execute and deliver on the Closing Date to each Lender (or to the Administrative Agent for that Lender) (i) a Term Loan A Note substantially in the form of Exhibit N-I, to evidence that Lender's Pro Rata Share of the principal amount of Term Loan A and with other appropriate insertions, and each Lender's Term Loan A Notes shall evidence such Lender's Pro Rata Share of such respective amounts, (ii) a Term Loan B Note substantially in the form of Exhibit N-II, to evidence that Lender's Pro Rata Share in the principal amount of Term Loan B and with other appropriate insertions, and each Lender's Term Loan B Notes shall evidence such Lender's Pro Rata Share of such respective amounts, (iii) a Term Loan C Note substantially in the form of Exhibit N-III, to evidence that Lender's Pro Rata Share in the principal amount of Term Loan C and with other appropriate insertions, and each Lender's Term Loan C Notes shall evidence such Lender's Pro Rata Share of such respective amounts and (iv) a Revolving Loan Note substantially in the form of Exhibit M to evidence that Lender's Pro Rata Share, in the principal amount of Revolving Loan Commitment and with other appropriate insertions. The Notes and the Obligations evidenced thereby shall be governed by, subject to and benefit from all of the terms and conditions of this Agreement and the other Loan Documents and shall be secured by the Collateral.                      (F) Letters of Credit. The Revolving Loan Commitments may, in addition to Revolving Advances, be utilized, upon the request of Borrowers, for (i) the issuance of letters of credit by Administrative Agent; or with Administrative Agent's consent any Lender, or (ii) the issuance by Administrative Agent of risk participations to banks to induce such banks to issue Bank Letters of Credit for the account of Borrowers (each of (i) and (ii) above a "Lender Letter of Credit"). Each Revolving Loan Lender shall be deemed to have purchased a participation in each Lender Letter of Credit issued on behalf of Borrowers in an amount equal to its Pro Rata Share of the Revolving Loan Commitment. In no event shall any Lender Letter of Credit be issued to the extent that the issuance of such Lender Letter of Credit would cause the sum of the Letter of Credit Reserve (after giving effect to such issuance) plus the Revolving Loan to exceed the lesser of the (x) Borrowing Base and (y) Revolving Loan Commitment.                                (1) Maximum Amount. The aggregate amount of Letter of Credit Liability with respect to all Lender Letters of Credit outstanding at any time shall not exceed $30,000,000.                                (2) Reimbursement. Each Borrower shall, jointly and severally, be irrevocably and unconditionally obligated forthwith without presentment, demand, protest or other formalities of any kind, to reimburse Administrative Agent or the issuer for any amounts paid with respect to a Lender Letter of Credit including all fees, costs and expenses paid to any bank that issues a Bank Letter of Credit. Each Borrower hereby authorizes and directs Administrative Agent, at Administrative Agent’s option, to debit Borrowers’ account (by increasing the Revolving Loan) in the amount of any payment made with respect to any Lender Letter of Credit. In the event that Administrative Agent elects not to debit Borrowers’ account and Borrowers fail to reimburse Administrative Agent in full on the date of any payment under a Lender Letter of Credit, Administrative Agent shall promptly notify each Revolving Loan Lender of the unreimbursed amount of such payment together with accrued interest thereon and each Revolving Loan Lender, on the next Business Day, shall deliver to Administrative Agent an amount equal to its respective participation in same day funds. The obligation of each Revolving Loan Lender to deliver to Administrative Agent an amount equal to its respective participation pursuant to the foregoing sentence shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3. In the event any Revolving Loan Lender fails to make available to Administrative Agent the amount of such Revolving Loan Lender’s participation in such Lender Letter of Credit, Administrative Agent shall be entitled to recover such amount on demand from such Revolving Loan Lender together with interest at the Base Rate.                                (3) Request for Letters of Credit. Borrowers shall give Administrative Agent at least two Business Days prior notice specifying the date a Lender Letter of Credit is to be issued, identifying the beneficiary and describing the nature of the transactions proposed to be supported thereby. The notice shall be accompanied by the form of the letter of credit being requested. Any letter of credit which Borrowers request must be in such form, be for such amount, contain such terms and support such transactions as are reasonably satisfactory to Administrative Agent. The expiration date of each Lender Letter of Credit shall be on a date which is at least 15 days prior to the Termination Date.                      (G) Other Letter of Credit Provisions.                                (1) Reimbursement Obligations. The obligation of Borrowers to reimburse Administrative Agent or any Revolving Loan Lender for payments made under, and other amounts payable in connection with, any Lender Letter of Credit shall be unconditional and irrevocable and shall be paid under all circumstances strictly in accordance with the terms of this Agreement including, without limitation, the following circumstances:                                          (a) any lack of validity or enforceability of any Lender Letter of Credit, or any other agreement;                                          (b) the existence of any claim, set-off, defense or other right which a Borrower, any of its Affiliates, any Agent or Revolving Loan Lender, on the one hand, may at any time have against any beneficiary or transferee of any Lender Letter of Credit (or any Persons for whom any such transferee may be acting), any Agent or Revolving Loan Lender or any other Person, on the other hand, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between a Borrower or any of its Affiliates and the beneficiary of the Lender Letter of Credit);                                          (c) any draft, demand, certificate or any other document presented under any Lender Letter of Credit is alleged to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;                                          (d) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Loan Parties or any of their Subsidiaries;                                          (e) any breach of this Agreement or any other Loan Document by any party thereto;                                          (f) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; the fact that a Default or an Event of Default shall have occurred and be continuing; or                                          (g) payment under any Lender Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Lender Letter of Credit; provided that, in the case of any payment by Administrative Agent or a Revolving Loan Lender under any Lender Letter of Credit, Administrative Agent or such Revolving Loan Lender has not acted with gross negligence or willful misconduct (as determined by a court of competent jurisdiction) in determining that the demand for payment under such Lender Letter of Credit complies on its face with any applicable requirements for a demand for payment under such Lender Letter of Credit.                                (2) Nature of Lender's Duties. As between any Revolving Loan Lender that issues a Lender Letter of Credit (an “Issuing Lender”), on the one hand, and Borrowers on the other hand, Borrowers assume all risks of the acts and omissions of, or misuse of any Lender Letter of Credit by the beneficiary thereof. In furtherance and not in limitation of the foregoing, neither Administrative Agent nor any Lender shall be responsible: (a) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document by any party in connection with the application for and issuance of any Lender Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Lender Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (c) for failure of the beneficiary of any Lender Letter of Credit to comply fully with conditions required in order to demand payment thereunder; provided that, in the case of any payment under any such Lender Letter of Credit, any Issuing Lender has not acted with gross negligence or willful misconduct (as determined by a court of competent jurisdiction) in determining that the demand for payment under any such Lender Letter of Credit complies on its face with any applicable requirements for a demand for payment thereunder; (d) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (e) for errors in interpretation of technical terms; (f) for any loss or delay in the transmission or otherwise of any document required in order to make a payment under any such Lender Letter of Credit; (g) for the credit of the proceeds of any drawing under any such Lender Letter of Credit; and (h) for any consequences arising from causes beyond the control of Administrative Agent or any Revolving Loan Lender as the case may be.                                (3) Liability. In furtherance and extension of and not in limitation of, the specific provisions herein above set forth, any action taken or omitted by Administrative Agent or any Revolving Loan Lender under or in connection with any Lender Letter of Credit, if taken or omitted in good faith, shall not put Administrative Agent or any Revolving Loan Lender under any resulting liability to any Borrower or any other Revolving Loan Lender.                      (H) Availability of a Lender's Pro Rata Share.                                (1) Unless Administrative Agent receives written notice from a Revolving Loan Lender on or prior to any Funding Date that such Revolving Loan Lender will not make available to Administrative Agent as and when required such Revolving Loan Lender’s Pro Rata Share of any requested Loan or Revolving Advance, Administrative Agent may assume that each Revolving Loan Lender will make such amount available to Administrative Agent in immediately available funds on the Funding Date and Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrowers on such date a corresponding amount.                                (2) A Defaulting Lender shall pay interest at the Federal Funds Effective Rate on the Defaulted Amount from the Business Day following the applicable Funding Date of such Defaulted Amount until the date such Defaulted Amount is paid to Administrative Agent. A notice of Administrative Agent submitted to any Revolving Loan Lender with respect to amounts owing under this subsection 2.1(H) shall be conclusive, absent manifest error. If such amount is not paid when due to Administrative Agent, Administrative Agent, at its option, may notify Borrowers of such failure to fund and, upon demand by Administrative Agent, Borrowers shall pay the unpaid amount to Administrative Agent for Administrative Agent’s account, together with interest thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loan made by the other Revolving Loan Lenders on such Funding Date. The failure of any Revolving Loan Lender to make available any portion of its Commitment on any Funding Date or to fund its participation in a Lender Letter of Credit shall not relieve any other Revolving Loan Lender of any obligation hereunder to fund such Revolving Loan Lender’s Commitment on such Funding Date or to fund any such participation, but no Revolving Loan Lender shall be responsible for the failure of any other Revolving Loan Lender to honor its Commitment on any Funding Date or to fund any participation to be funded by any other Revolving Loan Lender.                                (3) Administrative Agent shall not be obligated to transfer to a Defaulting Lender any payment made by any Borrower to Administrative Agent or any amount otherwise received by Administrative Agent for application to the Obligations nor shall a Defaulting Lender be entitled to the sharing of any interest, fees or payments hereunder.                                (4) For purposes of voting or consenting to matters with respect to (i) the Loan Documents or (ii) any other matter concerning the Loans, a Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitments and outstanding Loans and Revolving Advances shall be deemed to be zero; provided, however, that a Defaulting Lender’s commitment shall not be increased without the consent of the Defaulting Lender.            2.2 Interest.                      (A) Rate of Interest. The Loans and all other Obligations shall bear interest from the date such Loans are made or such other Obligations become due to the date paid at a rate per annum set forth in the chart below (the "Interest Rate"). Loan Type Base Rate Plus LIBOR Plus Revolver 0.75% 2.50% Term Loan A 1.00% 2.75% Term Loan B 3.25% 5.00% Term Loan C 3.00% N/A Subject to the provisions of subsection 2.1(D), Administrative Borrower shall designate to Administrative Agent whether a Loan shall be a Base Rate Loan or LIBOR Loan at the time a Notice of Borrowing is given pursuant to subsection 2.1(D). Such designation by Administrative Borrower may be changed from time to time pursuant to subsection 2.2(D). If on any day a Loan or a portion of any Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest or if LIBOR has been specified and no LIBOR quote is available, then for that day that Loan or portion thereof shall bear interest determined by reference to the Base Rate.            After the occurrence and during the continuance of an Event of Default (i)(a) the Loans and all other Obligations shall bear interest at a rate per annum equal to 2% plus the applicable Interest Rate (the “Default Rate”) and (b) the fees with respect to the Letters of Credit set forth in subsection 2.3(B) shall be increased by two percentage points (the “Letter of Credit Default Rate”), (ii) each LIBOR Loan shall automatically convert to a Base Rate Loan at the end of any applicable Interest Period and (iii) no Loans may be converted to LIBOR Loans. Interest and fees which accrue at the Default Rate and the Letter of Credit Default Rate shall be payable on demand.                      (B) Computation and Payment of Interest. Interest on the Loans and all other Obligations shall be computed on the daily principal balance on the basis of a 360 day year for the actual number of days elapsed. In computing interest on any Loan, the date of funding of the Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Loan, the date of conversion of such LIBOR Loan to such Base Rate Loan, shall be included; and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan, or with respect to a Base Rate Loan being converted to a LIBOR Loan, the date of conversion of such Base Rate Loan to such LIBOR Loan, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. Interest on Base Rate Loans and all other Obligations other than LIBOR Loans shall be payable to Administrative Agent for benefit of Lenders monthly in arrears on the first day of each month, on the date of any prepayment of Loans, and at maturity, whether by acceleration or otherwise. Interest on LIBOR Loans shall be payable to Administrative Agent for benefit of Lenders on the last day of the applicable Interest Period for such Loan, on the date of any prepayment of the Loans, and at maturity, whether by acceleration or otherwise. In addition, for each LIBOR Loan having an Interest Period longer than three months, interest accrued on such Loan shall also be payable on the last day of each three month interval during such Interest Period.                      (C) Interest Laws. Notwithstanding any provision to the contrary contained in this Agreement or any other Loan Document, Borrowers shall not be required to pay, and neither Administrative Agent nor any Lender shall be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by applicable law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any other Loan Document, then in such event: (1) the provisions of this subsection shall govern and control; (2) Borrowers or any other Loan Party shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Administrative Agent or any Lender may have received hereunder shall be, at such Lender's option, (a) applied as a credit against the outstanding principal balance of the Obligations or accrued and unpaid interest (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) Borrower or any Loan Party shall not have any action against Administrative Agent or any Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall remain at the Maximum Rate until each Lender shall have received the amount of interest which such Lender would have received during such period on such Obligations had the rate of interest not been limited to the Maximum Rate during such period.                      (D) Conversion or Continuation. Subject to the provisions of this subsection 2.2, Borrowers shall have the option to (1) convert at any time all or any part of outstanding Loans equal to $1,000,000 and integral multiples of $500,000 in excess of that amount from Base Rate Loans to LIBOR Loans or (2) upon the expiration of any Interest Period applicable to a LIBOR Loan, to (a) continue all or any portion of such LIBOR Loan equal to $1,000,000 and integral multiples of $500,000 in excess of that amount as a LIBOR Loan or (b) convert all or any portion of such LIBOR Loan to a Base Rate Loan. The succeeding Interest Period(s) of such continued or converted Loan commence on the last day of the Interest Period of the Loan to be continued or converted; provided that no outstanding Loan may be continued as, or be converted into, a LIBOR Loan, when any Event of Default or Default has occurred and is continuing.                      Administrative Borrower shall deliver a Notice of Borrowing with respect to such conversion/continuation to Administrative Agent no later than 12:00 p.m. Chicago time at least 3 Business Days in advance of the proposed conversion/ continuation date. The Notice of Borrowing with respect to such conversion/continuation shall certify: (1) the proposed conversion/continuation date (which shall be a Business Day); (2) the amount of the Loan to be converted/continued; (3) the nature of the proposed conversion/continuation; (4) in the case of conversion to, or a continuation of, a LIBOR Loan, the requested Interest Period; and (5) that no Default or Event of Default has occurred and is continuing or would result from the proposed conversion/continuation.                      In lieu of delivering the Notice of Borrowing with respect to such conversion/continuation, Administrative Borrower may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2(D); provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing with respect to such conversion/continuation to Administrative Agent on or before the proposed conversion/continuation date.                      Neither Administrative Agent nor any Lender shall incur any liability to Borrowers in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by an officer or other person authorized to act on behalf of Borrowers or for otherwise acting in good faith under this subsection 2.2(D).            2.3 Fees.                      (A) Unused Line Fee. Borrowers shall pay to Administrative Agent, for the benefit of Agents and Revolving Loan Lenders, a fee (the "Unused Line Fee") in an amount equal to the Revolving Loan Commitment less the sum of (i) the average daily balance of each Revolving Loan, plus (ii) the average daily face amount of the Letter of Credit Reserve during the preceding month, multiplied by 0.50% per annum, such fee to be calculated on the basis of a 360 day year for the actual number of days elapsed and to be payable monthly in arrears on the first day of each month following the Closing Date.                      (B) Letter of Credit Fees. Borrowers shall pay to Administrative Agent a fee with respect to the Lender Letters of Credit for the benefit of Revolving Loan Lenders in the amount of the average daily amount of Letter of Credit Liability outstanding during such month multiplied by 2.0% per annum. Such fee will be calculated on the basis of a 360 day year for the actual number of days elapsed and will be payable monthly in arrears on the first day of each month. Borrowers shall also reimburse Administrative Agent for any and all fees and expenses, if any, paid by Administrative Agent or any Revolving Loan Lender to the issuer of any Bank Letter of Credit.                      (C) Prepayment Fee. If Borrowers reduce the Revolving Loan Commitment in whole or in part, Borrowers, at the time of such reduction, shall pay to Administrative Agent for the benefit of Revolving Loan Lenders, as compensation for the costs of being prepared to make funds available to Borrowers under this Agreement, and not as a penalty, an amount determined by multiplying the percentage set forth below by the amount of the Revolving Loan Commitment so reduced (the "Prepayment Fee"): 2.0% upon a reduction during the first Loan Year; 1.0% upon a reduction during the second Loan Year; and 0.50% upon a reduction during the third Loan Year; provided, that no Prepayment Fee shall be due and owing if the Revolving Loan Commitment is reduced in whole or in part after the first Loan Year with funds raised from (a) unsecured borrowings; provided that Heller and GECC have the first right of refusal to match such borrowing and that Administrative Borrower shall have given Heller and GECC 30 days' prior written notice of such unsecured borrowing, (b) the issuance of capital stock, commercial paper or other debt or equity securities of Recoton in a public offering or private placement, provided, that the Net Securities Proceeds from such public offering or private placement shall be used to pay down the Obligations as set forth in subsection 2.4(B)(2) (with any repayment of the Revolving Loan constituting a permanent reduction of the Revolving Loan Commitment by such amount) or (c) the proceeds of the InterAct International IPO; provided, that all the terms and conditions set forth in subsection 7.6 have been satisfied. Notwithstanding anything to the contrary contained herein, the Prepayment Fee shall apply only to reductions and prepayments which reduce, in whole or in part, the Revolving Loan Commitment. Term Loan A, Term Loan B and Term Loan C may be prepaid at any time without a Prepayment Fee.                      (D) Audit Fees. Borrowers agree to pay all fees and expenses of the firms or individual(s) engaged by Collateral Agent to perform audits of Borrowers', Recoton Canada's and Recone's operations; provided such audits shall not be conducted more than quarterly unless there is a Default or an Event of Default has occurred and is continuing. Notwithstanding the foregoing, if Collateral Agent uses its internal auditors to perform any such audit, Borrowers agree to pay to Collateral Agent, for its own account, an audit fee with respect to each such audit equal to $850 per internal auditor per day (pro-rated for portions thereof), together with all out of pocket expenses.                      (E) Other Charges and Expenses. Borrowers shall pay to Administrative Agent, for its own account, all charges for returned items and all other bank charges incurred by Administrative Agent, as well as Administrative Agent's standard wire transfer charges for each wire transfer made under this Agreement.                      (F) Administrative Agent's Fee. Borrowers agree to pay to the Administrative Agent, for its own account, a non-refundable fee of $75,000 due on the Closing Date and on each anniversary thereof.                      (G) Collateral Agent's Fee. Borrowers agree to pay to the Collateral Agent, for its own account, a non-refundable fee of $75,000 due on the Closing Date and on each anniversary thereof.            2.4 Payments and Prepayments.                      (A) Manner and Time of Payment. In its sole discretion, Administrative Agent may elect to honor the automatic requests by Borrowers for Revolving Advances for all principal, interest, fees and any other amounts due hereunder on their applicable due dates pursuant to subsection 2.1(D) up to the Revolving Loan Commitment of all Revolving Loan Lenders, and the proceeds of each such Revolving Advance, if made, shall be applied as a direct payment of the relevant Obligation. To the extent such amounts exceed the Revolving Loan Commitment of all Revolving Loan Lenders, or if Administrative Agent elects to bill Borrowers for any amount due hereunder, such amount shall be immediately due and payable with interest thereon as provided herein. All payments made by Borrowers (or Recoton Canada with respect to its Guaranty) with respect to the Obligations shall be made without deduction, defense, setoff or counterclaim. All payments to Administrative Agent hereunder shall, unless otherwise directed by Administrative Agent, be made to Agent's Account or in accordance with subsection 4.22. Proceeds remitted to Agent's Account shall be credited to the Obligations on the Business Day of Administrative Agent's receipt of readily available federal funds. For the purpose of calculating interest on the Obligations, funds shall be deemed received on the Business Day of Administrative Agent's receipt of readily available federal funds.                      (B) Mandatory Prepayments.                                (1) Overadvance. At any time that the Revolving Loan exceeds the Maximum Revolving Loan Amount, Borrowers shall, immediately repay the Revolving Loan to the extent necessary to reduce the aggregate principal balance to an amount equal to or less than the Maximum Revolving Loan Amount.                                (2) Proceeds of Asset Dispositions. Immediately upon receipt by Borrowers, Recoton Canada or any of their respective Subsidiaries of proceeds of any Asset Disposition (in one or a series of related transactions or events), Borrowers shall prepay the Obligations in an amount equal to the Net Proceeds therefrom which Net Proceeds exceed $250,000 (it being understood that if the Net Proceeds exceed $250,000, the entire amount and not just the portion above $250,000 shall be subject to this subsection 2.4(B)(2)). Except as otherwise set forth in this subsection 2.4(B)(2) or in subsection 4.14, all such prepayments shall first be applied in payment of Scheduled Installments of the Term Loan B, then be applied in payment of Scheduled Installments of Term Loan A, then be applied in payment of Scheduled Installments of Term Loan C, each in inverse order of maturity, and then be applied in payment of the Revolver Loan without reducing the Revolving Loan Commitment; provided however, that in the case of (i) any such Net Proceeds consisting of insurance proceeds not to exceed $2,000,000 in the aggregate during the term of this Agreement (other than with respect to the portion of the insurance proceeds resulting from any casualty with respect to real estate) and for which the casualty giving rise thereto could not reasonably be expected to have a Material Adverse Effect, and (ii) any such Net Proceeds consisting of proceeds of an Asset Disposition permitted pursuant to subsection 7.3(A)(v), if Borrowers reasonably expect any Net Proceeds under clauses (i) any (ii) to be reinvested within 180 days to repair or replace the assets subject to such Asset Dispositions with like assets, Borrowers shall deliver such Net Proceeds to Administrative Agent to be applied to the Revolving Loan and Administrative Agent shall establish a reserve against available funds for borrowing purposes under the Revolving Loan for such amount of net proceeds, until such time as such proceeds have been re-borrowed or applied to other Obligations as set forth herein. Borrowers and Recoton Canada may, so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, re-borrow such proceeds only for such repair or replacement. If Borrowers fail to reinvest such proceeds within 180 days, Borrowers and Recoton Canada hereby authorize Administrative Agent to make a Revolving Advance to repay the Obligations in the manner set forth in this subsection 2.4(B)(2). With respect to insurance proceeds resulting from the damage or destruction of any building or real estate (and such casualty could not reasonably be expected to have a Material Adverse Effect), the Borrowers shall have 360 days to reinvest such proceeds to repair or replace the assets subject to such casualty with like assets. Borrowers shall deliver such proceeds to Administrative Agent to be applied to the Revolving Loan and Administrative Agent shall establish a reserve against available funds for borrowing purposes under the Revolving Loan for such amount of net proceeds, until such time as such proceeds have been re-borrowed or applied to other Obligations as set forth herein. Borrowers may, so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, re-borrow such proceeds only for such repair or replacement. If Borrowers fail to reinvest such proceeds within 360 days, Borrowers hereby authorize Administrative Agent to make a Revolving Advance to repay the Obligations in the manner set forth in this subsection 2.4(B)(2). Notwithstanding anything to the contrary contained herein, the proceeds resulting solely from the damage, destruction or condemnation of inventory or loss of Accounts shall be applied to repay the Revolving Loan without reducing the Revolving Loan Commitment. For the purposes of this subsection 2.4(B)(2), the events described in subsections 2.4(B)(5) and 2.4(B)(6) shall not be deemed Asset Dispositions.                                (3) Prepayments from Excess Cash Flow. Within 95 days after the end of each Fiscal Year Borrowers shall prepay the Obligations in an amount equal to 50% of Excess Cash Flow for such Fiscal Year calculated on the basis of the audited financial statements for such Fiscal Year delivered to Administrative Agent and Lenders pursuant to the Reporting Rider. Such required payment of Excess Cash Flow will be calculated and required to be paid based on receipt of the audited financial statements for Fiscal Year 2001 and each Fiscal Year thereafter. All such prepayments from Excess Cash Flow shall first be applied in payment of Scheduled Installments of the Term Loan B, then be applied in payment of Scheduled Installments of Term Loan A, then be applied in payment of Scheduled Installments of Term Loan C, each in inverse order of maturity, and then be applied in payment of the Revolver Loan without reducing the Revolving Loan Commitment. Concurrently with the making of any such payment, Administrative Borrower shall deliver to Administrative Agent and Lenders a certificate of its chief executive officer or chief financial officer demonstrating its calculation of the amount required to be paid.                                (4) Prepayments from Tax Refunds. Immediately upon receipt by Loan Parties of proceeds of any tax refunds, Borrowers shall prepay the Obligations in an amount equal to such proceeds. All such prepayments from tax refunds shall be applied to the Revolving Loans without reducing the Revolving Loan Commitment.                                (5) Prepayments and Reductions from Proceeds of Debt or Equity Offering. (a) Immediately upon receipt by Borrowers or any of their respective Subsidiaries of any proceeds of any Indebtedness for borrowed money (other than the Loans and any other Indebtedness permitted by this Agreement), the Borrowers shall prepay the Obligations in an amount equal to such proceeds; provided that payment or acceptance of the amounts provided for in this subsection 2.4(B)(5) shall not constitute a waiver of any Event of Default resulting from the incurrence of such Indebtedness or otherwise prejudice any rights or remedies of the Administrative Agent or any Lender.                      (b) Except as set forth in clause (6), immediately upon receipt by Borrowers or any of their respective Subsidiaries of any Equity Proceeds, the Borrower shall prepay the Obligations in an amount equal to such Equity Proceeds.            All such prepayments in this subsection 2.4(B)(5) shall first be applied in payment of Scheduled Installments of the Term Loan B, then be applied in payment of Scheduled Installments of Term Loan A, then be applied in payment of Scheduled Installments of Term Loan C, each in inverse order of maturity, and then be applied in payment of the Revolver Loan and reducing the Revolving Loan Commitment.                                (6) Prepayments from Proceeds of InterAct International IPO. Immediately upon receipt by Borrowers of the Net Securities Proceeds of the InterAct International IPO, such Net Securities Proceeds shall be applied only to the extent necessary to pay (i) the Revolving Loan (and reducing the Revolving Loan Commitment) by an amount equal to the value of Eligible Collateral set forth in the most recently delivered Monthly Borrowing Base Certificate and Semi-Monthly Borrowing Base Certificate pursuant to clause F of the Reporting Rider with respect to InterAct International, multiplied by the advance rates for such Collateral pursuant to such Monthly Borrowing Base Certificate and Semi-Monthly Borrowing Base Certificate and (ii) the outstanding principal and interest of the Term Loan A and Term Loan B.                      (C) Voluntary Prepayments and Repayments. Administrative Borrower may, at any time upon not less than three Business Days prior notice to Administrative Agent, prepay the Term Loans or reduce the Revolving Loan Commitment; provided, however, the Revolving Loan Commitment may not be terminated by Borrowers until all Loans are paid in full; provided, however, that with respect to the Term Loan C prepayments, the Term Loan C Repayment Restriction has been satisfied (including the delivery of the Repayment Certification). Administrative Borrower shall provide Administrative Agent with three days' prior notice of a prepayment of a LIBOR Loan. Notwithstanding anything to the contrary contained herein, as long as any amounts of principal under Term Loans remain outstanding, Borrowers may reduce, in part but not in whole, the Revolving Loan Commitment. All such voluntary prepayments and repayments of the Term Loans shall be applied to the Scheduled Installments of the Term Loans in the same manner set forth in subsection 2.4(B)(2). Upon termination of the Revolving Loan Commitment, Borrowers shall cause Administrative Agent and each Revolving Loan Lender to be released from all liability under any Lender Letters of Credit or, at Agent's option, Borrowers will deposit cash collateral with Administrative Agent in an amount equal to 105% of the Letter of Credit Liability that will remain outstanding after such termination.                      (D) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest or fees due hereunder.            2.5 Term of this Agreement. The Commitments shall terminate (unless earlier terminated pursuant to the terms hereunder) and all Obligations shall become immediately due and payable without notice or demand on the earlier of (such date, the “Termination Date”) (a) October 31 , 2003 and (b) the acceleration of all Obligations pursuant to subsection 8.3. Notwithstanding any termination, until all Obligations (excluding unasserted indemnity claims) have been indefeasibly paid in full in cash, Senior Agent, on behalf of the Benefitted Persons, shall be entitled to retain security interests in and liens upon all Collateral. Even after payment of all Obligations hereunder, Borrowers’ and the other Loan Parties’ obligation to indemnify each Agent and each Lender in accordance with the terms hereof shall continue.            2.6 Statements. Administrative Agent shall render a monthly statement of account to Borrowers within 20 days after the end of each month. Such statement of account shall constitute an account stated unless Borrowers make written objection thereto within 30 days from the date such statement is mailed to Borrowers. Administrative Agent shall record in its books and records, including computer records, the principal amount of the Loans owing to each Lender from time to time. Administrative Agent’s books and records including computer records, shall constitute presumptive evidence, absent manifest error, of the accuracy of the information contained therein. Failure by Administrative Agent to make any such notation or record shall not affect the obligations of Borrowers to Lenders with respect to the Loans.            2.7 Yield Protection.                      (A) Capital Adequacy and Other Adjustments. In the event any Lender shall have determined that the adoption after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or governmental agency or body having jurisdiction does or shall have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender or any corporation controlling such Lender and thereby reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder, then Borrowers shall within 15 days after notice and demand from such Lender (together with the certificate referred to in the next sentence and with a copy to Administrative Agent) pay to Administrative Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by such Lender to Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes.                      (B) Increased LIBOR Funding Costs. If, after the date hereof, the introduction of, change in or interpretation of any law, rule, regulation, treaty or directive would impose or increase reserve requirements (other than as taken into account in the definition of LIBOR) or otherwise increase the cost to any Lender of making or maintaining a LIBOR Loan, then Borrowers shall from time to time within 15 days after notice and demand from Administrative Agent (together with the certificate referred to in the next sentence) pay to Administrative Agent, for the account of all such affected Lenders, additional amounts sufficient to compensate such Lenders for such increased cost. A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by Administrative Agent on behalf of all such affected Lenders to Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes.            2.8 Taxes.                      (A) No Deductions. Any and all payments or reimbursements made hereunder shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto; excluding, however, the following: taxes imposed on the net income of any Lender or Agent by the jurisdiction under the laws of which such Agent or Lender is organized, resident or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of such Agent's or Lender's applicable lending office or any political subdivision thereof (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto excluding such taxes imposed on net income, herein "Tax Liabilities"). If any Loan Party shall be required by law to deduct any such Tax Liabilities from or in respect of any sum payable hereunder or under any other Loan Document to any Agent or Lender, then the sum payable hereunder or under any other Loan Document shall be increased as may be necessary so that, after making all required withholdings and deductions (including withholdings and deductions applicable to additional sums payable under this Section 2.8), such Agent or Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) Borrowers shall make such deductions and (iii) Borrowers shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law.                      (B) Changes in Tax Laws. In the event that, subsequent to the Closing Date, (i) any changes in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or any interpretation or application thereof, or (iii) compliance by Lender with any request or directive (whether or not having the force of law) from any Governmental Authority:                                (1) does or shall subject any Agent or Lender to any tax of any kind whatsoever or causes the withdrawal or termination of a previously granted tax exemption with respect to this Agreement, the other Loan Documents or any Loans made or Lender Letters of Credit issued hereunder, or change the basis of taxation of payments to such Agent or Lender of principal, fees, interest or any other amount payable hereunder (except for net income taxes, capital taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, provincial, state or local taxing authorities with respect to interest or commitment or other fees payable hereunder or changes in the rate of tax on the overall net income of such Agent or Lender); or                                (2) does or shall impose on any Agent or Lender any other condition or increased cost in connection with the transactions contemplated hereby or participations herein; and the result of any of the foregoing is to increase the cost to Administrative Agent or such Lender of issuing any Lender Letter of Credit or making or continuing any Loan hereunder, as the case may be, or to reduce any amount receivable hereunder; then, in any such case, Borrowers shall promptly pay to Administrative Agent or such Lender, upon its demand, any additional amounts necessary to compensate Administrative Agent or such Lender, on an after-tax basis, for such additional cost or reduced amount receivable, as determined by Administrative Agent or such Lender with respect to this Agreement or the other Loan Documents. If Administrative Agent or any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Borrowers of the event by reason of which Administrative Agent or such Lender has become so entitled (with any such Lender concurrently notifying Administrative Agent). A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Administrative Agent or any Lender to Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes.                      (C) Foreign Lenders. Each Lender organized under the laws of a jurisdiction outside the United States (a "Foreign Lender") shall provide to Borrowers and Administrative Agent (i) a properly completed and executed Internal Revenue Service Form W-8 BEN or Form W-8 ECI or other applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Foreign Lender's entitlement to a complete exemption from withholding with respect to payments to be made to such Foreign Lender under this Agreement, (a "Certificate of Exemption"), or (ii) a letter from any such Foreign Lender stating that it is not entitled to any such exemption or reduced rate of withholding (a "Letter of Non-Exemption"). Prior to becoming a Lender under this Agreement and within 15 days after a reasonable written request of Borrowers or Administrative Agent from time to time thereafter, each Foreign Lender that becomes a Lender under this Agreement shall provide a Certificate of Exemption or a Letter of Non-Exemption to Borrowers and Administrative Agent.                      If a Foreign Lender is entitled to an exemption with respect to payments to be made to such Foreign Lender under this Agreement (or to a reduced rate of withholding) and does not provide a Certificate of Exemption to Borrowers and Administrative Agent within the time periods set forth in the preceding paragraph, Borrowers shall withhold taxes from payments to such Foreign Lender at the applicable statutory rates and Borrowers shall not be required to pay any additional amounts as a result of such withholding; provided, however, that all such withholding shall cease upon delivery by such Foreign Lender of a Certificate of Exemption to Borrowers and Administrative Agent.            2.9 Required Termination and Prepayment. If on any date any Lender shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties) that the making or continuation of its LIBOR Loans has become unlawful or impossible by compliance by such Lender in good faith with any law, governmental rule, regulation or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, and in any such event, that Lender shall promptly give notice (by telephone confirmed in writing) to Borrowers and Administrative Agent of that determination. Subject to prior withdrawal of a Notice of Borrowing or a Notice of Borrowing with respect to such conversion/continuation or prepayment of LIBOR Loans as contemplated by subsection 2.10, the obligation of such Lender to make or maintain its LIBOR Loans during any such period shall be terminated at the earlier of the termination of the Interest Period then in effect or when required by law and Borrowers shall no later than the termination of the Interest Period in effect at the time any such determination pursuant to this subsection 2.9 is made or, earlier when required by law, repay or prepay LIBOR Loans together with all interest accrued thereon or convert LIBOR Loans to Base Rate Loans.            2.10 Optional Prepayment/Replacement of Lenders. Within 15 days after receipt by Borrowers of written notice and demand from any Lender for payment of additional costs as provided in subsection 2.7 or subsection 2.8 or, as provided in subsection 9.4(C) in als by any Lender to consent to certain proposed amendments, modifications, terminations or waivers with respect to this Agreement that have been approved by Requisite Lenders or if any Lender is unable to make or maintain or continue LIBOR Loans or if any Lender defaults in its obligation to make a Loan in accordance with the terms of this Agreement (any such Lender demanding such payment or refusing to so consent or agree being referred to herein as an “Affected Lender”), Borrowers may, at their option, notify Administrative Agent and such Affected Lender of its intention to do one of the following:                      (a) Borrowers may obtain, at Borrowers' expense, a replacement Lender ("Replacement Lender") for such Affected Lender, which Replacement Lender shall be reasonably satisfactory to Administrative Agent. In the event Borrowers obtain a Replacement Lender that will purchase all outstanding Obligations owed to such Affected Lender and assume its Commitments hereunder within 90 days following notice of Borrowers’ intention to do so, the Affected Lender shall sell and assign its Loans and Commitments to such Replacement Lender in accordance with the provisions of subsection 9.5; provided, that Borrowers have (i) reimbursed such Affected Lender for any administrative fee payable pursuant to subsection 9.5 and, (ii) in any case where such replacement occurs as the result of a demand for payment pursuant to subsection 2.7 or subsection 2.8, paid all increased costs for which such Affected Lender is entitled to under subsection 2.7 or subsection 2.8 through the date of such sale and assignment; or                      (b) Borrowers may prepay in full all outstanding Obligations owed to such Affected Lender and terminate such Affected Lender’s Commitments. Borrowers shall, within 90 days following notice of its intention to do so, prepay in full all outstanding Obligations owed to such Affected Lender, including such Affected Lender’s increased costs for which it is entitled to reimbursement under this Agreement through the date of such prepayment, but excluding any Prepayment Fee referenced in subsection 2.3(C) and terminate such Affected Lender’s Commitments.            2.11 Compensation. Borrowers shall compensate each Lender, upon written request by such Lender (which request shall set forth in reasonable detail the basis for requesting such amounts and which shall, absent manifest error, be conclusive and binding upon all parties hereto), for all reasonable losses, expenses and liabilities including, without limitation, any loss sustained by such Lender in connection with the re-employment of such funds: (i) if for any reason (other than a default by such Lender) a borrowing of any LIBOR Loan does not occur on a date specified therefor in a Notice of Borrowing, a Notice of Borrowing with respect to such conversion/continuation or a telephonic request for borrowing or conversion/continuation; (ii) if any repayment or prepayment of any LIBOR Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, whether by acceleration, repayment, prepayment or otherwise; (iii) if any prepayment of any of its LIBOR Loans is not made on any date specified in a notice of prepayment given by Borrowers; or (iv) as a consequence of any other default by Borrowers to repay the LIBOR Loans when required by the terms of this Agreement; provided that during the period while any such amounts have not been paid, such Lender shall reserve an equal amount from amounts otherwise available to be borrowed under the Revolving Loan.            2.12 Booking of LIBOR Loans. Each Lender may make, carry or transfer LIBOR Loans at, to, or for the account of, any of its branch offices or the office of an affiliate of such Lender.            2.13 Assumptions Concerning Funding of LIBOR Loans. Calculation of all amounts payable to each Lender under subsection 2.11 shall be made as though each Lender had actually funded its relevant LIBOR Loan through the purchase of a LIBOR deposit bearing interest at LIBOR in an amount equal to the amount of that LIBOR Loan and having maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office to a domestic office in the United States of America; provided, however, that each Lender may fund each of its LIBOR Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under subsection 2.11.            2.14 Joint and Several Liability of Borrowers.                      Each of Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by Agents and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.                      Each of Borrowers, jointly and severally, hereby, irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this subsection 2.14), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Person comprising Borrowers without preferences or distinction among them.                      Each Borrower expects to derive substantial benefit, directly or indirectly, from the making of the Loans and the issuance of the Letters of Credit.                      If and to the extent that any of Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Persons comprising Borrowers will make such payment with respect to, or perform, such Obligation.                      The Obligations of each Borrower under the provisions of this subsection 2.14 constitute the absolute and unconditional, full recourse Obligations of such Borrower enforceable against such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.                      Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Revolving Advances or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by the Administrative Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agents or Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agents or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each of Borrowers assents to any other action or delay in acting or failure to act on the part of the Administrative Agent or any Lender with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this subsection 2.14 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this subsection 2.14, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Borrower under this subsection 2.14 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this subsection 2.14 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or the Administrative Agent or any Lender. The joint and several liability of Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, constitution or place of formation of any Borrower or Agent or any Lender.                      The provisions of this subsection 2.14 are made for the benefit of the Agents, the Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all of Borrowers as often as occasion therefor may arise and without requirement on the part of the Agents, any Lender, or any successor or assign to first marshal any of its or their claims or to exercise any of its or their rights against any of other Borrowers or to exhaust any remedies, available to it or them against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this subsection 2.14 shall remain in effect until all of the Obligations shall have been indefeasibly paid in full in cash or otherwise fully satisfied to the satisfaction of the Agents and the Lenders. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Agents or any Lender upon the insolvency, bankruptcy or reorganization of any of Borrowers, or otherwise, the provisions of this subsection 2.14 will forthwith be reinstated in effect, as though such payment had not been made.                      Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Administrative Agent or the Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been indefeasibly paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to Administrative Agent or any Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior indefeasible payment in full, in cash, of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be indefeasibly paid in full, in cash, before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.                      Each Borrower hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the Indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full, in cash, of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any Indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been indefeasibly paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such Indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for Administrative Agent, and such Borrower shall deliver any such amounts to Administrative Agent for application to the Obligations in accordance with subsection 8.7.                      Each Borrower hereby agrees that to the extent that a Borrower shall have paid more than its proportionate share of any payment made hereunder, such Borrower shall be entitled to seek and receive contribution from and against any other Borrower hereunder in accordance with the terms and provisions of Section 2.5 of the Guaranty. Each Borrower's right of contribution shall be subject to the terms and conditions of this subsection 2.14. The provisions of this subsection 2.14(J) shall in no respect limit the obligations and liabilities of any Borrower or Guarantor to the Agents and Lenders, and each Borrower and Guarantor shall remain liable to the Agents or Lenders for the full amount of the Obligations.            2.15 Recoton as Agent for Borrowers. Each Borrower hereby irrevocably appoints Recoton as the borrowing agent and attorney-in-fact for all Borrowers (“Administrative Borrower”) which appointment shall remain in full force and effect unless and until Administrative Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower to (i) provide Administrative Agent with all notices with respect to Revolving Advances and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement, (ii) take such action as the Administrative Borrower deems appropriate on its behalf to obtain Revolving Advances and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement and (iii) receive and distribute accordingly the proceeds from the Loans. It is understood that the handling of the Agent’s Account and Collateral of Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that Lenders and Agents shall not incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of the Agent’s Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Lenders and Agents to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each Lender and Agent and hold each Lender and Agent harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lenders and Agents by any Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Agent’s Account and Collateral of Borrowers as herein provided, (b) the Lenders’ and Agents’ relying on any instructions of the Administrative Borrower, or (c) any other action taken by the Lenders and Agents hereunder or under the other Loan Documents, except that Borrowers will have no liability to the relevant Agent-Related Person or Lender-Related Person under this subsection 2.15 with respect to any liability that has been finally determined by final non-appealable judgment by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be.            2.16 Currency. All Loans hereunder shall be made in Dollars and all payments of the Obligations hereunder shall be made in Dollars.   SECTION 3. CONDITIONS TO LOANS            The obligations of Administrative Agent and each Lender to make Loans and the obligation of Administrative Agent or any Lender to issue Lender Letters of Credit on the Closing Date and on each Funding Date are subject to satisfaction of all of the terms and conditions set forth in this Agreement and in the Conditions Rider, attached hereto, and the accuracy of all the representations and warranties of Borrowers and the other Loan Parties set forth herein and in the other Loan Documents.   SECTION 4. LOAN PARTIES' REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS            To induce Agents and each Lender to enter into the Loan Documents, to make and to continue to make Loans and to issue and to continue to issue Lender Letters of Credit, each Loan Party represents, warrants and covenants to each Agent and each Lender that the following statements are and will be true, correct and complete and, unless specifically limited, shall remain so for so long as any of the Commitments hereunder shall be in effect and until payment in full of all Obligations:            4.1 Organization, Powers, Capitalization.                      (A) Organization and Powers. Each of the Loan Parties is a corporation duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation (which jurisdiction is set forth on Schedule 4.1(A)) and qualified to do business in all jurisdictions where such qualification is required except where failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Each of the Loan Parties (i) has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and to enter into each Loan Document and Related Agreements to which it is a party, (ii) subject to specific representations regarding Environmental Laws, has all material licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all material notices to, all national, federal, state, provincial, municipal or other governmental authorities having jurisdiction, to the extent required for such ownership, operation and conduct and (iii) is in compliance with its charter and bylaws or partnership, operating agreement or other organizational and governing documents, as applicable.                      (B) Capitalization. The authorized and issued capital stock or other equity interest of each of the Loan Parties and its respective Subsidiaries is as set forth on Schedule 4.1(A), including all preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Loan Party (other than Recoton) of any shares of capital stock or other equity interest or other securities of any such entity. All issued and outstanding shares of capital stock or other equity interest of each of the Loan Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Senior Agent for the benefit of the Benefitted Persons, and such shares were issued in compliance with all applicable state, provincial, federal and foreign laws concerning the issuance of securities. Each Loan Party (other than Recoton) will promptly notify Agents of any change in its ownership or corporate structure.            4.2 Authorization of Borrowing, No Conflict. Each Loan Party has the power and authority to incur the Obligations and to grant liens on or security interests in, the Collateral. On the Closing Date, the execution, delivery and performance of the Loan Documents and each Related Agreement by each Loan Party signatory thereto will have been duly authorized by all necessary corporate and shareholder or equivalent action. The execution, delivery and performance by each Loan Party of each Loan Document to which it is a party and the consummation of the transactions contemplated by the Loan Documents and each Related Agreement by each Loan Party (i) do not contravene any applicable law, the corporate charter or bylaws (or equivalent governing and organizational documents) of any Loan Party or any material agreement or any order by which any Loan Party or any Loan Party’s property is bound, (ii) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Loan Party is a party or by which such Loan Party or any of its property is bound; (iii) do not result in the creation or imposition of any Lien upon any of the property of such Loan Party other than those in favor of Administrative or Senior Agent on behalf of the Benefitted Persons, pursuant to the Loan Documents and Related Agreements; and (iv) do not require the consent or approval of any Governmental Authority or any other Person, except those which will have been duly obtained, made or complied with prior to the Closing Date. The Loan Documents are the legally valid and binding obligations of the applicable Loan Parties respectively, each enforceable against the Loan Parties party thereto, as applicable, in accordance with their respective terms.            4.3 Financial Condition. All financial statements concerning each Borrower and its Subsidiaries furnished by or on behalf of each Borrower or its Subsidiaries to Agents pursuant to this Agreement have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as disclosed therein) and present fairly, in all material respects, the financial condition of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. The Projections delivered by Recoton will be prepared in light of the past operations of the business of each Borrower and its Subsidiaries, and such Projections will represent the good faith estimate of each Borrower and its senior management concerning the most probable course of its business as of the date such Projections are delivered.            4.4 Indebtedness and Liabilities. As of the Closing Date, no Borrower nor any of its Subsidiaries has (a) any Indebtedness over $100,000 in the aggregate except as reflected on the most recent consolidating financial statements delivered to Administrative Agent and Lenders; or (b) any Liabilities over $100,000 in the aggregate other than as reflected on the most recent consolidating financial statements delivered to Administrative Agent and Lenders or as incurred in the ordinary course of business following the date of the most recent financial statements delivered to Administrative Agent and Lenders. Borrowers shall promptly deliver to Administrative Agent copies of all notices given or received by Borrowers and any of their Subsidiaries with respect to noncompliance with any term or condition related to any Subordinated Debt or other Indebtedness, and shall promptly notify Administrative Agent of any potential or actual Event of Default with respect to any Subordinated Debt or other Indebtedness.            4.5 Title to Properties; Liens. Each Loan Party and each of its Subsidiaries has good, sufficient and legal title to or valid leasehold interests in, all of its respective material properties (including, without limitation, the Collateral) and assets, in each case, free and clear of all Liens except Permitted Encumbrances. As of the Closing Date, the real estate (“Real Estate”) listed on Schedule 4.5 constitutes all of the real property owned, leased, subleased, or used by any Loan Party. Each Loan Party owns good and marketable fee simple title to all of its owned Real Estate, and valid and subsisting leasehold interests in all of its leased Real Estate, all as described on Schedule 4.5, and copies of all such leases or a summary of terms thereof reasonably satisfactory to Agents have been delivered to Agents. Schedule 4.5 further describes any Real Estate with respect to which any Loan Party is a lessor, sublessor or assignee as of the Closing Date.            4.6 Litigation; Adverse Facts. As of the Closing Date, there are no judgments outstanding against any Loan Party or affecting any property of any Loan Party nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the best knowledge of the Loan Parties after due inquiry, threatened against or affecting any Loan Party or any property of any Loan Party which could reasonably be expected to result in any Material Adverse Effect. Promptly upon any executive officer of the Administrative Borrower obtaining knowledge of (a) the institution of any action, suit, proceeding, governmental investigation or arbitration against or affecting any Loan Party or any property of any Loan Party not previously disclosed by Borrowers to Administrative Agent or (b) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting any Loan Party or any property of any Loan Party, in each case which could reasonably be expected to have a Material Adverse Effect, Borrowers will promptly give notice thereof to Administrative Agent and provide such other information as may be reasonably available to enable Administrative Agent and its counsel to evaluate such matter.            4.7 Payment of Taxes. All material tax returns and reports of each Loan Party and each of its Subsidiaries required to be filed by any of them have been timely filed and are complete and accurate in all material respects. All taxes, assessments, fees and other governmental charges which are due and payable by each Loan Party and each of its Subsidiaries have been paid when due; provided that no such tax need be paid if a Loan Party or one of its Subsidiaries is contesting same in good faith by appropriate proceedings promptly instituted and diligently conducted and if such Loan Party or such Subsidiary has established appropriate reserves as shall be required in conformity with GAAP. As of the Closing Date, except as set forth in Schedule 4.7, none of the income tax returns of any Loan Party or any of their Subsidiaries are under audit and each Loan Party shall promptly notify Administrative Agent in the event that any of such Loan Party’s or any of its Subsidiaries’ income tax returns become the subject of an audit. No tax liens have been filed against a Loan Party or any of its Subsidiaries. The charges, accruals and reserves on the books of each Loan Party and its Subsidiaries in respect of any taxes or other governmental charges are in accordance with GAAP. The federal tax identification number of Recoton and each Domestic Subsidiary is set forth below its signature hereto.            4.8 Performance of Agreements. None of the Loan Parties and none of their respective Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material contractual obligation of any such Person, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default.            4.9 Employee Benefit Plans. With respect to Employee Benefit Plans, each Loan Party, each of its respective Subsidiaries and each ERISA Affiliate (other than Recoton Canada) are in compliance, and will continue to remain in compliance, in all material respects with all applicable provisions of ERISA, the IRC and all other applicable laws and the regulations and interpretations thereof with respect to all Employee Benefit Plans and with the terms of such Employee Benefit Plans. No material liability has been incurred by any Loan Party, any Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding obligation, taxes or penalties with respect to any Employee Benefit Plan. No ERISA Event has occurred or is reasonably likely to occur. No Loan Party or its ERISA Affiliates contribute to or have any liability with respect to any Multiemployer Plan. With respect to Canadian Pension Plans, each Loan Party and each of its respective Subsidiaries represent and warrant that as to any Canadian Pension Plans of Borrowers or the other Loan Parties: (1) the Canadian Pension Plans are duly registered under all applicable provincial pension benefits legislation; (2) all obligations of Borrowers or the other Loan Parties (including fiduciary, funding, investment and administrative obligations) required to be performed in connection with the Canadian Pension Plans or the funding agreements therefor have been performed in a timely fashion and there are no outstanding disputes concerning the assets held pursuant to any such funding agreement; (3) all contributions or premiums required to be made by Borrowers or the other Loan Parties to the Canadian Pension Plans have been made in a timely fashion in accordance with the terms of the Canadian Pension Plans and applicable laws and regulations; (4) all employee contributions to the Canadian Pension Plans required to be made by way of authorized payroll deduction have been properly withheld by Borrowers or the other Loan Parties, as applicable, and fully paid into the Canadian Pension Plans in a timely fashion; (5) all reports and disclosures relating to the Canadian Pension Plans required by any applicable laws or regulations have been filed or distributed in a timely fashion; (6) there have been no improper withdrawals, or applications of, the assets of any of the Canadian Pension Plans; (7) no amount is owing by any of the Canadian Pension Plans under the Income Tax Act (Canada) or any provincial taxation statute; (8) the Canadian Pension Plans are fully funded both on an ongoing basis and on a solvency basis (using actuarial assumptions and methods which are consistent with the valuations last filed with the applicable governmental authorities and which are consistent with generally accepted actuarial principles); and (9) Borrowers, after diligent enquiry, have neither any knowledge, nor any grounds for believing, that any of the Canadian Pension Plans is the subject of an investigation, any other proceeding, an action or a claim. There exists no state of facts which after notice or lapse of time or both could reasonably be expected to give rise to any such proceeding, action or claim. The Loan Parties or any of their Subsidiaries shall not establish any new Employee Benefit Plan or Canadian Pension Plan or amend any existing Employee Benefit Plan or Canadian Pension Plan if the liability or increased liability resulting from such establishment or amendment is material. Schedule 4.9 lists all the Employee Benefit Plans and Canadian Pension Plans of the Loan Parties.            4.10 Broker's Fees. No broker's or finder's fee or commission will be payable with respect to any of the transactions contemplated hereby.            4.11 Environmental Matters. (a) Each Loan Party (including without limitation, all operations and conditions at or in the real estate presently owned and operated by such Loan Party) is in compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by such Loan Party of all permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof), except where failure to be in compliance could not reasonably be expected to have a Material Adverse Effect. Each Loan Party has not received any written communication, whether from a Governmental Authority, citizens group, employee or otherwise, alleging that such Loan Party is not in such compliance, and there are no past or present actions, activities, circumstances conditions, events or incidents that may prevent or interfere with such compliance in the future.                      (b) There is no Environmental Claim pending or threatened against any Loan Party or, to the best knowledge of such Loan Party, against any Person whose liability for any Environmental Claim such Loan Party has or may have retained or assumed either contractually or by operation of law, in each such case which, individually or in the aggregate, would have a Material Adverse Effect.                      (c) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the Release, threatened Release or presence of any Hazardous Material, which could reasonably be expected to form the basis of any Environmental Claim against any Loan Party, or to the best knowledge of such Loan Party, against any Person whose liability for any Environmental Claim such Loan Party has or may have retained or assumed either contractually or by operation of law, in each such case which would have a Material Adverse Effect.                      (d) Each Loan Party has not, and to the best knowledge of such Loan Party, no other Person has placed, stored, deposited, discharged, buried, dumped or disposed of Hazardous Materials or any other wastes produced by, or resulting from, any business, commercial or industrial activities, operations or processes, on, beneath or adjacent to any property currently or formerly owned, operated or leased by such Loan Party, except for inventories of such substances to be used, and wastes generated therefrom, in the ordinary course of business of such Loan Party (which inventories and wastes, if any, were and are stored or disposed of in accordance with applicable Environmental Laws and in a manner such that there has been no Release of any such substances), in each case, which, individually or in the aggregate, would have a Material Adverse Effect.                      (e) No Lien in favor of any Person relating to or in connection with any Environmental Claim has been filed or has been attached to any real estate owned or leased by a Loan Party.            4.12 Solvency. From and after the date of this Agreement, the Loan Parties are and will be Solvent.            4.13 Disclosure. No representation or warranty of a Loan Party or any of its Subsidiaries contained in this Agreement, the financial statements, the other Loan Documents, the Related Agreements, or any other document, certificate or written statement furnished to any Agent or Lender by or on behalf of a Loan Party for use in connection with the Loan Documents or any Related Agreements contains any untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. There is no material fact known to any Loan Party that has had or could have a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and statements furnished to Administrative Agent or any Lender for use in connection with the transactions contemplated hereby.            4.14 Insurance. Each Loan Party and its Subsidiaries maintains adequate insurance policies for public liability, property damage, product liability, and business interruption with respect to its business and properties and the business and properties of its Subsidiaries against loss or damage of the kinds customarily carried or maintained by corporations of established reputation engaged in similar businesses and in amounts acceptable to Senior Agent. Schedule 4.14 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Loan Party. The Loan Parties shall cause Senior Agent, for itself and on behalf of the Benefitted Persons, to be named as loss payee on all insurance policies relating to any Collateral and shall cause Senior Agent, for itself and on behalf of the Benefitted Persons, to be named as additional insured under all liability policies, in each case pursuant to appropriate endorsements in form and substance satisfactory to Senior Agent and shall collaterally assign to Senior Agent, on behalf of the Benefitted Persons, as security for the payment of the Obligations all business interruption insurance of the Loan Parties. No notice of cancellation has been received with respect to such policies and each Loan Party and its respective Subsidiaries are in compliance with all conditions contained in such policies. Borrowers shall apply any proceeds received from any policies of insurance relating to any Collateral (other than Inventory and Accounts) to the Obligations as set forth in subsection 2.4(B)(2). Borrowers shall apply any proceeds received from any policies of insurance relating to Inventory and Accounts to prepay the Revolving Loan without reducing the Revolving Loan Commitment. In the event the Loan Parties fail to provide Administrative Agent with evidence of the insurance coverage required by this Agreement, Senior Agent may, but is not required to, purchase insurance at the Loan Parties’ expense to protect Senior Agent’s and the Lender’s interests in the Collateral. This insurance may, but need not, protect Loan Parties’ interests. The coverage purchased by Senior Agent may not pay any claim made by a Loan Party or any claim that is made against a Loan Party in connection with the Collateral. A Loan Party may later cancel any insurance purchased by Senior Agent, but only after providing Senior Agent with evidence that such Loan Party has obtained insurance as required by this Agreement. If Senior Agent purchases insurance for the Collateral, the Loan Parties will be responsible for the costs of that insurance, including interest thereon and other charges imposed on Senior Agent in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance, and such costs may be added to the Obligations. The costs of the insurance may be more than the cost of insurance the Loan Parties are able to obtain on their own.            4.15 Compliance with Laws. Each Loan Party and its Subsidiaries are not in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, including, without limitation, any Environmental Law, which violation would subject such Loan Party or its Subsidiaries, or any of their respective officers to criminal liability or have a Material Adverse Effect and no such violation has been alleged.            4.16 Employee Matters. Except as set forth on Schedule 4.16, (a) no Loan Party nor any of such Loan Party’s employees is subject to any collective bargaining agreement, (b) no petition for certification or union election is pending with respect to the employees of any Loan Party and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of any Loan Party and (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of Borrowers after due inquiry, threatened between any Loan Party and its respective employees, other than employee grievances arising in the ordinary course of business, which could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.16, Borrowers and their respective Subsidiaries are not subject to any written employment contract.            4.17 Governmental Regulation. None of the Loan Parties is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal, state or foreign statute or regulation limiting its ability to incur indebtedness for borrowed money.            4.18 Currency Controls. There are no controls on payments by any Governmental Authority which could interfere with payments of obligations under the Loan Documents.            4.19 Access to Accountants and Management. Borrowers authorize Agents to discuss the financial condition and financial statements of Borrowers and their respective Subsidiaries with Administrative Borrower’s Accountants upon reasonable notice to Administrative Borrower of its intention to do so, and authorizes Borrower’s Accountants to respond to all of Agents’ inquiries. Each Agent and Lender may, with the consent of Administrative Borrower, which will not be unreasonably denied or withheld, confer with any executive management of Recoton directly regarding such Borrower’s business, operations and financial condition.            4.20 Inspection. Borrowers shall permit Agents and any authorized representatives designated by Agents to visit and inspect any of the properties of Borrowers and their Subsidiaries, including their financial and accounting records, and, in conjunction with such inspection, to make copies and take extracts therefrom, at such reasonable times during normal business hours and as often as may be reasonably requested. Each Lender may with the consent of Administrative Agent, which will not be unreasonably denied, and with prior notice to the Administrative Borrower, accompany Agents on any such visit or inspection.            4.21 Collateral Records. Each Loan Party shall keep full and accurate books and records relating to the Collateral. Upon the reasonable request of Senior Agent, Borrowers shall mark such negotiable instruments, invoices and other instruments or documents relating to the Collateral, to indicate Senior Agent’s security interests in the Collateral, for the benefit of the Benefitted Persons.            4.22 Collection of Accounts and Payments. Loan Parties shall establish lockboxes and blocked accounts (collectively, “Blocked Accounts”) in each Loan Party’s name with such banks (“Collecting Banks”) as are acceptable to Administrative Agent (subject to irrevocable instructions acceptable to Administrative Agent as hereinafter set forth) to which all account debtors shall directly remit all payments on Accounts and in which each Loan Party will immediately deposit all payments it otherwise directly receives for Inventory or other payments constituting proceeds of Collateral in the identical form in which such payment was made, whether by cash or check. The Collecting Banks shall acknowledge and agree, in a manner satisfactory to Administrative Agent, that all payments made to the Blocked Accounts are the sole and exclusive property of Senior Agent, for the benefit of Benefitted Persons, and that the Collecting Banks have no right to setoff against the Blocked Accounts and that all such payments received will be promptly transferred to the Agent’s Account, subject to the exception referred to below with respect to Recoton Canada. Loan Parties hereby agree that all payments made to such Blocked Accounts or otherwise received by Senior Agent, Administrative Agent and whether on the Accounts or as proceeds of other Collateral or otherwise will be the sole and exclusive property of Senior Agent, for the benefit of Benefitted Persons. Loan Parties shall irrevocably instruct each Collecting Bank to promptly transfer all payments or deposits to the Blocked Accounts into the Agent’s Account, except in the case of Recoton Canada in which case all such payments shall be transferred to Recoton’s concentration account at The Chase Manhattan Bank (or other account acceptable to Administrative Agent) which is swept to the Agent’s Account. If Loan Parties, or any if their Affiliates, employees, agents or other Person acting for or in concert with Loan Parties, shall receive any monies, checks, notes, drafts or any other payments relating to and/or proceeds of Accounts or other Collateral, Loan Parties or such Person shall hold such instrument or funds in trust for Senior Agent, for the benefit of Benefitted Persons, and, immediately upon receipt thereof, shall remit the same or cause the same to be remitted, in kind, to the Blocked Accounts or to Administrative Agent at its address set forth in subsection 10.3 below. For the purpose of calculating interest on the Obligations, all proceeds received in the Agent’s Account shall be credited to the Obligations on the Business Day of Administrative Agent’s receipt of immediately available federal funds.            4.23 Amendment of Schedules. Borrowers may amend any one or more of the Schedules referred in this Section 4 (subject to prior notice to Administrative Agent, as applicable) and any representation, warranty, or covenant contained herein which refers to any such Schedule shall from and after the date of any such amendment refer to such Schedule as so amended; provided however, that in no event shall the amendment of any such Schedule constitute a waiver by Administrative Agent and Lenders of any existing Default or Event of Default that exists notwithstanding the amendment of such Schedule.            4.24 Customer and Trade Relations. As of the Closing Date, there exists no actual or, to the knowledge of any Loan Party, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of any Loan Party with any of the material customers or the business relationship of any Loan Party with any supplier material to its operations.            4.25 Subordinated Debt. As of the Closing Date, Borrowers have delivered to Agents a complete and correct copy of the Subordinated Debt Documents (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). Borrowers have the power and authority to incur the Subordinated Debt. The subordination provisions of the Securities Purchase Agreement and the Subordination Agreement are enforceable against the holders of the Subordinated Debt by Agents and Lenders. All Obligations, including the Letter of Credit Liabilities, constitute senior Indebtedness entitled to the benefits of the subordination provisions contained in the Securities Purchase Agreement and the Subordination Agreement. Borrowers acknowledge that each Agent and each Lender is entering into this Agreement and is extending the Commitments in the case of the Lenders in reliance upon the subordination provisions of the Securities Purchase Agreement and the Subordination Agreement and this subsection 4.25.   SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS            Borrowers covenant and agree that, so long as any of the Commitments hereunder shall be in effect and until payment in full of all Obligations, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 5.            5.1 Financial Statements and Other Reports. Recoton will deliver to Administrative Agent the financial statements and other reports contained in the Reporting Rider attached hereto.            5.2 Endorsement. Each Borrower hereby constitutes and appoints Senior Agent and Administrative Agent and all Persons designated by Senior Agent or Administrative Agent for that purpose as such Borrower’s true and lawful attorney-in-fact, with power to endorse such Borrower’s name to any of the items of payment or proceeds described in subsection 4.22 above and all proceeds of Collateral that come into Senior Agent’s or Administrative Agent’s possession or under Senior Agent’s or Administrative Agent’s control. Both the appointment of Senior Agent and Administrative Agent as such Borrower’s attorney and Administrative Agent’s rights and powers are coupled with an interest and are irrevocable until payment in full and complete performance of all of the Obligations.            5.3 Maintenance of Properties. Each Loan Party will and will cause each of its Subsidiaries to maintain or cause to be maintained in good repair, working order and condition all material properties used in the business of each Loan Party and its Subsidiaries and will make or cause to be made all appropriate repairs, renewals and replacements thereof.            5.4 Compliance with Laws. Each Loan Party will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority as now in effect and which may be imposed in the future in all jurisdictions in which such Loan Party or any of its Subsidiaries is now doing business or may hereafter be doing business, other than those laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.            5.5 Further Assurances. Each Loan Party shall, and shall cause each of its Subsidiaries to, from time to time, execute such guaranties, financing or continuation statements, financing change statements, documents, security agreements, reports and other documents or deliver to Administrative Agent such instruments, certificates of title, mortgages, deeds of trust or hypothecs, (including with respect to real property acquired by a Loan Party after the date hereof) or other documents as Administrative Agent at any time may reasonably request to evidence, perfect or otherwise implement the guaranties and security for repayment of the Obligations provided for in the Loan Documents. It is understood and agreed that in making such request with respect to any Foreign Subsidiary or ownership interest therein, Administrative Agent shall take into account the effect the laws, rules and regulations of the United States and foreign countries may have on the granting of security, pledging of assets and entering into guaranties and that Administrative Agent would not knowingly request any of the foregoing which would cause a Material Adverse Effect arising in connection with such Foreign Subsidiary (or ownership thereof).            5.6 Mortgages; Title Insurance; Surveys.                      (A) Title Insurance. On the Closing Date, each Loan Party shall deliver or cause to be delivered to Administrative Agent ALTA lender's title insurance policies issued by title insurers reasonably satisfactory to Administrative Agent (the "Mortgage Policies") in form and substance and in amounts reasonably satisfactory to Administrative Agent assuring Administrative Agent that the Mortgages are valid and enforceable first priority mortgage liens on the respective Mortgaged Property, free and clear of all defects and encumbrances except Permitted Encumbrances. The Mortgage Policies shall be in form and substance reasonably satisfactory to Administrative Agent and shall include such endorsements insuring against the effect of future advances under this Agreement, for mechanics' liens and for such other matters that Administrative Agent may request. In the case of each leasehold constituting Mortgaged Property, Administrative Agent shall have received such estoppel letters, consents and waivers from the landlords and non-disturbance agreements from any holders of mortgages or deeds of trust on such real estate as may have been requested by Administrative Agent, which letters shall be in form and substance satisfactory to Administrative Agent.                      (B) Surveys. On or before the Closing Date, each Loan Party shall deliver or cause to be delivered to Administrative Agent current surveys, certified by a licensed surveyor, for all real property that is the subject of the Mortgage Policies. All such surveys shall be sufficient to allow the issuer of the mortgage policy to issue an ALTA lender's policy.            5.7 Use of Proceeds and Margin Security. Borrowers shall use the proceeds of all Loans for ordinary working capital and general corporate purposes (and as described in the recitals to this Agreement) consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of any Loan shall be used by Borrowers or any of their Subsidiaries for the purpose of purchasing or carrying margin stock within the meaning of Regulation U, or in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act.            5.8 Bailee. If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of the Loan Parties’ agents or processors, the Loan Parties shall, upon the request of Administrative Agent, notify such warehouseman, bailee, agent or processor of the security interests in favor of Senior Agent, for the benefit of the Benefitted Persons, created hereby and shall instruct such Person to hold all such Collateral for Senior Agent’s account subject to Administrative Agent’s instructions.            5.9 Year 2000. Each Borrower and each of its Subsidiaries has assessed the microchip and computer-based systems and the software used in its business and has determined that such systems and software are “Year 2000 Compliant”. Borrowers have not experienced any disruption in its business or any material expense as a result of its systems and software, and those of its principal vendors, suppliers, and customers, failing to be Year 2000 Compliant, and Borrowers are not aware of any circumstances that would be reasonably likely to result in a material adverse change in the business or financial condition of any Borrower or any of their Subsidiaries as a result of the failure of Borrowers or any of their Subsidiaries to have become Year 2000 Compliant prior to January 1, 2000. For purposes of this paragraph, “Year 2000 Compliant” means that all software, embedded microchips and other processing capabilities utilized by, and material to the business operations or financial condition of, each Borrower and its Subsidiaries are able to interpret, store, transmit, receive and manipulate data on and involving all calendar dates correctly and without causing any abnormal ending scenarios in relation to dates in and after the Year 2000.            5.10 Environmental Matters.            Each Loan Party shall comply with all Environmental Laws and shall promptly take any and all necessary Cleanup action in connection with the Release or threatened Release of any Hazardous Materials on, under or affecting any real estate in order to comply with all applicable Environmental Laws and governmental authorizations, unless the failure to so comply could not reasonably be expected to have a Material Adverse Effect. In the event a Loan Party undertakes any Cleanup action with respect to the Release or threatened Release of any Hazardous Materials on or affecting any real estate, such Loan Party shall conduct and complete such Cleanup action in material compliance with all applicable Environmental Laws, and in accordance with the policies, orders and directives of all federal, provincial, state and local governmental authorities except when, and only to the extent that, such Loan Party’s liability for such presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Hazardous Materials is being contested in good faith by such Loan Party.            Each Loan Party shall promptly advise the Administrative Agent in writing and in reasonable detail of (i) any Release or threatened Release of any Hazardous Materials required to be reported to any federal, state, local or foreign governmental or regulatory agency under any applicable Environmental Laws, (ii) any and all material written communications with respect to any pending or threatened Environmental Claims or Releases of Hazardous Materials, in each such case which, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect; (iii) any Cleanup performed by a Loan Party or any other Person in response to (x) any Hazardous Materials on, under or about any Real Estate, the existence of which has a reasonable possibility of resulting in an environmental liability having a Material Adverse Effect, or (y) any environmental liabilities that could have a Material Adverse Effect, and (iv) a Loan Party’s discovery of any occurrence or condition on any property that could cause any Real Estate presently owned or operated by the Loan Party or its Subsidiaries or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws.            Each Loan Party shall promptly notify the Administrative Agent of (i) any proposed acquisition of stock, assets, or property by such Loan Party that could reasonably be expected to expose such Loan Party and (ii) any proposed action to be taken by such Loan Party to commence manufacturing, industrial or other similar operations that could reasonably be expected to subject such Loan Party to additional Environmental Laws or governmental authorizations, that are materially different from the Environmental Laws applicable to the operations of such Loan Party.            Each Loan Party shall, at its own expense, provide copies of such documents or information as the Administrative Agent may reasonably request in relation to any matters disclosed pursuant to this subsection.            5.11 Required Minimum Excess Availability. Unless otherwise agreed to by the Requisite Lenders, Borrowers, on a consolidated basis shall maintain the Required Minimum Excess Availability.            5.12 Recoton Germany. Recoton shall cause Recoton German Holdings GmbH to provide one or more letters of credit (together with any replacements or extensions thereof, collectively, the “Recoton Germany L/Cs”) to the Administrative Agent on the Closing Date (which shall remain in effect for the duration of this Agreement) which designate Administrative Agent, as beneficiary, on behalf Agents and Lenders, in form and substance and amounts satisfactory to the Administrative Agent, in its sole discretion, each such Recoton Germany L/C to be used in the determination of the Borrowing Base; provided, however that if any such Recoton Germany L/C expires before the Termination Date, then prior to the date which is 30 days prior to such expiry date, Recoton shall either extend such Recoton Germany L/C or deliver a replacement letter of credit, in each case on terms substantially similar to the Recoton Germany L/C delivered on the Closing Date. Any failure to extend or replace any Recoton Germany L/C pursuant to this subsection 5.12 shall constitute an Event of Default under this Agreement and upon any such failure, Administrative Agent shall be entitled to draw (and upon the request of Required Lenders shall draw) all or a portion of all of the amounts available under such Recoton Germany L/C which amounts shall be applied to the repayment of the Revolving Loans and the other Obligations as Administrative Agent shall determine.   SECTION 6. FINANCIAL COVENANTS            Borrowers covenant and agree that so long as any of the Commitments remain in effect and until indefeasible payment in full of all Obligations and termination of all Lender Letters of Credit, each Borrower shall comply with and shall cause each of its Subsidiaries to comply with all covenants contained in the Financial Covenant Rider.   SECTION 7. NEGATIVE COVENANTS            Borrowers covenant and agree that so long as any of the Commitments remain in effect and until indefeasible payment in full of all Obligations and termination of all Lender Letters of Credit, each Borrower shall not and will not permit any of its Subsidiaries to:            7.1 Indebtedness and Liabilities. Directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable, on a fixed or contingent basis, with respect to any Indebtedness except:            (a) the Obligations;            (b) Indebtedness (excluding Capital Leases) not to exceed $1,500,000 in the aggregate at any time outstanding;            (c) Indebtedness under Capital Leases (excluding Capital Leases in connection with the New Information System) in existence as of the Closing Date plus an additional $1,000,000 outstanding at any time in the aggregate; provided, however, that amounts of such Indebtedness reduced shall be allowed to be incurred again;            (d) Indebtedness in connection with the New Information System not to exceed $15,000,000 outstanding at any time in the aggregate;            (e) (i) Indebtedness of any Loan Party to any other Loan Party; (ii) Indebtedness of any Foreign Subsidiary to any Loan Party to the extent permitted under subsection 7.4(f); (iii) Indebtedness of any Foreign Subsidiary to any other Foreign Subsidiary; (iv) Indebtedness of any Loan Party to any Foreign Subsidiary; provided, however, that (1) any intercompany Indebtedness of any Loan Party permitted under this subsection 7.1(e) shall be subordinated in right of payment to the Obligations on terms satisfactory to the Administrative Agent and evidenced by intercompany notes in form and substance satisfactory to the Administrative Agent, (2) all such intercompany notes shall be endorsed in blank or accompanied by note powers endorsed in blank and accompanied by note powers endorsed in blank and pledged and delivered to the Administrative Agent, for the benefit of the Benefitted Persons, (3) at the time any intercompany Indebtedness is incurred by any Loan Party pursuant to this subsection 7.1(e), and after giving effect thereto, the Loan Parties shall be Solvent; and (4) no Default or Event of Default exists or would occur and be continuing after giving effect to any proposed intercompany Indebtedness pursuant to this subsection 7.1(e).            (f) Indebtedness of Recoton in an amount not to exceed $5,518,399 plus accrued interest evidenced by a promissory note payable to the United States of America or an agency thereof delivered in settlement of obligations of Recoton arising out of the customs investigation discussed in Recoton’s Form 8-K for an event which occurred on July 27, 1999;            (g) the Subordinated Debt;            (h) Indebtedness under the German Facility provided, that the terms of the Indebtedness permitted under this subsection 7.1(h) can not be amended, replaced or terminated without the prior written consent of the Requisite Lenders;            (i) Indebtedness existing on the Closing Date and identified on Schedule 7.1;            (j) Indebtedness of the type described in subsection 2.3(C) with respect to the issuance of debt securities of Recoton in a public offering or a private placement and which (1) the Net Securities Proceeds are used to pay down the Obligations as set forth in subsection 2.4(B)(2), (2) shall be subordinate to the Obligations; (3) the terms and conditions shall be satisfactory to the Agents and the Requisite Lenders and (4) the documentation shall be satisfactory to the Agents and the Requisite Lenders;            (k) Indebtedness incurred by STD and its Subsidiaries to the extent supported by Lender Letters of Credit (which amount as of the Closing Date is $12,400,000);            (l) Indebtedness with respect to the obligations of Recoton Italy and Recoton UK referred to in subsection 7.2(e) and (f); and            (m) Indebtedness of Recoton Italy with respect to letters of credit that are cash collateralized.            (n) Borrowers will not, and will not permit any of their Subsidiaries to, incur any Liabilities except for Indebtedness permitted herein and trade and other payables and expenses arising in the ordinary course of business that are paid in accordance with their prior existing practices.            7.2 Guaranties. Guaranty, endorse, or otherwise in any way become or be responsible for any obligations of any other Person, whether directly or indirectly by agreement to purchase the indebtedness of any other Person or through the purchase of goods, supplies or services, or maintenance of working capital or other balance sheet covenants or conditions, or by way of stock purchase, capital contribution, advance or loan or issuance of a letter of credit for the purpose of paying or discharging any indebtedness or obligation of such other Person or otherwise except for:            (a) endorsements of instruments or items of payment for collection in the ordinary course of business;            (b) guaranties in existence on the date hereof and listed on Schedule 7.2; provided that any such guaranty of the Senior Subordinated Notes is subordinate to the Obligations on terms satisfactory to the Agents.            (c) guaranties pursuant to this Agreement;            (d) guaranties of the Indebtedness permitted under subsections 7.1 (b), (c) and (d);            (e) guaranties made in the ordinary course of business by a Loan Party with respect to Recoton Italy’s obligations not to exceed in the aggregate $2,000,000 for all Loan Parties;            (f) guaranties made in the ordinary course of business by a Loan Party with respect to Recoton UK’s obligations not to exceed in the aggregate $2,000,000 for all Loan Parties;            (g) guaranties made in the ordinary course of business by (i) a Loan Party with respect to obligations of another Loan Party and (ii) a Foreign Subsidiary with respect to obligations of a Loan Party or any other Foreign Subsidiary, which obligations in each case are not otherwise prohibited by this Agreement; and            (h) the guaranty made by Recoton of the obligations incurred by Recoton Germany under the German Facility.            7.3 Transfers, Liens and Related Matters.                      (A) Transfers. Sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral or the assets of such Person, except that Borrowers and their Subsidiaries may (i) sell or otherwise dispose of Inventory in the ordinary course of business; (ii) sell, transfer or discount without recourse, in the ordinary course of business, accounts receivables arising in the ordinary course of business in connection with the compromise or collection thereof or in connection with the receipt of proceeds under credit insurance; provided, that such proceeds are applied to prepay the Revolving Loans; (iii) sell or otherwise dispose of worn out, obsolete or surplus equipment and fixtures so long as the Net Proceeds are applied to the prepayment of the Obligations as provided in subsection 2.4(B); (iv) subject to the provisions of the Collateral Documents, transfer, sell or assign Collateral or other assets to another Loan Party (including in connection with the dissolution, liquidation or winding up of any Subsidiary set forth on Schedule 7.6); (v) make other Asset Dispositions if all of the following conditions are met: (1) the market value of assets sold or otherwise disposed of in one or a series of related transactions does not exceed $250,000 and the aggregate market value of assets sold or otherwise disposed of in any Fiscal Year does not exceed $1,000,000; (2) the consideration received is at least equal to the fair market value of such assets; (3) the sole consideration received is cash; provided, that trade-ins for which the cash value of such trade-in is applied against the purchase price of new equipment so purchased shall be deemed to be cash; (4) the Net Proceeds of such Asset Disposition are applied as required by subsection 2.4(B); (5) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayment of the Obligations with the proceeds thereof, each Borrower is in compliance on a pro forma basis with the covenants set forth in the Financial Covenant Rider recomputed for the most recently ended month for which information is available and showing it will be in compliance as of the date thereof and in the future, and is in compliance with all other terms and conditions contained in this Agreement; and (6) no Default or Event of Default shall then exist or result from such sale or other disposition; and (vii) consummate the InterAct International IPO. Notwithstanding anything to the contrary contained herein (x) Recoton shall be permitted to sell its stock (provided that the proceeds thereof shall be applied to the Revolving Loan without reducing the Revolving Loan Commitment); and grant options in accordance with its existing stock option plans and warrants in its reasonable business judgment, (y) InterAct International shall be permitted to sell its stock in accordance with subsection 2.4(B)(6); and options on the stock of InterAct International may be granted, and stock may be issued upon exercise of such options, to employees and directors of InterAct International as described in Schedule 11.1(C), and (z) subject to the provisions of the Security Documents any Subsidiary can sell stock to its parent to the extent permitted by 7.4(c), (g), (h) and (i).                      (B) Liens. Except for Permitted Encumbrances, directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of the Collateral or the assets of such Person or any proceeds, income or profits therefrom.                      (C) No Negative Pledges. Enter into or assume any agreement (other than the Loan Documents or the Subordinated Debt Documents) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired.                      (D) No Restrictions on Subsidiary Distributions to Borrowers. Except as provided herein (or in the Subordinated Credit Agreement or the Senior Subordinated Notes), directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to: (1) pay dividends or make any other distribution on any of such Subsidiary's capital stock or other equity interest owned by a Borrower or any Subsidiary of a Borrower; (2) pay any indebtedness owed to a Borrower or any other Subsidiary; (3) make loans or advances to a Borrower or any other Subsidiary; or (4) transfer any of its property or assets to a Borrower or any other Subsidiary.            7.4 Investments and Loans. Make or permit to exist any Investments in any other Person, except:                      (a) Borrowers may make and maintain Investments in Cash Equivalents consistent with the cash management system and subject to securities account control agreements in form and substance satisfactory to Administrative Agent;                      (b) Foreign Subsidiaries may make and maintain Investments in Cash Equivalents;                      (c) (i) Borrowers and their Subsidiaries may continue loans made to employees and former employees as set forth in Schedule 7.4(c) which loans, after the Closing Date, may not be increased or reborrowed; (ii) InterAct International may make loans to employees of InterAct International for the purpose of exercising options to purchase capital stock in InterAct International as described in Schedule 11.1(C); and (iii) Borrowers and their Subsidiaries may make and maintain additional loans and advances to employees in an aggregate outstanding amount not in excess of $2,000,000 at any time;                      (d) Borrowers and their Subsidiaries may make and maintain extensions of trade credit in the ordinary course of business;                      (e) Borrowers and their Subsidiaries may make and maintain Investments existing as of the Closing Date in their respective Subsidiaries as set forth in Schedule 7.4(e);                      (f) after the Closing Date, Loan Parties may make and replenish Investments in:                                (i) Recoton UK up to $2,000,000 in the aggregate (including guaranties);                                (ii) Recoton Italy up to $2,000,000 in the aggregate (including guaranties); and                                (iii) Recoton Germany up to $7,000,000 in the aggregate (including guaranties);                      (g) each Loan Party may make and maintain additional equity Investments in their respective Subsidiaries which are Loan Parties;                      (h) Borrowers and their Subsidiaries may make additional equity Investments in existing and new Subsidiaries in connection with the STD Restructuring to the extent permitted under subsection 7.11;                      (i) Foreign Subsidiaries may make and maintain additional equity Investments in their respective Subsidiaries;                      (j) Borrowers and their Subsidiaries may make intercompany loans to the extent permitted pursuant to subsection 7.1(e);                      (k) Borrowers and their Subsidiaries may make loans and advances to suppliers for the purchase and preparation of Inventory in the ordinary course of business not to exceed $2,000,000 at any one time outstanding; provided that no such loan or advance shall be outstanding for more than180 days; and                      (l) debt held by any Loan Party or any of their Subsidiaries in a Subsidiary may be converted to equity of that Subsidiary.            7.5 Restricted Junior Payments. (A) Directly or indirectly declare, order, pay, make or set apart any sum for any Restricted Junior Payment, except that: (a) Subsidiaries of any Borrower may make Restricted Junior Payments with respect to their common stock or other equity interest which Restricted Junior Payment shall be applied to pay the Obligations and (b) so long as no Default or Event of Default is occurring or continuing and after giving effect to such payment no Default or Event of Default results (i) Recoton may repurchase capital stock issued to its employees, directors or consultants, and the employees, directors or consultants of its Subsidiaries, in an aggregate amount not to exceed $3,000,000 in cash during the term of this Agreement and (ii) Borrowers may make Permitted Subordinated Debt Payments as defined in and in accordance with the Subordination Agreement and regularly scheduled interest payments on the Senior Subordinated Notes. Notwithstanding anything to the contrary contained herein, Recoton may repurchase shares of its capital stock which are surrendered by optionees which consideration for repurchase shall be made solely with the issuance of shares of additional stock issued upon the exercise of options granted under Recoton’s stock option plans.            (B) Directly or indirectly pay or prepay any account payables to STD; provided, however, so long as no Default or Event of Default has then occurred or is continuing or would be caused thereby, the account payables to STD may be paid on a monthly basis, provided that all the following conditions have been met:                       (a) the payment to STD is within normal and customary terms and shall be payment for invoices that have remained unpaid for at least 90 days from the date of issuance;                       (b) the amount to be paid shall not be in excess of $25,000,000 per month; and                       (c) the amounts to be repaid shall be for account payables with respect to the purchase of Inventory from STD.            7.6 Restriction on Fundamental Changes. (a) Enter into any transaction of merger, amalgamation or consolidation (other than a merger, amalgamation or consolidation among Loan Parties); (b) other than the Subsidiaries set forth in Schedule 7.6, liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business or assets, or the capital stock or other equity interest of any of its Subsidiaries, whether now owned or hereafter acquired other than pursuant to the establishment of Subsidiaries as described in Schedule 7.11 or the liquidation, winding up or dissolution of the Subsidiaries set forth on Schedule 7.6 (provided that, in connection with the transfer of assets or creation of Subsidiaries in connection with the transactions described on Schedule 7.11, Agents shall have received (a) such amendments and counterparts to the Security Documents, Guaranties and the other Loan Documents as may be requested by Agents to bind newly created Subsidiaries or existing Subsidiaries to the terms of this Agreement and the Related Agreements and the other applicable Loan Documents, (b) copies of organizational documents, resolutions and incumbency certificates of any Persons executing any of the foregoing amendments or counterparts, and such other documents and instruments in connection therewith as may be reasonably requested by Senior Agent, and (c) a favorable opinion of counsel to Loan Parties as to due authorization, execution, and delivery of such amendments or counterparts, the enforceability thereof and such other matters as may be reasonably requested by Agents (including as to the creation and perfection of Liens pursuant to the Security Documents), all of the foregoing in form and substance reasonably satisfactory to Agents); or (d) acquire by purchase or otherwise all or any substantial part of the business or assets of, or stock or other beneficial ownership of, any Person; provided, however, that any Subsidiary may be merged, amalgamated or consolidated with or into a Borrower (provided that such Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrowers that are Guarantors (provided that the wholly owned Subsidiary or Subsidiaries that are Guarantors shall be the continuing or surviving corporations). It is understood and agreed that the InterAct International IPO shall be permitted if the following conditions are met:                      (i) the Net Securities Proceeds of the InterAct International IPO shall be applied in payment of the Loans pursuant to and, to the extent required by and in accordance with subsection 2.4(B)(6);                      (ii) Borrowers shall deliver a certificate showing pro forma compliance with the financial covenants and Minimum Excess Availability after giving effect to the InterAct International IPO; and                      (iii) upon the indefeasible payment in full in cash of the Obligations in accordance with subsection 2.4(B)(6), InterAct International will no longer be a Loan Party and the Collateral with respect to InterAct International shall be released.            7.7 Changes Relating to Subordinated Debt. Change or amend the terms of the Subordinated Debt (including any guaranties thereof) if the effect of such amendment is an attempt to: (a) increase the interest rate on such Indebtedness; (b) change the dates upon which payments of principal or interest are due on such Indebtedness; (c) change any event of default or add any covenant with respect to such Indebtedness; (d) change the payment or amendment and modification provisions of such Indebtedness; (e) change the subordination provisions thereof; or (f) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to Borrowers, any of their Subsidiaries, Agents or any Lender.            7.8 Transactions with Affiliates. Directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale or exchange of property or the rendering of any service) with any Affiliate or with any officer, director or employee of any Loan Party, except for transactions in the ordinary course of a Borrower’s business and upon fair and reasonable terms and except for the transactions set forth in subsections 7.4(c) on terms which are no less favorable to such Borrower than it would obtain in a comparable arm’s length transaction with an unaffiliated Person.            7.9 Conduct of Business. From and after the Closing Date, engage in any business other than businesses of the type engaged in by Borrowers or their Subsidiaries on the Closing Date or those in or directly related to the consumer electronics industry.            7.10 Tax Consolidations. File or consent to the filing of any consolidated income tax return with any Person other than any other Borrowers or any of their Subsidiaries, or any Guarantor, provided that in the event a Borrower files a consolidated return with any such Person, such Borrower’s contribution with respect to taxes as a result of the filing of such consolidated return shall not be greater, nor the receipt of tax benefits less, than they would have been had such Borrower not filed a consolidated return with such Person.            7.11 Subsidiaries. Other than the Subsidiaries set forth on Schedule 7.11, establish, create or acquire any new Subsidiaries.            7.12 Fiscal Year; Tax Designation. Change its Fiscal Year; or elect to be designated as an entity other than a C corporation as defined in IRC.            7.13 Press Release; Public Offering Materials. Without the prior written consent of the applicable party, such consent not to be unreasonably withheld or delayed, disclose the name of Agents or any Lender in any press release or in any prospectus, proxy statement or other materials filed with any governmental entity relating to a public offering of the capital stock or other equity interest of any Loan Party except as may be required by law or regulators of applicable self regulatory organizations.            7.14 Bank Accounts. With respect to any Loan Party, establish any new bank accounts (other than disbursement accounts for which deposits thereto shall be made from the Revolving Loans; provided, that such Loan Party gives Administrative Agent notice of the establishment of any such disbursement account), or attempt to amend or terminate any Blocked Account or lockbox agreement without Administrative Agent’s prior written consent.            7.15 Sale-Leasebacks. No Loan Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.            7.16 Cancellation of Indebtedness. No Loan Party shall cancel any claim or debt owing to it by a third-party, except for reasonable consideration negotiated on an arm’s length basis and in the ordinary course of its business consistent with past practices.            7.17 Inactive Subsidiaries. Each of the Inactive Subsidiaries shall not conduct any business, acquire any assets or otherwise become liable for any obligation except for nominal amounts as may be required to liquidate, wind-up or dissolve such Inactive Subsidiaries.            7.18 Parity with Senior Lender. No Loan Party shall grant any security interest in property or deliver a guarantee to any holder of the Senior Subordinated Notes or the Subordinated Agent, on behalf of the Subordinated Creditors, or any Subordinated Creditor to secure payment and performance of the obligations incurred under the Securities Purchase Agreement or the Subordinated Credit Agreement, as the case may be, that is not also granted to the Senior Agent on behalf of the Lenders to secure payment and performance of the Obligations hereunder and in each case subject to the Subordination Agreement and the subordination provisions of the Securities Purchase Agreement.   SECTION 8. DEFAULT, RIGHTS AND REMEDIES            8.1 Event of Default. "Event of Default" means the occurrence or existence of any one or more of the following:                      (A) Payment. Failure to make payment of the principal of or interest on any Loan, or failure to pay any other Obligation pursuant to this Agreement not charged to the Revolving Loan within five days after such amount becomes due in accordance with this Agreement; or                      (B) Default in Other Agreements. (1) Failure of Borrowers or any of their Subsidiaries to pay when due any principal or interest on any Indebtedness (other than the Obligations) or (2) breach or default of Borrowers or any of their Subsidiaries with respect to any Indebtedness (other than the Obligations); if such failure to pay, breach or default entitles the holder or trustee to cause such Indebtedness having an aggregate principal amount in excess of $1,000,000 to become or be declared due prior to its stated maturity in each case regardless of whether such default is waived or such right is exercised by such holder or trustee; or                      (C) Breach of Certain Provisions. Failure of any Borrower to perform or comply with any term or condition contained in paragraphs (A), (B), (C) and (K) of the Reporting Rider, subsections 5.3, 5.5, 5.6, 5.11 or 5.12, Section 4, Section 6, Section 7 or the Financial Covenants Rider; or                      (D) Breach of Warranty. Any representation, warranty, certification or other statement made by any Loan Party in any Loan Document or in any statement or certificate at any time given by such Person in writing pursuant or in connection with any Loan Document is false in any material respect on the date made; or                      (E) Other Defaults Under Loan Documents. Any Loan Party defaults in the performance of or compliance with any term contained in this Agreement or the other Loan Documents and such default is not remedied or waived within 15 days after receipt by such Loan Party of notice from Administrative Agent, or Requisite Lenders, of such default (other than occurrences described in other provisions of this subsection 8.1, for which a different grace or cure period is specified, or, if no grace or cure period is specified, constitute immediate Events of Default); or                      (F) Change in Control. (i) Any Person (other than Robert L. Borchardt and/or any trust established by him) or "group" within the meaning of Section 13(d) or 14(d) of the Exchange Act (other than a group controlled by Robert L. Borchardt or any trust established by him) (a) shall have acquired beneficial ownership of 20% or more of any outstanding class of capital stock having ordinary voting power in the election of directors of Recoton or (b) shall obtain the power (whether or not exercised) to elect a majority of Recoton's directors, (ii) the Board of directors of Recoton shall not consist of a majority of Continuing Directors ("Continuing Directors" means the directors of Recoton on the date of this Agreement and each other director, if such director's nomination for election to the Board of Directors of Recoton is recommended by a majority of then Continuing Directors), (iii) Recoton ceases to own, directly or indirectly, 100% of the other Borrowers, Recone or Recoton Canada other than with respect to options to acquire InterAct International stock and (iv) Robert L. Borchardt or any trust established by him shall cease to beneficially own and control 4% of the outstanding capital stock of Recoton.                      (G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court enters a decree or order for relief with respect to any Loan Party or any of its Subsidiaries in an involuntary case under any applicable bankruptcy, reorganization, insolvency, receivership or other similar law now or hereafter in effect, which decree or order is not stayed or other similar relief is not granted under any applicable federal, provincial or state law; or (2) the continuance of any of the following events for 60 days unless dismissed, bonded or discharged: (a) an involuntary case, petition or proceeding is commenced against any Loan Party or any of its Subsidiaries, under any applicable bankruptcy, reorganization, insolvency or other similar law now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity); or (b) a receiver, receiver-manager, administrator, manager, liquidator, sequestrator, trustee, custodian or other fiduciary having similar powers over any Loan Party or any of its Subsidiaries, or over all or a substantial part of their respective property, is appointed; or                      (H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) Any Loan Party or any of its Subsidiaries commences a voluntary petition, proceeding or case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity), or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, receiver-manager, administrator, manager, trustee or other custodian for all or a substantial part of its property; or (2) any Loan Party or any of its Subsidiaries makes any assignment for the benefit of creditors; (3) the board of directors of any Loan Party or any of its Subsidiaries adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (4) any Loan Party or any of its subsidiaries is unable, or admits in writing its inability to pay its debts as they mature, or commits any other act of bankruptcy; or                      (I) Liens. Any lien, levy or assessment is filed or recorded with respect to or otherwise imposed upon all or any part of the Collateral or the assets of any Loan Party or any of its Subsidiaries by the United States or any foreign government or any department or instrumentality thereof or by any federal, state, provincial, county, municipality or other governmental agency (other than Permitted Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or discharged within 10 days; or                      (J) Judgment and Attachments. Any money judgment, writ or warrant of attachment, or similar process involving (1) an amount in any individual case in excess of $2,000,000 or (2) an amount in the aggregate at any time in excess of $2,000,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against any Loan Party or any of its Subsidiaries or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of 30 days, but in any event not later than 5 days prior to the date of any proposed sale thereunder; or                      (K) Dissolution. Any order, judgment or decree is entered against any Loan Party or any of its Subsidiaries decreeing the dissolution or winding up or split up of such Loan Party or that Subsidiary and such order remains undischarged or unstayed for a period in excess of 20 days, but in any event not later than 5 days prior to the date of any proposed dissolution or winding up or split up; or                      (L) Solvency. The Loan Parties cease to be Solvent or admit in writing their present or prospective inability to pay their debts as they become due; or                      (M) Injunction. Any Loan Party or any of its Subsidiaries is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency (including, but not limited to, those of any foreign country) from conducting all or any material part of the business of Borrowers' and their Subsidiaries, on a consolidated basis, and such order continues for 30 days or more; or                      (N) Invalidity of Loan Documents. Any of the Loan Documents for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void, or any Loan Party denies that it has any further liability under any Loan Documents to which it is party, or gives notice to such effect; or                      (O) Failure of Security. Senior Agent, on behalf of the Benefitted Persons, does not have or ceases to have a valid and perfected first priority security interest in the Collateral (other than in de minimis amounts and subject to Permitted Encumbrances), in each case, for any reason other than the failure of Senior Agent or any Lender to take any action within its control; or                      (P) Damage, Strike, Casualty. Any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than ten consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities at any facility of any Loan Party or any of its Subsidiaries if any such event or circumstance could reasonably be expected to have a Material Adverse Effect; or.                      (Q) Licenses and Permits. The loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Borrower or any of its Subsidiaries, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect; or.                      (R) Forfeiture. There is filed against any Loan Party or any of its Subsidiaries any civil or criminal action, suit or proceeding under any federal or state racketeering statute (including, without limitation, the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is not dismissed within 120 days; and (2) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral; or.                      (S) Currency Controls. There are controls on payments imposed by a Governmental Authority which interfere with the payment of obligations under the Loan Documents; or                      (T) Environmental Matters. Except as to any of the following for which such Loan Party has provided timely notice and has been granted a reasonable period to cure (but only for the duration of such cure period): (i) Any Environmental Claim shall have been asserted against a Loan Party which could reasonably be expected to have a Material Adverse Effect, (ii) any Release or threatened Release of any Hazardous Materials on, under or affecting any real estate shall have occurred, and such event could reasonably form the basis of an Environmental Claim against a Loan Party which, if determined adversely, could reasonably be expected to have a Material Adverse Effect, or (iii) a Loan Party shall have failed to obtain any governmental authorization necessary under any Environmental Law for the management, use, control, ownership or operation of its business or any of the real estate or any such governmental authorization shall be revoked, terminated, modified, or otherwise cease to be in full force and effect, in each case, if the existence of such condition could reasonably be expected to have a Material Adverse Effect; or                      (U) Default Under German Facility. There shall occurred a default under the loan documents evidencing the German Facility and to the extent a cure period is provided under such documents with respect to such default, such default shall continue unremedied for such period of time during which cure of such default is permitted thereunder; or                      (V) Recoton Germany. Recoton Germany shall have failed to comply with the terms of subsection 5.12; or                      (W) Employee Benefit Plans. There occurs one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of any Loan Party or any of its ERISA Affiliates in excess of $500,000 during the term of this Agreement; or there exists, an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) which exceeds $500,000; or                      (X) Foreign Exchange. There occurs a fluctuation in the foreign exchange affecting the Deutsche Mark which results in the sum of the aggregate amount of commitments outstanding under the German Facility, the aggregate amounts outstanding of Subordinated Debt and the aggregate amount of the Revolving Commitment and the outstanding Term Loans to exceed $275,000,000; or                      (Y) Resignation of Borrowers' Accountants. The Borrowers' Accountants shall resign because of impropriety or irregularity in the conduct of the Loan Parties or their Subsidiaries; or                      (Z) Income Tax Act. A requirement from the Minister of National Revenue for payment pursuant to Section 224 or any successor section of the Income Tax Act (Canada) or Section 317, or any successor section of the Excise Tax Act (Canada) or any comparable provision of similar legislation shall have been received by any Agent or any Lender or any other Person in respect of any Borrower or its Subsidiaries or otherwise issued in respect of any Borrower or any of its Subsidiaries.            8.2 Suspension of Commitments. Upon the occurrence of any Default or Event of Default, notwithstanding any grace period or right to cure, Administrative Agent may or upon demand by Requisite Lenders shall, without notice or demand, immediately cease making additional Loans and the Commitments (other than the obligation of Lenders to purchase participations in Letters of Credit) shall be suspended; provided that, in the case of a Default, if the subject condition or event is waived or cured within any applicable grace or cure period, the Commitments shall be reinstated.            8.3 Acceleration. Upon the occurrence of any Event of Default described in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by any Borrower, and the Commitments shall thereupon terminate. Upon the occurrence and during the continuance of any other Event of Default, Administrative Agent may, and upon the written request of the Requisite Lenders shall, by written notice to Borrowers, (a) declare all or any portion of the Obligations to be, and the same shall forthwith become, immediately due and payable and the Commitments shall thereupon terminate and (b) demand that Borrowers immediately deposit with Administrative Agent an amount equal to 105% of the Letter of Credit Reserve to enable Administrative Agent or any Lender that has issued any Lender Letter of Credit to make payments under the Lender Letters of Credit when required and such amount shall become immediately due and payable.            8.4 Remedies. If any Event of Default shall have occurred and be continuing, in addition to and not in limitation of any other rights or remedies available to any Agent and Lenders at law or in equity, Senior Agent may and shall upon the request of Requisite Lenders exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it or any other Agent, all the rights and remedies of a secured party on default under the UCC or PPSA, as applicable (whether or not the UCC or the PPSA, as applicable, applies to the affected Collateral) and may also (a) require the Loan Parties to, and the Loan Parties hereby agree that they will, at their expense and upon request of Senior Agent forthwith, assemble all or part of the Collateral as directed by Senior Agent and make it available to Senior Agent at a place to be designated by Senior Agent which is reasonably convenient to both parties; (b) withdraw all cash in the Blocked Accounts and apply such monies in payment of the Obligations in the manner provided in subsection 8.7, (c) without notice or demand or legal process, enter upon any premises of any Loan Party and take possession of the Collateral, (d) sell, assign, lease, license (on an exclusive or non-exclusive basis), give an option or options to purchase or otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more contracts or as an entirety. The Loan Parties agree that, to the extent notice of sale of the Collateral or any part thereof shall be required by law, at least 10 days notice to the Loan Parties of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. At any sale of the Collateral (whether public or private), if permitted by law, any Agent or any Lender may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for the purchase of the Collateral or any portion thereof for the account of such Agent or such Lender. Senior Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Borrowers shall remain liable for any deficiency. Senior Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by law, each Loan Party hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter enacted. Senior Agent shall not be required to proceed against any Collateral but Senior Agent or Administrative Agent may proceed against the Loan Parties directly.            8.5 Appointment of Attorney-in-Fact. Each Loan Party hereby constitutes and appoints Senior Agent as such Loan Party’s attorney-in-fact with full authority in the place and stead of such Loan Party and in the name of such Loan Party, Senior Agent or otherwise, from time to time in Senior Agent’s discretion while an Event of Default is continuing (except that the Senior Agent shall at all times be able to file under the Uniform Commercial Code and the Personal Property Security Act financing statements and financing change statements in the name of each Loan Party as debtor, and record in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property (as defined in the Security Agreements) in the name of each Loan Party as assignor) to take any action and to execute any instrument that Senior Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including: (a) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any customer or obligor thereunder or allow any credit or discount thereon; (c) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (d) to file any claims or take any action or institute any proceedings that Senior Agent may deem necessary or desirable for the collection of or to preserve the value of any of the Collateral or otherwise to enforce the rights of Agents and Lenders with respect to any of the Collateral; and (e) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts or any other documents of title, assignments, verifications and notices in connection with Accounts and other documents relating to the Collateral, (f) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (g) to defend any suit, action or proceeding brought against any Loan Party with respect to any Collateral; (h) to settle, compromise or adjust any suit, action or proceeding described in the preceding clause and, in connection therewith, to give such discharges or releases as the Senior Agent may deem appropriate; (i) generally, to sell or transfer and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Senior Agent were the absolute owner thereof for all purposes, and to do, at the Senior Agent’s option and the Loan Party’s expense, at any time, or from time to time, all acts and things which the Senior Agent deems necessary to protect, preserve or realize upon the Collateral and the Liens of the Senior Agent thereon and to effect the intent of this Agreement all as fully and effectively as any Loan Party might do; and (j) execute, in connection with any foreclosure, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. The appointment of Senior Agent as each Loan Party’s attorney and Senior Agent’s rights and powers are coupled with an interest and are irrevocable until indefeasible payment in full and complete performance of all of the Obligations and the termination of the Commitments.            8.6 Limitation on Duty of Agents with Respect to Collateral. Beyond the safe custody thereof, each Agent and each Lender shall have no duty with respect to any Collateral in its possession or control (or in the possession or control of any agent or bailee) or with respect to any income thereon or the preservation of rights against prior parties or any other rights pertaining thereto. Each Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which such Agent accords its own property. Neither any Agent nor any Lender shall be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee, broker or other agent or bailee selected by Borrowers or selected by any Agent in good faith.            8.7 Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, (a) each Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Senior Agent or Administrative Agent from or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that Senior Agent and Administrative Agent shall have the continuing exclusive right to apply and to reapply any and all payments received at any time or times after the occurrence and during the continuance of an Event of Default against the Obligations in such manner as Administrative Agent may deem advisable notwithstanding any previous entry by Administrative Agent upon any books and records and (b) the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied: first, to all fees, costs and expenses incurred by or owing to Agents with respect to this Agreement, the other Loan Documents or the Collateral; second, to all fees, costs and expenses incurred by or owing to any Lender with respect to this Agreement, the other Loan Documents or the Collateral; third, to accrued and unpaid interest on the Obligations; and fourth, to the principal amounts of the Obligations outstanding. Notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of an Event of Default, the outstanding principal and interest on the Term Loan C shall be paid after all the other Obligations have been paid in full in cash.            8.8 Waivers; Non-Exclusive Remedies. No failure on the part of Administrative Agent or any Lender to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement or the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise by Administrative Agent or any Lender of any right under this Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement and the other Loan Documents are cumulative and shall in no way limit any other remedies provided by law.   SECTION 9. AGENTS            9.1 Agents.                      (A) Appointment. Each Lender hereto and, upon obtaining an interest in any Loan, any participant, transferee or other assignee of any Lender irrevocably appoints, designates and authorizes Heller, as Administrative Agent, and GECC, as Collateral Agent and Syndication Agent, to take such actions or refrain from taking such action as its agents on its behalf and to exercise such powers hereunder and under the other Loan Documents as are delegated by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. In addition, each Lender hereto and, upon obtaining an interest in any Loan, any participant, transferee or other assignee of any Lender irrevocably appoints, designates and authorizes Heller, as Senior Agent, to take such actions or refrain from taking such action as its agent on its behalf and to exercise such powers under the Subordination Agreement as are delegated by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Neither the Agents nor any of its directors, officers, employees or agents shall be liable for any action so taken. The provisions of this subsection 9.1 are solely for the benefit of Agents and Lenders and neither Borrowers nor any other Loan Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, each Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Loan Party, except that the Senior Agent shall also act as agent for the Subordinated Creditors in accordance with the terms of the Subordination Agreement. Each Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees.                      (B) Nature of Duties. Agents shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement or in the Loan Documents. The duties of each Agent shall be mechanical and administrative in nature. Agents shall not have by reason of this Agreement a fiduciary, trust or agency relationship with or in respect of any Lender, any Borrower or any other Loan Party. Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon any Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Each Lender shall make its own appraisal of the creditworthiness of each Borrower, and shall have independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of each Borrower, and Agents shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than as expressly required herein), whether coming into its possession before the Closing Date or at any time or times thereafter. If an Agent seeks the consent or approval of any Lenders to the taking or refraining from taking any action hereunder, then such Agent shall send notice thereof to each Lender. Agents shall promptly notify each Lender any time that the Requisite Lenders have instructed Agents to act or refrain from acting pursuant hereto.                      (C) Rights, Exculpation, Etc. Neither Agents nor any of their officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that an Agent shall be liable to the extent of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. Administrative Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). In performing its functions and duties hereunder, Agents shall exercise the same care which it would in dealing with loans for its own account, but neither Agents nor any of their agents or representatives shall be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any of the Loan Documents or the transactions contemplated thereby, or for the financial condition of any Loan Party. Agents shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default. Agents may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Loan Documents Agents are permitted or required to take or to grant, and if such instructions are promptly requested, Agents shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Loan Documents until they shall have received such instructions from Requisite Lenders or all or such other portion of the Lenders as shall be prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of action whatsoever against any Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders in the absence of an express requirement for a greater percentage of Lender approval hereunder for such action.                      (D) Reliance. Agents shall be under no duty to examine, inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any other Loan Document, or any instrument, document or communication furnished pursuant hereto or in connection herewith. Agents shall be entitled to rely, and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, fax, telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and their duties hereunder or thereunder. Each Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by such Agent in its sole discretion.                      (E) Indemnification. Lenders will reimburse and indemnify Agents for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, legal and attorneys' fees and expenses), advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agents in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by Agents under this Agreement or any of the Loan Documents, in proportion to each Lender's Pro Rata Share, but only to the extent that any of the foregoing is not promptly reimbursed by Loan Parties; provided, however, that Agents shall provide written notice to the Lenders of any claim made against the Agents and provided, further, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agents' gross negligence or willful misconduct as determined by a final non-appealable judgment by a court of competent jurisdiction. If any indemnity furnished to Agents for any purpose shall, in the opinion of Agents, be insufficient or become impaired, Agents may call for additional indemnity and cease, or not commence, to do the acts indemnified against, even if so directed by Lenders or Requisite Lenders, until such additional indemnity is furnished. The obligations of Lenders under this subsection 9.1(E) shall survive the payment in full of the Obligations and the termination of this Agreement.                      (F) Heller and GECC Individually. With respect to its Commitments and the Loans made by it, each of Heller and GECC shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include each of Heller and GECC in their individual capacity as a Lender or one of the Requisite Lenders. Each of Heller and GECC may lend money to, acquire equity or other ownership interests in, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as Agent pursuant hereto.                      (G) Successor Agent.                                (1) Resignation. An Agent may resign from the performance of all its agency functions and duties hereunder at any time by giving at least 30 Business Days’ prior written notice to the Loan Parties and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment as provided below.                                (2) Appointment of Successor. Upon any such notice of resignation pursuant to clause (G)(1) above, Requisite Lenders shall appoint a successor Agent (which successor Agent shall also be a Lender) which, unless an Event of Default has occurred and is continuing, shall be reasonably acceptable to Borrowers. If a successor Agent shall not have been so appointed within said 30 Business Day period, the retiring Agent, upon notice to Borrowers, shall then appoint a successor Agent who shall serve as Agent until such time, if any, as Requisite Lenders appoint a successor Agent as provided above.                                (3) Successor Agent. Upon the acceptance of any appointment as Agent under the Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent’s resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.                      (H) Collateral Matters.                                (1) Release of Collateral. Lenders hereby irrevocably authorize Senior Agent, at its option and in its discretion, to release any Lien granted to or held by Senior Agent upon any Collateral (i) upon termination of the Commitments and upon payment and satisfaction of all Obligations (other than contingent indemnification obligations to the extent no claims giving rise thereto have been asserted); or (ii) constituting property being sold or disposed of if Borrowers certify to Senior Agent that the sale or disposition is made in compliance with the provisions of this Agreement (and Senior Agent may rely in good faith conclusively on any such certificate, without further inquiry). In addition, Lenders hereby irrevocably authorize Senior Agent, at its option and in its discretion, to release any Lien granted to or held by Senior Agent upon any Collateral having an aggregate book value of less than 10% of the total book value of all Collateral provided, that Senior Agent shall deliver written notice of such release with respect to Collateral having an aggregate book value of greater than $1,000,000; provided, however, that only with the consent of Requisite Lenders, may Senior Agent release Liens granted to or held by Senior Agent upon any Collateral having an aggregate book value of greater than 10% of the total book value of all Collateral, as determined by Senior Agent, either in a single transaction or in a series of related transactions; provided, further, in no event will Senior Agent, acting under the authority granted to it pursuant to this sentence, release during any calendar year Liens granted to or held by Senior Agent upon any Collateral having a total book value in excess of 20% of the total book value of all Collateral, as determined by Senior Agent. The Lenders hereby authorize Senior Agent to release any Collateral owned by InterAct International for purposes of the consummation of the InterAct International IPO in accordance with the terms and conditions under this Agreement.                                (2) Confirmation of Authority; Execution of Releases. Without in any manner limiting Senior Agent's authority to act without any specific or further authorization or consent by Lenders (as set forth in subsection 9.2(H)(1) above), each Lender agrees to confirm in writing, upon request by Administrative Agent or Borrowers, the authority to release any Collateral conferred upon Senior Agent under clauses (i) and (ii) of subsection 9.2(H)(1). Upon receipt by Senior Agent of confirmation from the requisite percentage of Lenders (as set forth in subsection 9.1(H)(1) above), if any, of Senior Agent’s authority to release any Liens upon any Collateral, and upon at least 10 Business Days prior written request by Borrowers, Agent shall, and is hereby irrevocably authorized by Lenders to, execute such documents as may be necessary to evidence the release of the Liens granted to Senior Agent, for the benefit of the Benefitted Persons upon such Collateral; provided, however, that (i) Senior Agent shall not be required to execute any such document on terms which, in Senior Agent’s opinion, would expose Senior Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens granted to Senior Agent on behalf of the Benefitted Persons upon (or obligations of any Loan Party, in respect of), all interests retained by any Loan Party, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the property covered by this Agreement or the Loan Documents.                                (3) Absence of Duty. Agents shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by this Agreement or the Loan Documents exists or is owned by Borrowers or is cared for, protected or insured or has been encumbered or that the Liens granted to Senior Agent on behalf of the Benefitted Persons herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Administrative Agent in this Agreement or in any of the Loan Documents, it being understood and agreed that in respect of the property covered by this Agreement or the Loan Documents or any act, omission or event related thereto, Administrative Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in property covered by this Agreement or the Loan Documents as one of the Lenders and that Administrative Agent shall have no duty or liability whatsoever to any of the other Lenders; provided, however, that Administrative Agent shall exercise the same care which it would in dealing with loans for its own account.                      (I) Agency for Perfection. Each Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent's security interest in assets which, in accordance with the Uniform Commercial Code or Personal Property Security Act in any applicable jurisdiction, can be perfected only by possession. Should any Lender (other than Administrative Agent or Senior Agent) obtain possession of any such assets, such Lender shall notify Administrative Agent thereof, and, promptly upon Administrative Agent's request therefor, shall deliver such assets to Administrative Agent or in accordance with Administrative Agent's instructions. The Administrative Agent may file such proofs of claim or documents as may be necessary or advisable in order to have the claims of the Administrative Agent and the Lenders (including any claim for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and the Lenders, their respective agents, financial advisors and counsel), allowed in any judicial proceedings relative to any Borrower and/or its Subsidiaries, or any of their respective creditors or property, and shall be entitled and empowered to collect, receive and distribute any monies, securities or other property payable or deliverable on any such claims. Any custodian in any judicial proceedings relative to any Borrower and/or its Subsidiaries is hereby authorized by each Lender to make payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent, its agents, financial advisors and counsel, and any other amounts due the Administrative Agent. Nothing contained in this Agreement or the other Loan Documents shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Agent or Lender any plan of reorganization, arrangement, adjustment or composition affecting the Loans, or the rights of any holder thereof, or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding, except as specifically permitted herein.                      (J) Exercise of Remedies. Each Lender agrees that it will not have any right individually to enforce or seek to enforce this Agreement or any Loan Document or to realize upon any collateral security for the Loans, unless instructed to do so by Senior Agent, it being understood and agreed that such rights and remedies may be exercised only by Senior Agent.            9.2 Notice of Default.                      Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Administrative Agent shall have received written notice from a Lender or Borrowers referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". Administrative Agent will notify each Lender of its receipt of any such notice.            9.3 Action by Administrative Agent and Senior Agent.                      Administrative Agent and Senior Agent shall take such action with respect to any Default or Event of Default as may be requested by Requisite Lenders in accordance with Section 8. Unless and until Administrative Agent or Senior Agent has received any such request, Administrative Agent or Senior Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any Default or Event of Default as it shall deem advisable or in the best interests of Lenders.            9.4 Amendments, Waivers and Consents.                      (A) Except as otherwise provided herein or in any of the other Loan Documents, no amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Requisite Lenders (or, Administrative Agent, if expressly set forth herein or in any of the other Loan Documents) and the applicable Loan Party; provided however, no amendment, modification, termination, waiver or consent shall be effective, unless in writing and signed by all Lenders, to do any of the following: (i) increase any of the Commitments; (ii) reduce the principal of or the rate of interest on any Loan or reduce the fees payable with respect to any Loan or Letter of Credit; (iii) extend the Termination Date or the scheduled due date for all or any portion of principal of the Loans or any interest or fees due hereunder; (iv) amend the definition of the term "Requisite Lenders" or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (v) amend or waive this subsection 9.4 or the definitions of the terms used in this subsection 9.4 insofar as the definitions affect the substance of this subsection 9.4; (vi) amend the definition of Borrowing Base; (vii) release Collateral (except if the sale, disposition or release of such Collateral is permitted under subsection 7.3 or subsection 9.1 or under any other Loan Document); or (viii) consent to the assignment, delegation or other transfer by any Loan Party of any of its rights and obligations under any Loan Document; provided, further, that no amendment, modification, termination, waiver or consent affecting the rights or duties of Agents under this Section 9 or under any Loan Document shall in any event be effective, unless in writing and signed by Agents, in addition to the Lenders required to take such action. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 9 shall be binding upon each Lender or future Lender and, if signed by a Loan Party, on such Loan Party. Notwithstanding anything to the contrary contained herein, the Term Loan C Lenders shall not have any voting rights under this Agreement or any other Loan Document except as follows: no amendment, modification, termination, waiver or consent with respect to any Loan Document shall be effective to do any of the following unless such amendment, modification, termination, waiver or consent is in writing and signed by all Term Loan C Lenders: (i) increase the Term Loan C Commitments, (ii) reduce the principal of or the rate of interest or fees on Term Loan C, (iii) extend the Termination Date or the scheduled due date for payment of all or any portion of principal, interest or fees on Term Loan C, (iv) amend or waive this last sentence of this subsection 9.4 or the definitions of the terms used in this last sentence of this subsection 9.4, (v) amend or waive subsection 2.1A(3) or the definitions of the terms used in subsection 2.1A(3) in respect of Term Loan C in an way adverse to the Term Loan C Lenders, including, without limitation, the definition of "Scheduled Installment" or (vi) amend or waive subsection 9.5(A)(a) or 9.5(A)(c)(i) or any of the definitions of the terms used in subsection 9.5(A)(a) or 9.5(A)(b)(ii) in respect of Term Loan C in any way adverse to the Term Loan C Lenders.                      (B) Each amendment, modification, termination, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination, waiver or consent shall be required for Senior Agent to take additional Collateral.                      (C) In the event Administrative Agent requests the consent of a Lender and does not receive a written consent or denial thereof within 10 Business Days after such Lender's receipt of such request, then such Lender will be deemed to have denied the giving of such consent. If, in connection with any proposed amendment, modification, termination or waiver of any of the provisions of this Agreement requiring the consent or approval of all Lenders under this subsection 9.4, the consent of Requisite Lenders is obtained but the consent of one or more other Lenders whose consent is required is not obtained, then Borrowers shall have the right, so long as all such non-consenting Lenders are either replaced or prepaid as described in clauses (A) or (B) below, to either (A) replace the non-consenting Lenders with one or more Replacement Lenders pursuant to clause (a) of subsection 2.10 so long as each such Replacement Lender consents to the proposed amendment, modification, termination or waiver or (B) prepay in full the Obligations of the non-consenting Lenders and terminate the non-consenting Lenders' Commitments in accordance with clause (b) of subsection 2.10. Notwithstanding anything in this subsection 9.4, Administrative Agent and Borrowers, without the consent of either Requisite Lenders or all Lenders, may execute amendments to this Agreement and the Loan Documents, which consist solely of the making of typographical corrections so long as such corrections do not change the meaning or intent in a manner which adversely affects the Lenders.            9.5 Assignments and Participations in Loans.                      (A) Each Lender may assign its rights and delegate its obligations under this Agreement to an Eligible Assignee; provided, that (a) such Lender shall first obtain the written consent of Administrative Agent (except that no such consent shall be required in connection with assignments by Term Loan C Lenders which are insurance companies), which shall not be unreasonably withheld, and the Administrative Agent shall deliver prior written notice to the Borrowers, (b) the amount of Commitments and Loans of the assigning Lender being assigned shall in no event be less than the lesser of (i) $5,000,000 or (ii) the entire amount of the Commitments and Loans of such assigning Lender and (c)(i) unless consented to by the Administrative Agent (except that no such consent shall be required in connection with assignments by Term Loan C Lenders which are insurance companies), which consent shall not be unreasonably withheld or delayed, each such assignment shall be of a pro rata portion (except in the case of Term Loan C) of all such assigning Lender's Loans and Commitments hereunder, and (ii) the parties to such assignment shall execute and deliver to Administrative Agent for acceptance and recording an Assignment and Acceptance Agreement together with (x) a processing and recording fee of $3,500 payable to Administrative Agent and (y) each of the Notes, if any, originally delivered to the assigning Lender. The administrative fee referred to in clause (c) of the preceding sentence shall not apply to an assignment described in paragraph (D) below. Upon receipt of all of the foregoing, Administrative Agent shall notify Borrowers of such assignment and Borrowers shall comply with their obligations under the last sentence of subsection 2.1(F). In the case of an assignment authorized under this subsection 9.5, the assignee shall be considered to be a "Lender" hereunder and Borrowers hereby acknowledge and agree that any assignment will give rise to a direct obligation of Borrowers to the assignee. The assigning Lender shall be relieved of its obligations hereunder with respect to the assigned portion of its Commitment.                      (B) Each Lender may sell participations in all or any part of any Loans or Commitments made by it to another Person, and any such participation shall be in a minimum amount of $5,000,000. All amounts payable by Borrowers hereunder shall be determined as if that Lender had not sold such participation and the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly effecting (a) any reduction in the principal amount or an interest rate on any Loan in which such holder participates; (b) any extension of the Termination Date or the date fixed for any payment of interest or principal payable with respect to any Loan in which such holder participates; and (c) any release of substantially all of the Collateral. Borrowers hereby acknowledge and agree that the participant under each participation shall for purposes of subsections 2.8, 2.9, 2.10, 9.6 and 10.2 be considered to be a "Lender".                      (C) Except as otherwise provided in subsection 9.5(A) no Lender shall, as between Borrowers and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans or other Obligations owed to such Lender. Each Lender may furnish any information concerning each Borrower and its Subsidiaries in the possession of that Lender from time to time to Eligible Assignees and participants (including prospective assignees and participants) provided that the Persons obtaining such information agrees to maintain the confidentiality of such information to the extent required by subsection 10.18. Each Borrower agrees that it will use its best efforts to assist and cooperate with Administrative Agent and any Lender in any manner reasonably requested by Administrative Agent or such Lender to effect the sale of a participation or an assignment described above, including without limitation assistance in the preparation of appropriate disclosure documents or placement memoranda. Notwithstanding anything contained in this Agreement to the contrary, so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no Person shall become a Lender hereunder unless such Person shall also be capable of making LIBOR Loans.                      (D) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time (a) following written notice to Administrative Agent, create a security interest in all or any portion of its rights under this Agreement or the other Loan Documents in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System and (b) subject to complying with the provisions of subsection 9.5 (A) (other than the payment of the administrative fee referred to in clause (c) of subsection 9.5 (A)), assign all or any portion of its funded loans to an Eligible Assignee which is a Subsidiary of such Lender or its parent company, to one or more other Lenders, or to a Related Fund. For purposes of this paragraph, a "Related Fund" means, with respect to any Lender, a fund or other investment vehicle that invests in commercial loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.                      (E) Administrative Agent shall maintain at its office in Chicago, Illinois a copy of each Assignment and Acceptance Agreement delivered to it and a register for the recordation of the names and addresses of Lenders, and the commitments of, and principal amount of the Loans owing to each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be presumptive evidence of the amounts due and owing to Lender in the absence of manifest error. Borrowers, Administrative Agent and each Lender may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrowers and any Lender, at any reasonable time upon reasonable prior notice.            9.6 Set Off and Sharing of Payments. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized by each Borrower at any time or from time to time, with reasonably prompt subsequent notice to such Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender at any of its offices for the account of such Borrower or any of its Subsidiaries (regardless of whether such balances are then due to such Borrower or its Subsidiaries), and (b) other property at any time held or owing by such Lender to or for the credit or for the account of such Borrower or any of its Subsidiaries, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Administrative Agent. Any Lender exercising its right to set off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off with each other Lender in accordance with their respective Pro Rata Shares. Borrowers agree, to the fullest extent permitted by law, that any Lender may exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and upon doing so shall deliver such amount so set off to Administrative Agent for the benefit of all Lenders in accordance with their Pro Rata Shares.            9.7 Disbursement of Funds. Administrative Agent may, on behalf of the Benefitted Persons, disburse funds to Borrowers for Loans requested. Each Lender shall reimburse Administrative Agent on demand for all funds disbursed on its behalf by Administrative Agent, or if Administrative Agent so requests, each Lender will remit to Administrative Agent its Pro Rata Share of any Loan or Revolving Advance before Administrative Agent disburses same to Borrowers. If Administrative Agent elects to require that each Lender make funds available to Administrative Agent prior to a disbursement by Administrative Agent to Borrowers, Administrative Agent shall advise each Lender by telephone, telex, fax or telecopy of the amount of such Lender’s Pro Rata Share of the Loan requested by Borrowers no later than 1:00 p.m. Chicago time on the Funding Date applicable thereto, and each such Lender shall pay Administrative Agent such Lender’s Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Administrative Agent’s account on such Funding Date.            9.8 Settlements, Payments and Information.                      (A) Revolving Advances and Payments; Fee Payments.                                (1) The Revolving Loan balance may fluctuate from day to day through Administrative Agent's disbursement of funds to, and receipt of funds from, Borrowers. In order to minimize the frequency of transfers of funds between Administrative Agent and each Revolving Loan Lender notwithstanding terms to the contrary set forth in Section 2 and subsection 9.7, Revolving Advances and repayments (except as set forth in subsection 2.1(D)) will be settled according to the procedures described in this subsection 9.8. Notwithstanding these procedures, each Revolving Loan Lender’s obligation to fund its portion of any advances made by Administrative Agent to Borrowers will commence on the date such advances are made by Administrative Agent. Such payments will be made by such Revolving Loan Lender without set-off, counterclaim or reduction of any kind.                                (2) Once each week for the Revolving Loan or more frequently (including daily), if Administrative Agent so elects (each such day being a “Settlement Date”), Administrative Agent will advise each Revolving Loan Lender by telephone, fax or telecopy of the amount of each such Revolving Loan Lender’s Pro Rata Share of the Revolving Loan. In the event payments are necessary to adjust the amount of such Revolving Loan Lender’s required Pro Rata Share of the Revolving Loan balance to such Revolving Loan Lender’s actual Pro Rata Share of the Revolving Loan balance as of any Settlement Date, the party from which such payment is due will pay the other, in same day funds, by wire transfer to the other’s account not later than 3:00 p.m. Chicago time on the Business Day following the Settlement Date.                                (3) For purposes of this subsection 9.8(A), the following terms and conditions will have the meanings indicated:                                          (a) "Daily Loan Balance" means an amount calculated as of the end of each calendar day by subtracting (i) the cumulative principal amount paid by Administrative Agent to a Revolving Loan Lender on a Loan from the Closing Date through and including such calendar day, from (ii) the cumulative principal amount on a Loan advanced by such Revolving Loan Lender to Administrative Agent on that Loan from the Closing Date through and including such calendar day.                                          (b) "Daily Interest Rate" means an amount calculated by dividing the interest rate payable to a Revolving Loan Lender on a Loan (as set forth in subsection 2.2) as of each calendar day by three hundred sixty (360).                                          (c) "Daily Interest Amount" means an amount calculated by multiplying the Daily Loan Balance of a Loan by the associated Daily Interest Rate on that Loan.                                          (d) "Interest Ratio" means a number calculated by dividing the total amount of the interest on a Loan received by Administrative Agent with respect to the immediately preceding month by the total amount of interest on that Loan due from Borrowers during the immediately preceding month.                                (4) On the first Business Day of each month ("Interest Settlement Date"), Administrative Agent will advise each Revolving Loan Lender by telephone, fax or telecopy of the amount of such Revolving Loan Lender’s Pro Rata Share of interest and fees on each of the Loans as of the end of the last day of the immediately preceding month. Provided that such Revolving Loan Lender has made all payments required to be made by it under this Agreement, Administrative Agent will pay to such Revolving Loan Lender, by wire transfer to such Revolving Loan Lender’s account (as specified by such Revolving Loan Lender on the signature page of this Agreement or the applicable Assignment and Acceptance Agreement, as amended by such Revolving Loan Lender from time to time after the date hereof or in the applicable Assignment and Acceptance Agreement) not later than 3:00 p.m. Chicago time on the next Business Day following the Interest Settlement Date, such Revolving Loan Lender’s Pro Rata Share of interest and fees on each of the Loans. Such Revolving Loan Lender’s Pro Rata Share of interest on each Loan will be calculated for that Loan by adding together the Daily Interest Amounts for each calendar day of the prior month for that Loan and multiplying the total thereof by the Interest Ratio for that Loan. Such Revolving Loan Lender’s Pro Rata Share of the fees described in subsection 2.3 paid to Administrative Agent for the benefit of Agents and Revolving Loan Lenders shall be paid and calculated in a manner consistent with the payment and calculation of interest as described in this subsection 9.8(A).                      (B) Term Loan Principal Payments. Payments of principal in respect of each of the Term Loans will be settled in accordance with each Lender's Pro Rata Share on the date of receipt if received by Administrative Agent on the first Business Day of a month and on the Business Day immediately following the date of receipt if received on any day other than the first Business Day of a month.                      (C) Return of Payments.                                (1) If Administrative Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Administrative Agent from Borrowers and such related payment is not received by Administrative Agent, then Administrative Agent will be entitled to recover such amount from such Lender without set-off, counterclaim or deduction of any kind together with interest thereon, for each day from and including the date such amount is made available by Administrative Agent to such Lender to but excluding the date of repayment to Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by Administrative Agent in accordance with banking industry rules on interbank compensation.                                (2) If Administrative Agent determines at any time that any amount received by Administrative Agent under this Agreement must be returned to Borrowers or paid to any other Person pursuant to any requirement of law, court order or otherwise, then, notwithstanding any other term or condition of this Agreement, Administrative Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Administrative Agent on demand any portion of such amount that Administrative Agent has distributed to such Lender, together with interest at such rate, if any, as Administrative Agent is required to pay to Borrowers or such other Person, without set-off, counterclaim or deduction of any kind.            9.9 Discretionary Advances. Notwithstanding anything contained herein to the contrary, Administrative Agent may, in its sole discretion during the continuance of an Event of Default and for a period not to exceed fifteen (15) days, make Revolving Advances in an aggregate amount of not more than $10,000,000 in excess of the limitations set forth in the Borrowing Base for the purpose of preserving or protecting the Collateral or for incurring any costs associated with collection or enforcing rights or remedies against the Collateral, or incurred in any action to enforce this Agreement or any other Loan Document; provided that such Revolving Advances shall become immediately due and payable on the fifteenth day after the making such Revolving Advances.   SECTION 10. MISCELLANEOUS            10.1 Expenses and Attorneys’ Fees. Whether or not the transactions contemplated hereby shall be consummated, Borrowers agree to promptly pay all fees, costs and expenses incurred in connection with any matters contemplated by or arising out of this Agreement or the other Loan Documents including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand and secured by the Collateral: (a) fees, costs and expenses incurred by Agents (including reasonable legal and attorneys’ fees, allocated costs of internal counsel and reasonable fees of environmental consultants, accountants and other professionals retained by Agents) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (b) fees, costs and expenses incurred by Agents (including reasonable legal and attorneys’ fees, allocated costs of internal counsel and reasonable fees of environmental consultants, accountants and other professionals retained by Agents) incurred in connection with the review, negotiation, preparation, documentation, execution, syndication, and administration of the Loan Documents, the Loans, and any amendments, waivers, consents, forbearances and other modifications relating thereto or any subordination or intercreditor agreements; (c) fees, costs and expenses incurred by Agents or any Lender in creating, perfecting and maintaining perfection of Liens in favor of Senior Agent, on behalf of the Benefitted Persons; (d) fees, costs and expenses incurred by Administrative Agent in connection with forwarding to Borrowers the proceeds of Loans including Administrative Agent’s or any Lenders’ standard wire transfer fee; (e) fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by Administrative Agent or any Lender in establishing, maintaining and handling lock box accounts, blocked accounts or other accounts for collection of the Collateral; (f) fees, costs, expenses (including reasonable legal and attorneys’ fees and allocated costs of internal counsel) of Administrative Agent or any Lender and costs of settlement incurred in collecting upon or enforcing rights against the Collateral or incurred in any action to enforce this Agreement or the other Loan Documents or to collect any payments due from Borrowers or any other Loan Party under this Agreement or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement, whether in the nature of a “workout” or in connection with any insolvency, winding up or bankruptcy proceedings or otherwise.            10.2 Indemnity. In addition to the payment of expenses pursuant to subsection 10.1, whether or not the transactions contemplated hereby shall be consummated, each Loan Party agrees to indemnify, pay and hold each Agent, Syndication Agent and each Lender, and the officers, directors, employees, agents, consultants, auditors, persons engaged by any Agent, Syndication Agent or Lender, to evaluate or monitor the Collateral, affiliates and attorneys and solicitors and barristers of Agents, Syndication Agent, Lenders and such holders (collectively called the “Indemnitees”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) this Agreement or the other Loan Documents, (B) the consummation of the transactions contemplated by this Agreement, (C) the issuance of any Letter of Credit or guaranty thereof, (D) the failure of any Agent or any Lender seeking indemnification or of any issuer to honor a demand for payment under any Letter of Credit or guaranty thereof as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority, (E) the statements contained in the commitment letters, if any, delivered by Agents, Syndication Agent or any Lender, each Agent’s and each Lender’s agreement to make the Loans and Letters of Credit hereunder, (F) the use or intended use of the proceeds of any of the Loans or Letters of Credit or the exercise of any right or remedy hereunder or under the other Loan Documents (the “Indemnified Liabilities”); provided that Loan Parties shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a final non-appealable judgment by a court of competent jurisdiction.            10.3 Notices. Unless otherwise specifically provided herein, all notices shall be in writing addressed to the respective party as set forth below and may be personally served, faxed, telecopied or sent by overnight courier service or United States mail and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by fax or telecopy, on the date of transmission if transmitted on a Business Day before 4:00 p.m. Chicago time or, if not, on the next succeeding Business Day; (c) if delivered by overnight courier, two days after delivery to such courier properly addressed; or (d) if by U.S. Mail or Canada Post, four Business Days after depositing in the United States mail, with postage prepaid and properly addressed.   If to Borrowers or any Loan Party: Recoton Corporation 2950 Lake Emma Road Lake Mary, FL 32746 Attn.: Arnold Kezsbom Fax/Telecopy No.: (407) 333-8903   With a copy to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038 Attn.: Theodore S. Lynn Fax/Telecopy No.: (212) 806-6006   If to Administrative Agent or Heller: HELLER FINANCIAL, INC. 500 West Monroe Chicago, Illinois, 60661 Attn: Account Manager - Heller Corporate Finance - Recoton Corporation Fax/Telecopy No.: (312) 441-7367   With a copy to: HELLER FINANCIAL, INC. 500 West Monroe Chicago, Illinois 60661 Attn: Legal Services/HCF- Recoton Corporation Fax/Telecopy No.: (312) 441-6876   If to Collateral Agent or GE: GENERAL ELECTRIC CAPITAL   CORPORATION GE Capital Commercial Finance Northeast Region 800 Connecticut Avenue, Two North Attn: Account Manager - GE Capital Corporation Telephone: (203) 852-3600 Fax/Telecopy No.: (203) 852-3640 With a copy to: GENERAL ELECTRIC CAPITAL   CORPORATION 201 High Ridge Road Stamford, Connecticut 06927 Attn: Corporate Counsel - Commercial Finance Telephone: (203) 316-7552 Fax/Telecopy No.: (203) 316-7889            If to any Lender: Its address indicated on the signature page hereto, in an Assignment and Acceptance Agreement or in a notice to Administrative Agent and Borrowers or to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this subsection 10.3.            10.4 Survival of Representations and Warranties and Certain Agreements. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of each Borrower and Lender set forth in subsections 10.1, 10.2, 10.6, 10.11, 10.14, and 10.15 (Borrowers’ agreement to pay fees, agreement to indemnify Lender, the reinstatement of Obligations, agreement as to choice of law and jurisdiction and Borrowers’ and Lender’s waiver of a jury trial) shall survive the payment of the Loans and the termination of this Agreement.            10.5 Indulgence Not Waiver. No failure or delay on the part of any Agent, Lender or holder of any Note in the exercise of any power, right or privilege hereunder or under any Note shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.            10.6 Marshaling; Payments Set Aside. Neither Administrative Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent that any Loan Party makes a payment or payments to Agent and/or any Lender or Administrative Agent and/or any Lender enforces its security interests or exercise its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state, provincial, foreign or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.            10.7 Entire Agreement. This Agreement and the other Loan Documents embody the entire agreement among the parties hereto and supersede all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof, and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto.            10.8 Severability. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement or the other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or the other Loan Documents.            10.9 Lenders' Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several and not joint and neither Agents nor Lenders shall be responsible for the obligation or Commitment of any other Lender hereunder. In the event that any Lender at any time should fail to make a Loan as herein provided, the Lenders, or any of them, at their sole option, may make the Loan that was to have been made by the Lender so failing to make such Loan. Nothing contained in any Loan Document and no action taken by any Agent or Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and, provided Administrative Agent fails or refuses to exercise any remedies against Borrowers after receiving the direction of the Requisite Lenders, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.            10.10 Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.            10.11 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.            10.12 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided, however, a Loan Party may not assign its rights or obligations hereunder without the written consent of Lenders.            10.13 No Fiduciary Relationship; No Duty; Limitation of Liabilities.                      (A) No provision in this Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create any fiduciary duty by any Agent or Lender to the Loan Parties.                      (B) All attorneys, legal counsel, accountants, appraisers, and other professional Persons and consultants retained by any Agent or Lender shall have the right to act exclusively in the interest of such Agent or Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Borrowers or any of Borrowers' shareholders or any other Person.                      (C) Neither Agents nor Lenders, nor any affiliate, officer, director, shareholder, employee, attorney, legal counsel or agent of any Agent or Lender shall have any liability with respect to, and each Loan Party hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by such Loan Party in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Each Loan Party hereby waives, releases, and agrees not to sue any Agent or Lender or any of any Agent's or Lender's affiliates, officers, directors, employees, attorneys, legal counsel or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the transactions contemplated hereby.            10.14 CONSENT TO JURISDICTION. EACH LOAN PARTY HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH LOAN PARTY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON A LOAN PARTY BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH LOAN PARTY, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE 10 DAYS AFTER THE SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF EACH LOAN PARTY OR OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS OF SUCH LOAN PARTY FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE). EACH BORROWER AGREES THAT ANY AGENT’S OR LENDER’S COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. THE LOAN PARTIES IN ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY ANY AGENT OR LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.            10.15 WAIVER OF JURY TRIAL. EACH LOAN PARTY, AGENT AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH LOAN PARTY, AGENT AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH LOAN PARTY, AGENT AND LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.            10.16 Construction. Each Loan Party, Agent and Lender acknowledges that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Loan Documents with its legal counsel and that this Agreement and the other Loan Documents shall be construed as if jointly drafted by each Loan Party, Agent and Lender.            10.17 Counterparts; Effectiveness. This Agreement and any amendments, waivers, consents, or supplements may be executed via telecopier or facsimile transmission in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto.            10.18 Confidentiality. Agents and Lenders shall hold all nonpublic information obtained pursuant to the requirements hereof and identified as such by Borrowers in accordance with such Person’s customary procedures for handling confidential information of this nature and in accordance with safe and sound business practices but, in any event may make disclosure to such of its respective affiliates, officers, directors, employees, agents and representatives as need to know such information in connection with the Loans subject to such confidentiality limitation. If any Lender or its respective affiliates is otherwise a creditor of a Borrower, such Lender may use the information in connection with its other credits. Agents and Lenders may also make disclosure reasonably required by a bona fide offeree or assignee (or participant), or as required or requested by any Governmental Authority or representative thereof, or pursuant to legal process, or to its accountants, lawyers and other advisors, and shall require any such offeree or assignee (or participant) to agree (and require any of its offerees, assignees or participants to agree) to comply with this subsection 10.18. In no event shall any Agent or Lender be obligated or required to return any materials furnished by any Borrower provided, however, each offeree shall be required to agree that if it does not become an assignee (or participant) it shall return all materials furnished to it by any Borrower or Agent in connection therewith.            10.19 Judgment Currency. Each Loan Party, each Agent and each Lender hereby agree that if, in the event that a judgment is given in relation to any sum due to any Agent or Lender, such judgment is given in a currency other than that in which such sum was originally denominated (the “Original Currency”), each Loan Party agrees to indemnify the Agents and Lenders, as the case may be, to the extent that the amount of the Original Currency which could have been purchased thereby in accordance with normal banking procedures on the Business Day following receipt of such sum is less than the sum which could have been so purchased thereby had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding the giving of such judgment, and if the amount so purchased exceeds the amount which could have been so purchased thereby had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding the giving of such judgment, each Agent and Lender agrees to remit such excess to such Loan Party. The agreements in this subsection 10.19 shall survive payment of any such judgment.   SECTION 11. DEFINITIONS AND ACCOUNTING TERMS            11.1 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings:          “Accounts” means all “accounts” (as defined in the UCC and the PPSA, as applicable), accounts receivable, contract rights and general intangibles relating thereto, notes, drafts and other forms of obligations owed to or owned by Loan Parties arising or resulting from the sale of goods or the rendering of services, whether or not earned by performance.          “Administrative Agent” has the meaning assigned to that term in the preamble and any successor in such capacity appointed pursuant to subsection 9.1(G).          “Administrative Borrower” has the meaning assigned to that term in subsection 2.15.            “Affiliate” means any Person (other than any Agent or Lender): (a) directly or indirectly controlling, controlled by, or under common control with, any Loan Party; (b) directly or indirectly owning or holding 10% or more of any equity interest in any Borrower; (c) 10% or more of whose stock or other equity interest having ordinary voting power for the election of directors or the power to direct or cause the direction of management, is directly or indirectly owned or held by any Borrower; or (d) which has a senior officer who is also a senior officer of any Borrower. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”) means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other equity interest, or by contract or otherwise.            “Agents” has the meaning set forth for that term in the preamble and any successor to any Agent in such capacity appointed pursuant to subsection 9.1(G).            “Agent's Account” means ABA No. 0710-0001-3, Account No. 52-98695 at Bank One, NA, 1 Bank One Plaza, Chicago, IL 60670, Reference: Heller Corporate Finance for the benefit of Recoton Corporation.            “Agent-Related Person” means, with respect to any Agent, such Agent together with its affiliates, officers, directors, employees, and agents.            “Agreement” means this Loan Agreement as it may be amended, restated, supplemented or otherwise modified from time to time.            “Asset Disposition” means the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise, of any or all of the assets of Borrowers or any of their Subsidiaries other than sales of Inventory in the ordinary course of business.            “Assignment and Acceptance Agreement” means an Assignment and Acceptance Agreement substantially in the form of Exhibit A.            “Bank Letter of Credit” means each letter of credit issued by a bank acceptable to and approved by Agent for the account of Borrowers and supported by a risk participation agreement issued by Administrative Agent.            “Base Rate” means a variable rate of interest per annum equal to the higher of (a) the rate of interest from time to time published by the Board of Governors of the Federal Reserve System as the “Bank Prime Loan” rate in Federal Reserve Statistical Release H.15(519) entitled “Selected Interest Rates” or any successor publication of the Federal Reserve System reporting the Bank Prime Loan rate or its equivalent, or (b) the Federal Funds Effective Rate plus 50 basis points. The statistical release generally sets forth a Bank prime loan rate for each business day. The applicable Bank Prime Loan Rate for any date not set forth shall be the rate set forth for the last preceding date. In the event the Board of Governors of the Federal Reserve System ceases to publish a Bank Prime Loan rate or its equivalent, the term “Base Rate” means a variable rate of interest per annum equal to the highest of the “prime rate”, “reference rate”, “base rate”, or other similar rate announced from time to time by any of the three largest banks (based on combined capital and surplus) headquartered in New York, New York (with the understanding that any such rate may merely be a reference rate and may not necessarily represent the lowest or best rate actually charged to any customer by any such bank).            “Base Rate Loans” means Loans bearing interest at rates determined by reference to the Base Rate.            “Benefitted Persons” means collectively the Agents, Lenders, Subordinated Creditors and Subordinated Agent.            “Borrowers’ Accountants” means the independent certified public accountants selected by a Borrower and its Subsidiaries as its auditors and reasonably acceptable to Administrative Agent, which selection shall not be modified during the term of this Agreement without Administrative Agent’s prior written consent. It is understood and agreed that the “Big Five” independent certified public accountants shall be deemed acceptable and therefore no such written consent shall be necessary.            “Borrowing Base” has the meaning assigned to that term in subsection 2.1(B)(2).            “Business Day” means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of Illinois, Florida or New York, or is a day on which banking institutions located in any such state are closed and (ii) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, or a continuation of or conversion into, a LIBOR Loan, or a notice by Borrowers with respect to any such borrowing, payment, prepayment, continuation or conversion, any day which is a Business Day described in clause (i) and which is also a day on which commercial banks are open for dealings in Dollar deposits in the London, England (U.K.) market.            “Canada Guaranty” means the Canada Guaranty substantially in the form of Exhibit K-2.            “Canada Security Agreement” means the Canada Security Agreement substantially in the form of Exhibit L-2.            “Canadian Pension Plans” means each of the pension plans, if any, registered in accordance with the Income Tax Act (Canada) which any Borrower or any other Loan Party sponsors or administers or into which any Borrower or Loan Party makes contributions.            “Capital Expenditures” means all expenditures (including deposits) for, or contracts for expenditures (excluding contracts for expenditures under or with respect to Capital Leases, but including cash down payments for assets acquired under Capital Leases) with respect to the purchase or acquisition of any fixed assets or improvements recorded as an asset in conformity with GAAP.            “Capital Lease” means any lease of any property (whether real, personal or mixed) that, in conformity with GAAP, should be accounted for as a capital lease.            “Cash Equivalents” means: (a) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within six months from the date of acquisition thereof; (b) commercial paper maturing no more than six months from the date issued and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor’s Corporation or at least P-1 from Moody’s Investors Service, Inc.; (c) money market funds that have at least 95% of their assets continuously invested in investments of the type listed in clause (a) above; and (d) certificates of deposit or bankers’ acceptances maturing within six months from the date of issuance thereof issued by, or overnight reverse repurchase agreements from any commercial bank organized under the laws of the United States of America or any Schedule I bank organized under the laws of Canada, or any state thereof or the District of Columbia,having combined capital and surplus of not less than $250,000,000 and not subject to setoff rights in favor of such bank.            “Cleanup” means all actions required to: (a) cleanup, remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (b) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (c) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (d) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous Materials in the indoor or outdoor environment.            “Closing Date” means October 31, 2000.            “Collateral” the collective reference to any and all property upon which a Lien is purported to be created by any Security Documents.            “Collateral Agent” has the meaning set forth for that term in the preamble and any successor in such capacity appointed pursuant to subsection 9.1(G).            “Collateral Access Agreement” means a Landlord’s Consent, Warehouseman’s Waiver or any other agreement which grants the Senior Agent and the Lenders access to Borrowers’ Inventory and which agreement shall be in form and substance satisfactory to the Administrative Agent.            “Collecting Banks” has the meaning assigned to that term in subsection 4.22.            “Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Agreement such Commission is not existing and performing the duties now assigned to it under the Exchange Act, the body performing such duties at such time.            “Commitment” or “Commitments” means the commitment or commitments of Lenders to make Loans as set forth in subsections 2.1(A) and 2.1(B) and to provide Lender Letters of Credit as set forth in subsection 2.1(F).            “Compliance Certificate” means a certificate duly executed by the chief executive officer, chief operating officer or chief financial officer of Recoton appropriately completed and in substantially the form of Exhibit C.            “Consolidated Intangibles” means as of any date of determination, all assets of the Borrowers and their Subsidiaries, determined on a consolidated basis at such date, that are generally classified as intangibles, including without limitation, goodwill, trademarks, patents and copyrights.            “Consolidated Net Worth” means as of any date of determination, all amounts which would be included under shareholders equity on a balance sheet of the Borrowers and their Subsidiaries determined on a consolidated basis at such date in accordance with GAAP.            “Consolidated Tangible Net Worth” means as of any date of determination, the excess, if any, of Consolidated Net Worth less Consolidated Intangibles as at such date subtracting the net write-up or adding back the net write-down since June 30, 2000 in the book value of assets resulting from the revaluations arising out of foreign currency valuations in accordance with GAAP.            “Continuing Directors” has the meaning assigned to that terms in subsection 8.1(F).            “Copyright Security Agreement” means the Copyright Security Agreement dated as of even date herewith among the Loan Parties and the Senior Agent.            “Default” means a condition, act or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition, act or event were not cured or removed within any applicable grace or cure period.            “Defaulted Amount” means, with respect to any Lender at any time, any amount required to be paid by such Lender to the Administrative Agent or any other Lender hereunder or under any other Loan Document which has not been so paid.            “Defaulting Lender” means, at any time, any Lender that owes a Defaulted Amount.            “Default Rate” has the meaning assigned to that term in subsection 2.2(A).            “Dollars” or “$” means the lawful currency of the United States of America.            “Domestic Subsidiary” means any Subsidiary other than a Foreign Subsidiary.            “EBITDA” means, for any period, without duplication, the total of the following for Borrowers and their Subsidiaries on a consolidated basis, each calculated for such period: (1) net income determined in accordance with GAAP; plus, to the extent included in the calculation of net income, (2) the sum of (a) income and franchise taxes paid or accrued; (b) interest expenses, net of interest income, paid or accrued; (c) amortization and depreciation; (d) other non-cash charges (excluding accruals for cash expenses made in the ordinary course of business) and (e) the yield maintenance fee resulting from the repayment of indebtedness on the Closing Date; less, to the extent included in the calculation of net income, (3) the sum of (a) the income of any Person (other than majority-owned Subsidiaries of Borrowers) in which Borrowers or a majority-owned Subsidiary of Borrowers has an ownership interest except to the extent such income is received by Borrowers or such majority-owned Subsidiary in a cash distribution during such period; (b) gains or losses from sales or other dispositions of assets (other than Inventory in the normal course of business); and (c) extraordinary or non-recurring gains, but not net of extraordinary or non-recurring “cash” losses.            “Eligible Accounts” has the meaning assigned to that term in subsection 2.1(C).            “Eligible Assignee” means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000 (or $250,000,000 in the case of an assignment of a Revolving Loan Commitment); (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000 (or $250,000,000 in the case of an assignment of a Revolving Loan Commitment), provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (c) any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses, including but not limited to, insurance companies, mutual funds and lease financing companies, (d) a Related Fund (as such term is defined in subsection 9.5(D)), and (e) a Person that is primarily engaged in the business of lending that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; provided however, that no Affiliate of a Borrower shall be an Eligible Assignee.            “Eligible Collateral” means Eligible Accounts, Letter of Credit Inventory and Eligible Inventory.            “Eligible Inventory” has the meaning assigned to that term in subsection 2.1(C).            “Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party or any ERISA Affiliate or (b) has at any time within the preceding 6 years been maintained for the employees of any Loan Party or any current or former ERISA Affiliate.            “Environmental Claim” means any claim, action, cause of action, investigation or notice (written or oral) by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or Release of any Hazardous Materials at any location, whether or not owned, leased or operated by the Loan Party or any of its Subsidiaries, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.            “Environmental Law” means all federal, state, provincial, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials, laws and regulations with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials and laws relating to the management or use of natural resources.            “Equity Proceeds” means the cash proceeds from the issuance of any capital stock or other equity securities of, or the making of any capital contribution to the Borrowers or any of their Subsidiaries after the Closing Date (net of underwriting discounts and commissions and other reasonable costs associated therewith). It is understood and agreed that cash received from any one individual with respect to stock options equal to or less than $1,000,000 in the aggregate in any year shall not be deemed Equity Proceeds.            “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.            “ERISA Affiliate”, as applied to any Loan Party, means any Person who is a member of a group which is under common control with any Loan Party, who together with any Loan Party is treated as a single employer within the meaning of Section 414(b) and (c) of the IRC. Any former ERISA Affiliate of a Loan Party shall continue to be considered an ERISA Affiliate within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Loan Party and with respect to liabilities arising after such period for which such Loan Party could be liable under the IRC or ERISA.            “ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the Pension Benefit Guaranty Corporation has been waived by regulation); (ii) the withdrawal by any Loan Party or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (iii) the institution by the Pension Benefit Guaranty Corporation of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (iv) the imposition of liability on any Loan Party or any of its ERISA Affiliates pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; or (v) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any Loan Party or any of its ERISA Affiliates in connection with any Employee Benefit Plan.            “Excess Cash Flow” means, for any period, the greater of (A) zero (0); or (B) without duplication, the total of the following for Borrowers and their Subsidiaries on a consolidated basis, each calculated for such period: (1) EBITDA; less (2) Capital Expenditures (to the extent actually made in cash and/or due to be made in cash within such period but in no event more than the amount permitted in paragraph E of the Financial Covenants Rider); less (3) income and franchise taxes paid or accrued excluding any provision for deferred taxes included in the determination of net income; less (4) decreases in deferred income taxes resulting from payments of deferred taxes accrued in prior periods; less (5) Interest Expense; less (6) scheduled amortization of Indebtedness actually paid in cash and/or due to be paid in cash within such period and permitted under subsection 7.5; and less (7) voluntary prepayments of Term Loans made under subsection 2.4(C).            “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder.            “Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the immediately following Business Day by the Board of Governors of the Federal Reserve System as the Federal Funds Rate or Federal Reserve Statistical Release H.15(519) entitled “Selected Interest Rates” or any successor publication of the Federal Reserve System reporting the Federal Funds Effective Rate or its equivalent or, if such rate is not published for any Business Day, the average of the quotations for the day of the requested Loan received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent.            “Fiscal Year” means each twelve month period ending on the last day of December in each year.            “Fiscal Year-To-Date” means as of any date of determination, all completed Fiscal Quarters within the then current Fiscal Year.            “Fixed Charge Coverage” means, for any period, EBITDA less Capital Expenditures (excluding expenditures with respect to the New Information System) divided by Fixed Charges.            “Fixed Charges” means, for any period, and each calculated for such period (without duplication), (a) Interest Expense of Borrowers and their Subsidiaries; plus (b) scheduled payments of principal with respect to all Loans of Borrowers and their Subsidiaries; plus (c) income and franchise taxes paid in cash by Recoton and its Subsidiaries, all on a consolidated basis.            “Foreign Subsidiary” means any Subsidiary (other than Recoton Canada) that is not incorporated or organized in the United States of America, any state thereof or in the District of Columbia.            “Funding Date” means the date of each funding of a Loan or issuance of a Lender Letter of Credit.            “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination.            “GECC” has the meaning assigned to such term in the preamble.            “German Facility” means the DM 50,000,000 financing arrangement between Recoton Germany and its Subsidiaries and Heller Bank A.G or, if such facility is not renewed during the term of this Agreement, a replacement facility on terms and pursuant to documentation substantially consistent with those in existence on the date hereof and otherwise reasonably satisfactory to the Agents and the Requisite Lenders.            “German Pledge Agreement” means the pledge agreement executed and delivered in connection with the Loan Agreement and in form and substance satisfactory to the Senior Agent among Recoton European Holdings, Inc. and the Senior Agent regarding the stock of Recoton Germany.            “Governmental Authority” means any nation or government, any state, province, or any political subdivision of any of the foregoing and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.            “Guarantors” means any Person (other than Senior Agent) party to the Guaranties.            “Guaranties” means the Guaranty substantially in the form of Exhibit K-1 and the Canada Guaranty.            “Hazardous Material” means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. § 300.5, or defined as such by, or regulated as such under, any Environmental Law.            “Hedge Agreements” means all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Borrowers or any of their Subsidiaries providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.            “Heller” has the meaning assigned to such term in the preamble.            “Hong Kong Pledge Agreement” means the pledge agreements executed and delivered in connection with the Loan Agreement and in form and substance satisfactory to the Senior Agent, among Recoton and the Senior Agent regarding the stock of Recoton (Far East) Limited.            “Inactive Subsidiaries” means those Subsidiaries set forth in Schedule 7.6.            “Indebtedness”, as applied to any Person, means without duplication: (a) all indebtedness for borrowed money; (b) obligations under Capital Leases; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six months from the date the obligation is incurred or is evidenced by a note or similar written instrument; (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non recourse to the credit of that Person; (f) obligations in respect of letters of credit; (g) all obligations under Hedge Agreements, including, as of any date of determination, the net amounts, if any, that would be required to be paid by such Person if such Hedge Agreements were terminated on such date and (h) any amounts due to the U.S. Customs Service pursuant to the outstanding note.            “In-Season Period” has the meaning assigned to that term in subsection 2.1(B)(2).            “InterAct International” means InterAct International Inc., a Delaware corporation, and its Subsidiaries.            “InterAct International IPO” means an underwritten public offering of common stock made by InterAct International pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act.            “Interest Expense” means, without duplication, for any period, the following on a consolidated basis, for Borrowers and their Subsidiaries each calculated for such period: interest expenses deducted in the determination of net income (excluding (i) the amortization of fees and costs with respect to the transactions contemplated by this Agreement and the Related Agreements which have been capitalized as transaction costs in accordance with the provisions of subsection 11.2; and (ii) interest paid in kind).            “Interest Period” means, in connection with each LIBOR Loan, an interest period Borrowers shall elect (each an “Interest Period”) to be applicable to such Loan, which Interest Period shall be either a one, two, three, or six month period; provided that:                       (1)     the initial Interest Period for any LIBOR Loan shall commence on the Funding Date of such Loan;                       (2)     in the case of successive Interest Periods, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires;                       (3)     if an Interest Period expiration date is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period expiration date is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;                       (4)     any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to part (5) below, end on the last Business Day of a calendar month;                       (5)     no Interest Period shall extend beyond the Termination Date;                       (6)     no Interest Period for any portion of the Term Loans shall extend beyond the date of the final Scheduled Installment thereof;                       (7)     no Interest Period may extend beyond a scheduled principal payment date of any Loan unless the aggregate principal amount of such Loan that is a Base Rate Loan or that has Interest Periods expiring on or before such date equals or exceeds the principal amount required to be repaid on such Loan on such date; and                       (8)     there shall be no more than seven Interest Periods relating to LIBOR Loans outstanding at any time.            “Interest Rate” has the meaning assigned to that term in subsection 2.2(A).            “Inventory” means “inventory” (as defined in the PPSA and UCC), including, without limitation, finished goods, raw materials, work in process and other materials and supplies used or consumed in a Person’s business, and goods which are returned or repossessed, including any Inventory in the possession of any consignee, bailee, warehouseman, agent or processor and/or subject to, described in or covered by, any document and, including, without limitation, any Inventory in transit from one location to another, including on the “high seas” and otherwise outside the United States and its territorial waters.            “Investment” means (i) any direct or indirect purchase or other acquisition by a Borrower or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of a Borrower), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of a Borrower from any Person other than a Borrower or any of its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct or indirect loan, advance or capital contribution by a Borrower or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business, or (iv) any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement which is not designed to hedge against fluctuations in interest rates or currency values, respectively. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.            “IRC” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.            “Issuing Lender” has the meaning assigned to that term in subsection 2.1(G)(2).            “Italy Pledge Agreement” means the pledge agreement executed and delivered in connection with the Loan Agreement and in form and substance satisfactory to the Senior Agent among Recoton European Holdings, Inc. and the Senior Agent regarding the stock of Recoton Italy.            “Landlord's Consent” means a Landlord's Consent substantially in the form of Exhibit I.            “Lender Letter of Credit” has the meaning assigned to that term in subsection 2.1(F).            “Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s affiliates, and the officers, directors, employees, and agents of such Lender.            “Letter of Credit Liability” means, all reimbursement and other liabilities of a Borrower or any of its Subsidiaries with respect to each Lender Letter of Credit, whether contingent or otherwise, including: (a) the amount available to be drawn or which may become available to be drawn; (b) all amounts which have been paid or made available by any Lender issuing a Lender Letter of Credit or any bank issuing a Bank Letter of Credit to the extent not reimbursed; and (c) all unpaid interest, fees and expenses related thereto.            “Letter of Credit Default Rate” has the meaning assigned to that term in subsection 2.2(A).            “Letter of Credit Reserve” means, at any time, an amount equal to (a) the aggregate amount of Letter of Credit Liability with respect to all Lender Letters of Credit outstanding at such time plus, without duplication, (b) the aggregate amount theretofore paid by Administrative Agent or any Lender under Lender Letters of Credit and not debited to the Loan Account pursuant to subsection 2.1(F)(2) or otherwise reimbursed by Borrowers.            “Liabilities” shall have the meaning given that term in accordance with GAAP and shall include Indebtedness.            “LIBOR” means, for each Interest Period, a rate per annum equal to:                       (a)     the offered rate for deposits in U.S. dollars in an amount comparable to the amount of the applicable Loan in the London interbank market for the relevant Interest Period which is published by the British Bankers’ Association and currently appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, that if such a rate ceases to be available to Administrative Agent on that or any other source from the British Bankers’ Association, LIBOR shall be equal to a rate per annum equal to the average rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which Administrative Agent determines that U.S. dollars in an amount comparable to the amount of the applicable Loans are being offered to prime banks at approximately 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period for settlement in immediately available funds by leading banks in the London interbank market selected by Administrative Agent; divided by                       (b)     a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) which are required to be maintained by a member bank of the Federal Reserve System; such rate to be rounded upward to the next whole multiple of one-sixteenth of one percent (.0625%).            “LIBOR Loans” means at any time that portion of the Loans bearing interest at rates determined by reference to LIBOR.            “Lien” means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest).            “Loan” or “Loans” means an advance or advances under the Term Loan Commitment or the Revolving Loan Commitment.            “Loan Documents” means this Agreement, the Notes, the Security Documents and all other documents, instruments and agreements executed by or on behalf of a Borrower, such Borrower’s Subsidiaries or any other Loan Party and delivered concurrently herewith or at any time hereafter to or for any Agent or any Lender in connection with the Loans, any Lender Letter of Credit, and any other transaction contemplated by this Agreement, including, without limitation, the Subordination Agreement but excluding the German Facility documents, all as amended, restated, supplemented or modified from time to time.            “Loan Party” means each of the Borrowers, any Guarantor and any other Person (other than Agent, any Lender, Subordinated Agent and any Subordinated Creditor) which is or becomes a party to this Agreement or any other Loan Documents.            “Loan Year” means each period of 12 consecutive months commencing on the Closing Date and on each anniversary thereof.            “London Banking Day” means any day on which dealings in deposits in U.S. dollars are transacted in the London Interbank market.            “Material Adverse Effect” means (i) any material adverse effect on the business, financial position, results of operations or prospects of the Borrowers and their Subsidiaries, considered as a whole, (ii) any material impairment of the legality, validity and enforceability of the Loan Documents (including without limitation, the validity, enforceability or priority of security interests to be granted), or the rights and remedies of the Agents and Lenders, or (iii) any material impairment of the Loan Parties’ ability to perform their obligations under the Loan Documents.            “Maximum Revolving Loan Amount” has the meaning assigned to that term in subsection 2.1(B)(1).            “Monthly Borrowing Base Certificate” means a certificate and schedule duly executed by an executive officer of the Administrative Borrower appropriately completed and in substantially the form of Exhibit B-2.            “Mortgage” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust or other similar real estate security documents delivered by any Loan Party to Senior Agent, on behalf of the Benefitted Persons, with respect to Mortgaged Property, substantially in the form of Exhibit G.            “Mortgaged Property” means all of the real property owned by any Borrower or its Subsidiaries, each as listed on Schedule 11.1(A).            “Multiemployer Plan” means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.            “Net Proceeds” means, (a) with respect to any Asset Disposition constituting a casualty or condemnation, the insurance or condemnation proceeds received in connection therewith net of any expenses, if any, incurred by any Agent in the collection or handling thereof and (b) with respect to any other Asset Disposition, the proceeds received in connection therewith net of (i) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers or any of their Subsidiaries in connection therewith (in each case, paid to non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (iv) an appropriate reserve for income taxes in accordance with GAAP in connection therewith.            “Net Securities Proceeds” means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses) from the issuance of Securities of or incurrence of Indebtedness by a Borrower or its Subsidiaries.            “New Information System” means the enterprise resource planning system consisting of licensed software, purchased or leased hardware, consulting services and related expenses which Recoton and its Subsidiaries are in the process of contracting for and implementing.            “Notes” means the Revolving Notes and the Term Loan Notes.            “Notice of Borrowing” means a notice duly executed by an authorized representative of a Borrower appropriately completed and in the form of Exhibit D.            “Obligations” means all obligations, liabilities and indebtedness of every nature of each Loan Party from time to time owed to any Agent or Lender (or any lender under a Hedge Agreement) under the Loan Documents (whether incurred before or after the Termination Date) including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable including, without limitation, all interest, fees, cost and expenses accrued or incurred after the filing of any petition under any bankruptcy or insolvency law whether or not allowed in any resulting proceeding.            “Original Currency” shall have the meaning assigned to that term in subsection 10.19.            “Patent Security Agreement” means the Patent Security Agreement dated as of even date herewith amount the Loan Parties and the Senior Agent.            “Payoff Letter” means the letter agreement dated the date hereof delivered, pursuant to subsection J of the Condition Rider by The Chase Manhattan Bank and other existing creditors of Recoton signatory thereto and pursuant to which the Master Restructuring Agreement dated as of September 8, 1999 is terminated.            “Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the IRC or Section 302 of ERISA.            “Permitted Encumbrances” means the following types of Liens: (a) Liens (other than Liens relating to Environmental Claims or ERISA) for taxes, assessments or other governmental charges not yet due and payable or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such Loan Party or such Subsidiary has established appropriate reserves as shall be required in conformity with GAAP; (b) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than 30 days delinquent and that attach only to Real Estate, fixtures and equipment; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) easements, rights-of-way, zoning restrictions, licenses and other similar charges or encumbrances affecting the use of real property not interfering in any material respect with the ordinary conduct of the business of any Loan Party or any of its Subsidiaries; (e) Liens for purchase money obligations, provided that (i) the Indebtedness secured by any such Lien is permitted under subsection 7.1, and (ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of Senior Agent, on behalf of the Benefitted Persons; (g) Liens on deposits on other property of the Borrower or any Subsidiary to secure up to $500,000 of insurance obligations incurred in the ordinary course of business; (h) Liens on the Inventory of the Borrowers or any of their Subsidiaries that is consigned in an aggregate amount not to exceed $500,000 at any one time outstanding; (i) any interest or title of a lessor or sublessor under any real property lease not prohibited by this Agreement; and (j) Liens set forth on Schedule 11.1(B); and; (k) Liens arising in respect of judgments in an aggregate amount of less than $2,000,000 at any one time outstanding in circumstances not constituting a Default or an Event of Default.            “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.            “Pledge Agreement” means the Pledge Agreement substantially in the form of Exhibit M.            “PPSA” means the Personal Property Security Act (Ontario) and any other applicable provincial or Canadian personal property security legislation as such legislation now exists or may from time to time hereafter be amended, modified, recodified, supplemented or replaced, together with all rules, regulations and interpretations thereunder or related thereto.            “Prepayment Fee” has the meaning assigned to that term in subsection 2.3(C).            “Priority Payable Reserves” means with respect to Recoton Canada or the assets located in Canada of any Borrower or ReCone, as the case may be, at any time, the full amount of the liabilities at such time which have a trust imposed to provide for payment or that are secured by a Lien ranking or capable of ranking senior to or pari passu with security interests, liens or charges securing the Obligations on any of the Collateral under federal, provincial, county, municipal, common or local law including, but not limited, to claims for unremitted and accelerated rents, taxes, wages, workers’ compensation obligations, government royalties and pension fund obligations, together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which Administrative Agent, acting reasonably, considers may be or may become subject to a right of a supplier to recover possession thereof under any federal or provincial law, where such supplier's right may have priority over the security interests, liens or charges securing the Obligations including, without limitation, Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the Bankruptcy and Insolvency Act (Canada). Administrative Agent shall from time to time determine in its reasonable discretion the amount of Priority Payables Reserves and shall deliver written notice of such determination to Administrative Borrower and Lenders.            “Projections” means Borrowers’ forecasted: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) statements of shareholders equity all prepared in accordance with clause L of the Reporting Rider, and based upon good faith estimates and assumptions by Borrowers believed to be reasonable at the time made, together with appropriate supporting details and a statement of underlying assumptions.            “Pro Rata Share” means (a) with respect to a particular Commitment, the percentage obtained by dividing (i) such Commitment of that Lender by (ii) all such Commitments of all Lenders; (b) with respect to all other matters, the percentage obtained by dividing (i) the Total Loan Commitment of a Lender (other than a Term Loan C Lender) by (ii) the Total Loan Commitments of all Lenders (other than Term Loan C Lenders); and (c) with respect to matters affecting the Term Loan C, the percentage obtained by dividing (i) the Total Loan Commitment of a Term Loan C Lender by (ii) the Total Loan Commitments of all Term Loan C Lenders; in each case as such percentage may be adjusted by assignments permitted pursuant to subsection 9.5; provided, however, if any Commitment is terminated pursuant to the terms hereof, then “Pro Rata Share” means the percentage obtained by dividing (x) the aggregate amount of such Lender’s outstanding Loans and Letters of Credit Liabilities, as applicable, related to such Commitment by (y) the aggregate amount of all outstanding Loans and Letters of Credit Liabilities, as applicable, related to such Commitment.            “Real Estate” has the meaning assigned to that term in subsection 4.5.            “Recone” means Recone, Inc., a Delaware corporation.            “Recoton” has the meaning assigned to that term in the preamble.            “Recoton Canada” means Recoton Canada Ltd., an Ontario corporation.            “Recoton Germany” means Recoton German Holdings GmbH, a corporation organized under the laws of the Federal Republic of Germany.            “Recoton Italy” means Recoton Italia s.r.l., a corporation incorporated under the laws of Italy. "Recoton UK" means Recoton (UK) Limited, a corporation incorporated under the laws of England and Wales.            “Related Agreements” means the Subordinated Credit Agreement, the Senior Subordinated Notes, the Securities Purchase Agreement, the Payoff Letter, and documents and agreements evidencing the German Facility and all other documents, agreements and instruments in connection with the foregoing.            “Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), or into or out of any property, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property.            “Repayment Certification” has the meaning assigned to such term in subsection 2.1(A)(3).            “Required Minimum Excess Availability” means, after the Closing Date, $10,000,000, which sum represents the minimum amount by which the Maximum Revolving Loan Amount shall exceed the Revolving Loan at each month’s end as measured on the Monthly Borrowing Base Certificate. Notwithstanding the foregoing, if the sum of the Borrowing Base less the Letter of Credit Reserves exceeds the Revolving Loan Commitment, the amount by which the Borrowing Base less the Letter of Credit Reserves exceeds the Revolving Loan Commitment shall count towards the Required Minimum Excess Availability.            Notwithstanding the foregoing, on the date of delivery of the audited financial statements for the Fiscal Year ended December 31, 2001 pursuant to Section (C) of the Reporting Rider, the Required Minimum Excess Availability shall be reduced to the level set forth in the column captioned “Required Minimum Excess Availability” if the Fixed Charge Coverage for such Fiscal Year for Recoton and its Subsidiaries, on a consolidated basis and as set forth in the Compliance Certificate delivered pursuant to Section (E) of the Reporting Rider in connection with such financial statements, meets the stated ratio set forth below in the column captioned “Ratio”. Such Fixed Charge Coverage shall be calculated based on the financial statements dated as of December 31, 2001 to be delivered to the Agents pursuant to subsection (C) of the Reporting Rider: Required Minimum Excess Availability Ratio $5,000,000 = 1.20:1.00, = 1.33:1.0 Zero. = 1.33:1.00            “Requisite Lenders” means Lenders (other than a Defaulting Lender) holding or being responsible for 51% or more of the sum of (a) outstanding Loans, (b) outstanding Letter of Credit Liability and (c) unutilized Commitments of all Lenders which are not Defaulting Lenders. It is understood that for purposes of this definition the Term Loan C Lenders shall not be deemed to be “Lenders” except solely with respect to matters set forth in subsection 9.4(A).            “Restricted Junior Payment” means: (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or other equity interest of any Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely with shares of the class of stock on which such dividend is declared or any properly and legally declared dividend which is not paid in cash; (b) any payment or prepayment of principal of, premium, if any, or interest on, or any redemption, conversion, exchange, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Subordinated Debt or any shares of any class of stock of any Borrower or any of its Subsidiaries now or hereafter outstanding, or the issuance of a notice of an intention to do any of the foregoing; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of a Borrower or any of its Subsidiaries now or hereafter outstanding; and (d) any payment by a Borrower or any of its Subsidiaries of any management, consulting or similar fees to any Affiliate other than a Loan Party, whether pursuant to a management agreement or otherwise in excess of $100,000 as to any Person per Fiscal Year, or in excess of $250,000 in the aggregate in any Fiscal Year (it being understood that fees paid to directors of Recoton for services as directors or on committees of the Board are not considered as management, consulting or similar fees).            “Revolving Advance” means each advance made by Lender(s) pursuant to subsection 2.1(B).            “Revolving Loan” means the outstanding balance of all Revolving Advances and any amounts added to the principal balance of the Revolving Loan pursuant to this Agreement.            “Revolving Loan Commitment” means (a) as to any Lender, the commitment of such Lender to make Revolving Advances pursuant to subsection 2.1(B), and to purchase participations in Lender Letters of Credit pursuant to subsection 2.1(F) in the aggregate amount set forth on the signature page of this Agreement opposite such Lender’s signature or in the most recent Assignment and Acceptance Agreement, if any, executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Advances and to purchase participations in Lender Letters of Credit.            “Revolving Loan Lender” means any Lender that has a Revolving Loan Commitment or has made a Revolving Loan or has become a Revolving Loan Lender pursuant to subsection 9.5.            “Revolving Note” means (i) the promissory notes of the Borrowers issued pursuant to subsection 2.1(E)(iv) on the Closing Date and (ii) any promissory notes issued by the Borrowers in connection with assignments under subsection 9.5 of the Revolving Loan of any Lender, in each case substantially in the form of Exhibit O.            “Scheduled Installment” has the meaning assigned to that term in subsection 2.1(A).            “Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.            “Securities Act” means (i) the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder and (ii) the Securities Act (Ontario), as amended, and the rules and regulations promulgated thereunder.            “Security Agreement” means the Security Agreement substantially in the form of Exhibit L-1 and the Canada Security Agreement.            “Security Documents” means, collectively, the Guaranties, the Security Agreements, the Mortgages, the Pledge Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement, the Italy Pledge Agreement, the Hong Kong Pledge Agreement, the UK Pledge Agreement, the German Pledge Agreement and all other security documents, including financing statements now or hereafter delivered to the Senior Agent purporting to grant a Lien on any assets of any Person to secure the obligations and liabilities of any Loan Party hereunder or under any other Loan Document.            “Semi-Monthly Borrowing Base Certificate” means a certificate and schedule duly executed by an executive officer of the Administrative Borrower appropriately completed and in substantially the form of Exhibit B-1.            “Senior Agent” means Heller and any successor in such capacity appointed pursuant to subsection 9.1(G).            “Senior Subordinated Notes” means the $35,000,000 Senior Subordinated Notes issued pursuant to the Securities Purchase Agreement dated as of February 4, 1999, as amended by the First Amendment to Securities Purchase Agreement dated as of the date hereof.            “Solvent” means, with respect to the Loan Parties on a consolidated basis that they (a) own assets the fair salable value of which are greater than the total amount of their liabilities (including contingent liabilities); (b) have capital that is not unreasonably small in relation to their business as presently conducted or any contemplated or undertaken transaction; and (c) do not intend to incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due.            “STD” means STD Holdings Limited, a corporation organized under the laws of Hong Kong.            “STD Restructuring” means the restructuring of InterAct International and the Subsidiaries of STD as set forth in Schedule 11.1(C).            “Subordinated Agent” means The Chase Manhattan Bank acting as agent on behalf of the Subordinated Creditors and its successors and its assigns.            “Subordinated Credit Agreement” has the meaning assigned to such term in the recitals.            “Subordinated Creditors” means The Chase Manhattan Bank, First Union National Bank, HSBC Bank U.S.A., Harris Trust and Savings Bank, Sun Trust Bank, The Prudential Life Insurance Company of America, John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company, Investors Partner Life Insurance Company, Mellon Bank, N.A., as Trustee for Long-Term Investment Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company), Mellon Bank, N.A., as Trustee for Bell Atlantic Master Pension Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company), The Northern Trust Company, as Trustee of the Lucent Technologies, Inc. Master Pension Trust and their successors and permitted assigns, each of the foregoing solely in its capacity as lender under the Subordinated Credit Agreement.            “Subordinated Debt” means (i) the $15,000,000 owing by Borrowers to the Subordinated Creditors pursuant to the Subordinated Credit Agreement and (ii) the $35,000,000 Senior Subordinated Notes due February 4, 2004.            “Subordination Agreement” means that certain Subordination and Intercreditor Agreement, dated as of the date hereof, among the Loan Parties, Senior Agent, Administrative Agent, on behalf of Agents and Lenders, and the Subordinated Creditors, in a form and substance acceptable to Administrative Agent.            “Subordination Debt Documents” means the Subordinated Credit Agreement, any guaranty with respect to the incurred thereunder, any security agreement or other collateral document securing the debt incurred thereunder and any other document, instrument or agreement executed by or on behalf of Borrowers in connection with the transactions contemplated thereby.            “Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person or a combination thereof.            “Syndication Agent” has the meaning set forth for that term in the preamble, it being understood and agreed that the Syndication Agent shall have no obligations or duties as agent for or on behalf of any party to this Agreement or any other Loan Document.            “Term Loans” mean(s) the unpaid balance of the term loans made pursuant to subsection 2.1(A).            “Term Loan A” means the advances made pursuant to subsection 2.1(A)(1).            “Term Loan B” means the advances made pursuant to subsection 2.1(A)(2).            “Term Loan C” means the advances made pursuant to subsection 2.1(A)(3).            “Term Loan Commitment” means (a) as to any Lender, the commitment of such Lender to make its Pro Rata Share of the Term Loans in the maximum aggregate amount set forth on the signature page of this Agreement opposite such Lender’s signature or in the most recent Assignment and Acceptance Agreements, if any, executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Term Loans.            “Term Loan A Lender” means any Lender that has Term Loan Commitment with respect to the Term Loan A or has made a Term Loan A or has become a Term Loan A Lender pursuant to subsection 9.5.            “Term Loan A Notes” means (i) the promissory notes of the Borrowers issued pursuant to subsection 2.1(E)(1) on the Closing Date and (ii) any promissory notes issued by the Borrowers in connection with assignments under subsection 9.5 of the Term Loan A of any Lender, in each case substantially in the form of Exhibit N-I.            “Term Loan B Lender” means any Lender that has Term Loan Commitment with respect to the Term Loan B or has made a Term Loan B or has become a Term Loan B Lender pursuant to subsection 9.5.            “Term Loan B Notes” means (i) the promissory notes of the Borrowers issued pursuant to subsection 2.1(E)(2) on the Closing Date and (ii) any promissory notes issued by the Borrowers in connection with assignments under subsection 9.5 of the Term Loan B of any Lender, in each case substantially in the form of Exhibit N-II.            “Term Loan C Lender” means any Lender that has Term Loan Commitment with respect to the Term Loan C or has made a Term Loan C or has become a Term Loan C Lender pursuant to subsection 9.5.            “Term Loan C Notes” means (i) the promissory notes of the Borrowers issued pursuant to subsection 2.1(E)(3) on the Closing Date and (ii) any promissory notes issued by the Borrowers in connection with assignments under subsection 9.5 of the Term Loan C of any Lender, in each case substantially in the form of Exhibit N-III.            “Term Loan Note” or “Term Loan Notes” means the Term Loan A Notes, Term Loan B Notes and Term Loan C Notes.            “Termination Date” means the date set forth in subsection 2.5.            “Term Loan C Repayment Restriction” has the meaning assigned to such term in subsection 2.1(A)(3).            “Trademark Security Agreement” means the Trademark Security Agreement dated as of even date herewith among the Loan Parties and the Senior Agent.            “Total Loan Commitment” means as to any Lender the aggregate commitments of such Lender with respect to its Revolving Loan Commitment and Term Loan Commitment.            “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York, as amended from time to time, and any successor statute.            “UK Pledge Agreement” means the pledge agreement executed and delivered in connection with the Loan Agreement and in form and substance satisfactory to the Senior Agent, among Recoton European Holdings, Inc. and the Senior Agent, regarding the stock of Recoton UK.            “Unused Line Fee” has the meaning assigned to that term in subsection 2.3(A).            “Warehouseman's Waiver” means a Warehouseman's Waiver substantially in the form of Exhibit H.            11.2 Accounting Terms. For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP. Financial statements and other information furnished to Agent or any Lender pursuant to subsection 5.1 shall be prepared in accordance with GAAP (as in effect at the time of such preparation) on a consistent basis. In the event any “Accounting Changes” (as defined below) shall occur and such changes affect financial covenants, standards or terms in this Agreement, then Borrowers and Lenders agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of Borrowers shall be the same after such Accounting Changes as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by Borrowers and Requisite Lenders, (A) all financial covenants, standards and terms in this Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (B) Borrowers shall prepare footnotes to each Compliance Certificate and the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). “Accounting Changes” means: (a) changes in accounting principles required by GAAP and implemented by Borrowers and (b) changes in accounting principles recommended by Borrowers’ Accountants.            11.3 Other Definitional Provisions. References to “Sections”, “subsections”, “Riders”, “Exhibits”, “Schedules” and “Addendums” shall be to Sections, subsections, Riders, Exhibits, Schedules and Addendums, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 11.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Agreement, words importing any gender include the other genders; the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. [Remainder of page intentionally left blank]            Witness the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BORROWERS: RECOTON CORPORATION (FEIN: 11-1771737) By: /s/ Arnold Kezsbom                                                         Name:  Arnold Kezsbom Title:  Senior Vice President - Finance INTERACT ACCESSORIES, INC. (FEIN: 52-1941363) RECOTON AUDIO CORPORATION (FEIN: 13-3346656) AAMP OF FLORIDA, INC. (FEIN: 59-2901317) RECOTON HOME AUDIO, INC. (FEIN: 36-3718266) By: /s/ Arnold Kezsbom                                                          Name:  Arnold Kezsbom Title:  Vice President GUARANTORS: CHRISTIE DESIGN CORPORATION (FEIN: 59-3308472) RECOTON INTERNATIONAL HOLDINGS, INC.      (FEIN: 36-3718240) RECOTON EUROPEAN HOLDINGS, INC.      (FEIN: 36-3764914) RECOTON JAPAN, INC. (FEIN: 36-3718238) RECONE, INC. (FEIN: 36-3095337) RECOTON CANADA LTD (FEIN: N/A) By: /s/ Arnold Kezsbom                                                         Name:  Arnold Kezsbom Title:  Vice President LENDERS: HELLER FINANCIAL, INC., individually and as Senior Agent and Administrative Agent By: /s/ Dwayne L. Coker                                                          Name:  Dwayne L. Coker Title:  Vice President Revolving Loan Commitment: Revolving Loan Commitment:$ 25,227.272.73 Term Loan A Commitment:$ 2,727,272.73 Term Loan B Commitment:$ 2,045,454.55 Term Loan C Commitment:$5,000,000.00 GENERAL ELECTRIC CAPITAL CORPORATION, individually and as Collateral Agent and Syndication Agent By: /s/ James F. Hogan                                                          Name:  James F. Hogan Title:  Duly Authorized Signatory Revolving Loan Commitment: $25,227,272.73 Term Loan A Commitment: $2,727,272.73 Term Loan B Commitment: $2,045.454.55 Term Loan C Commitment: $5,000,000.00 THE CHASE MANHATTAN BANK By: /s/ Roger A. Odell                                                         Name: Roger A. Odell Title: Managing Director Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 761,255.35 HARRIS TRUST AND SAVINGS BANK By: /s/ Janet Maxwell-Wickett                                                          Name: Janet Maxwell-Wickett Title: Vice President Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 304,870.40 HSBC BANK U.S.A. (formerly known as MARINE MIDLAND BANK) By: /s/ Joseph E. Salonia                                                         Name: Joseph E. Salonia Title: Vice President Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 439,862.05 FIRST UNION NATIONAL BANK By: /s/ James R. Connors                                                         Name: James R. Connors Title: Senior Vice President Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 440,343,70.00 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Scott S. Hartz                                                         Name: Scott S. Hartz Title: Managing Director Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 1,641,998.64 JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Marlene J. DeLeon                                                         Name: Marlene J. DeLeon Title: Authorized Signatory Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 751,531.35 JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By: /s/ Marlene J. DeLeon                                                         Name: Marlene J. DeLeon Title: Authorized Signatory Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 751,531.35 BANK OF AMERICA By: /s/ E. Middleton Thorne, III                                            Name: E. Middleton Thorne, III Title: Vice President Revolving Loan Commitment: $21,022,727.27 Term Loan A Commitment: $2,272,727.27 Term Loan B Commitment: $1,704,545.45 Term Loan C Commitment: $ 0.00 THE CITI GROUP / BUSINESS CREDIT, INC. By: /s/ Allison Friedman                                                         Name: Allison Friedman Title: Assistant Vice President Revolving Loan Commitment: $25,227,272.73 Term Loan A Commitment:$2,727.272.73 Term Loan B Commitment:$2,045.454.55 Term Loan C Commitment:$ 0.00 GUARANTY BUSINESS CREDIT CORPORATION By: /s/ Michael Haddad                                                         Name: Michael Haddad Title: President and CEO Revolving Loan Commitment: $ 12,613,636.36 Term Loan A Commitment: $ 1,363,636.36 Term Loan B Commitment: $ 1,022,727.27 Term Loan C Commitment:$ 0.00 DAIMLER CHRYSLER CAPITAL By: /s/ James M. Vandervalk                                                          Name: James M. Vandervalk Title: President, Asset Based Lending Director Revolving Loan Commitment: $12,613,636.36 Term Loan A Commitment: $1,363,636.36 Term Loan B Commitment: $1,022,727.27 Term Loan C Commitment: $ 0.00 FOOTHILL CAPITAL By: /s/ Martin S. Chin                                                          Name: Martin S. Chin Title: Assistant Vice President Revolving Loan Commitment: $ 12,613,636.36 Term Loan A Commitment: $ 1,363,636.36 Term Loan B Commitment: $ 1,022,727.27 Term Loan C Commitment:$ 0.00 CITIZENS BUSINESS CREDIT By: /s/ Vincent P. O'Leary                                                         Name: Vincent P. O'Leary Title: Senior Vice President Revolving Loan Commitment: $12,613,636.36 Term Loan A Commitment: $1,363,636.36 Term Loan B Commitment: $1,022,727.27 Term Loan C Commitment: $0.00 FIRSTAR BANK By: /s/ Dirk Davidson                                                         Name: Dirk Davidson Title: Vice President Revolving Loan Commitment: $ 12,613,636.36 Term Loan A Commitment: $ 1,363,636.36 Term Loan B Commitment: $ 1,022,727.27 Term Loan C Commitment: $ 0.00 WASHINGTON MUTUAL BANK By: /s/ Kenneth A. Slavitt                                                         Name: Kenneth A. Slavitt Title: Senior Vice President Revolving Loan Commitment: $ 8,409,090.91 Term Loan A Commitment: $ 909,090.91 Term Loan B Commitment: $ 681,818.18 Term Loan C Commitment:$ 0.00 SIEMENS FINANCIAL SERVICES, INC. By: /s/ Frank Amodio                                                          Name: Frank Amodio Title: Vice President - Credit Revolving Loan Commitment: $ 8,409,090.91 Term Loan A Commitment: $ 909,090.91 Term Loan B Commitment: $ 681,818.18 Term Loan C Commitment:$ 0.00 MELLON BANK N.A., AS TRUSTEE FOR THE LONG-TERM INVESTMENT TRUST, solely in its capacity as Trustee and not in its individual capacity as Trustee and not in its individual capacity (as directed by John Hancock Mutual Life Insurance Company) By: /s/ Bernadette T. Rist                                                        Name: Bernadette T. Rist Title: Authorized Signatory Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 16,585.75 MELLON BANK N.A., AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST, solely in its capacity as Trustee and not in its individual capacity as Trustee and not in its individual capacity (as directed by John Hancock Mutual Life Insurance Company) By: /s/ Bernadette T. Rist                                                        Name: Bernadette T. Rist Title: Authorized Signatory Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 38,872.15 THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST By:  John Hancock Mutual Life Insurance Company, as Investment Manager By: /s/ Scott A. Hartz                                                         Name: Scott A. Hartz Title: Managing Director Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 35,244.25 INVESTORS PARTNER LIFE INSURANCE COMPANY By: /s/ Marlene J. DeLeon                                                         Name: Marlene J. DeLeon Title: Authorized Signatory Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 25,914.85 SUNTRUST BANK, CENTRAL FLORIDA NATIONAL ASSOCIATION By: /s/ Byron P. Kurtgis                                                         Name: Byron P. Kurtgis Title: Director Revolving Loan Commitment: $ 0.00 Term Loan A Commitment: $ 0.00 Term Loan B Commitment: $ 0.00 Term Loan C Commitment:$ 439,862.05 GMAC BUSINESS CREDIT LLC By: /s/ William J. Stewart                                                         Name: William J. Stewart Title: Director Revolving Loan Commitment: $ 21,022,727.27 Term Loan A Commitment: $ 2,272,727.27 Term Loan B Commitment: $ 1,704,545.45 Term Loan C Commitment:$ 0.00 EXHIBITS A. Assignment and Acceptance Agreement B-1. Semi-Monthly Borrowing Base Certificate B-2. Monthly Borrowing Base Certificate C. Compliance Certificate D. Notice of Borrowing E. Inventory Report F. Reconciliation Report G. Form of Mortgage or Deed of Trust H. Form of Warehouseman's Waiver I. Form of Landlord's Consent J. List of Opinion Topics K-1. Form of Guaranty K-2. Form of Canada Guaranty L-1. Form of Security Agreement L-2. Form of Canada Security Agreement M. Form of Pledge Agreement N-1. Form of Term Loan A Note N-II. Form of Loan B Note N-III. Form of Term Loan C Note O. Form of Revolving Loan Note SCHEDULES 2.1(C)(i) Concentration Limitation 2.1(C)(ii) Locations of Inventory in Transit 3 List of Closing Documents 4.1(A) Capitalization of Loan Parties and Subsidiaries' Jurisdictions 4.5 Real Estate 4.7 Taxes 4.9 Employee Benefit Plans 4.14 Insurance Policies 4.16 Employee Matters 7.1 Indebtedness 7.2 Guaranties 7.4(c) Closing Date Employee Loans 7.4(e) Investments 7.6 Inactive Subsidiaries 7.11 Subsidiaries 11.1(A) Mortgaged Property 11.1(B) Other Liens 11.1(C) STD Restructuring RIDERS A Conditions Rider B Reporting Rider C Financial Covenants Rider CONDITIONS RIDER            This Conditions Rider is attached to and made a part of that certain Loan Agreement dated as of October 31, 2000 (the “Loan Agreement”) and entered into among Recoton Corporation, a New York corporation, InterAct Accessories, Inc., a Delaware corporation, Recoton Audio Corporation, a Delaware corporation, AAMP of Florida, Inc., a Florida corporation, and Recoton Home Audio, Inc., a California corporation, the other Loan Parties party thereto and Agents and Lenders party thereto. Capitalized terms used herein but not otherwise defined herein have the meaning assigned to those terms in the Loan Agreement.            (A) Closing Deliveries. Administrative Agent shall have received, in form and substance satisfactory to Administrative Agent and Lenders, all documents, instruments and information identified on Schedule 3 and all other agreements, notes, certificates, orders, authorizations, financing statements, mortgages and other documents which Agent may at any time reasonably request.            (B) Security Interests. Administrative Agent and Lenders shall have received satisfactory evidence that all security interests and liens granted to Senior Agent for the benefit of the Benefitted Persons pursuant to the Loan Agreement or the other Loan Documents have been duly perfected and constitute first priority liens on the Collateral (other than in de minimis amounts and subject only to Permitted Encumbrances). The Loan Parties shall have pledged 100% of their equity interest in all Domestic Subsidiaries and Recoton Canada and 65% of their equity interest in all "first-tier" Foreign Subsidiaries.            (C) Required Minimum Excess Availability. After giving effect to the consummation of the transactions contemplated under the Loan Agreement on the Closing Date and the payment by Borrowers of all costs, fees and expenses relating thereto, the Maximum Revolving Loan Amount on the Closing Date shall exceed the Revolving Loan by at least $25,000,000. Following the Closing Date, at each month's end based on the Monthly Borrowing Base Certificate submitted pursuant to clause (P) of the Reporting Rider, the Maximum Revolving Loan Amount shall exceed the Revolving Loan by at least the Required Minimum Excess Availability.            (D) Representations and Warranties. The representations and warranties contained herein and in the Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except for any representation or warranty limited by its terms to a specific date and taking into account any amendments to the Schedules or Exhibits as a result of any disclosures made by Borrowers to Administrative Agent after the Closing Date and approved by Administrative Agent.            (E) No Default. No event shall have occurred and be continuing or would result from funding a Loan or issuing a Lender Letter of Credit requested by Borrowers that would constitute an Event of Default or a Default.            (F) Performance of Agreements. Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which any Loan Document provides shall be performed by it on or before that Funding Date.            (G) No Prohibition. No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain Administrative Agent or any Lender from making any Loans or issuing any Lender Letters of Credit.            (H) No Litigation. There shall not be pending or, to the knowledge of any executive officer of the Administrative Borrower, threatened, any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration by, against or affecting any Loan Party or any of its Subsidiaries or any property of any Loan Party or any of its Subsidiaries that has not been disclosed to Administrative Agent by Borrowers in writing, nor shall there have occurred any material development in any such action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration, in each case which could reasonably be expected to have a Material Adverse Effect.            (I) No Material Adverse Effect. There shall have been no event or occurrence which could reasonably be expected to result in a Material Adverse Effect.            (J) Repayment of Existing Indebtedness/Permitted Indebtedness. After giving effect to the consummation of the transactions contemplated under the Loan Agreement, no Loan Party shall have outstanding any Indebtedness (including guarantied Indebtedness or preferred stock) other than the Obligations under the Loan Documents, the Subordinated Debt referred to in item (Q) hereof and other than those items set forth in subsection 7.1 or Schedule 7.1.            (K) Unaudited Financial Statements. Administrative Agent shall have received a copy of the consolidated unaudited financial statements of Recoton for the fiscal quarters ended March 30, 2000 and June 30, 2000.            (L) Audit. Agents shall be satisfied, with the results of an audit by Agents or their representatives of Borrowers' business, operations, financial condition and assets (including, but not limited to, an update of the inventory appraisal performed by the Ozer Group or an appraiser satisfactory to the Agents), including, without limitation, the opportunity to meet with Borrowers' management. Such audit shall be at Borrowers' expense and shall include an analysis of Borrowers' financial and collateral reporting capabilities the results of which must (i) be satisfactory to the Agents and (ii) confirm that Borrowers have a minimum of $25,000,000 in excess availability under the Revolving Loan Commitments as of Closing Date.            (M) Management Letters. Agents shall have received copies of the management letters generated by Borrowers' audit firm for the fiscal years ending December 31, 1998 and December 31, 1999 in form and substance acceptable to the Agents.            (N) Business Plan. Agents shall have received copies of Borrowers' business plan, including, without limitations, financial Projections in form and substance satisfactory to the Agents and that accurately reflects the transaction contemplated herein. Agents shall have had the opportunity to discuss the business plan with Recoton's operating management and be satisfied as to the likelihood of its successful implementation.            (O) Insurance. Agents shall have received copies of the insurance policies or binders in types and amounts, under terms and conditions satisfactory to the Agents and with appropriate endorsements naming the Administrative Agent as loss payee, mortgagee and additional insured.            (P) Environmental Matters. The Agents shall have received an environmental audit report for all properties in which the Lenders will be taking a security interest, in scope and substance satisfactory to the Agents and Agents' environmental legal counsel and which has been prepared by a nationally recognized environmental engineering firm acceptable to the Agents. Agents shall be satisfied that there are no existing environmental liabilities that could have a material adverse impact on the financial condition or prospects of Borrowers and their Subsidiaries, taken as a whole.            (Q) Subordinated Debt. Any indebtedness of Borrowers that is not refinanced with the proceeds of the Term Loans or the Revolving Loans or which is incurred in order to satisfy the requirements of item (C) hereof shall have terms and conditions that are acceptable to the Agents in their sole discretion and shall, unless otherwise agreed to by the Agents, be subordinated to the Obligations under the Loan Documents pursuant to subordination agreements containing terms and conditions, including, without limitation, payment blockage rights, remedies and standstill provisions, satisfactory to the Agents in their sole discretion. The amount of subordinated indebtedness evidenced by the Subordinated Credit Agreement shall equal $15,000,000, pursuant to and subject to the terms and conditions of the Subordination Agreement. Agents shall have received fully executed copies of the documents related to the Subordinated Debt, each of which shall be in form and substance satisfactory to Agents in their sole discretion.            (R) German Facility. On or before the Closing Date, Recoton German Holdings GmbH shall have entered into a financing arrangement with Heller Bank A.G. for an aggregate committed amount of DM 50,000,000 which shall have terms and conditions acceptable to the Agents in their sole discretion. Agents shall have received fully executed copies of the documents related to the German Facility, each of which shall be in form and substance satisfactory to Agents in their sole discretion. On the Closing Date, Recoton German Holdings GmbH shall provide cash or collateral (such collateral to be acceptable to the Agents) to Borrowers in amounts sufficient in order to satisfy the requirements under item (C) hereof.            (S) Capital Organization/Legal Structure/Taxes. (i) The ownership, capital, corporate, tax, organizational and legal structure of Borrowers and their Subsidiaries shall be acceptable to the Agents and Lenders and shall optimize the rights of the Lenders as secured creditors of Borrowers and their Subsidiaries to enforce their claims against Borrowers and their Subsidiaries and the collateral securing the Obligations under the Loan Documents.                       (ii) Agents shall have received a copy of Recoton's organizational chart clearly demonstrating all legal entities affiliated with or owned directly or indirectly by Borrowers, which chart shall be certified to be true and correct by the chief operating officer or secretary of Recoton.                       (iii) Borrower's shall adopt such amendments to the by-laws and other governing documents of the foreign subsidiaries as the Agents may reasonably request.                       (iv) The following shall be acceptable to the Agents: other debt instruments, tax laws, fraudulent conveyance laws, thin capitalization laws (in the United States, Canada, the United Kingdom, or elsewhere, as appropriate, as such tax and fraudulent conveyance laws relate to the transaction contemplated under the Loan Documents, including, but not limited to, the tax and fraudulent conveyance implications of the movement of funds from Canada, the United Kingdom or elsewhere to the United States) and the governing documents of Borrowers and their Subsidiaries.            (T) Consents. Agent shall have received (i) satisfactory evidence that the Loan Parties have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby or (ii) an officer's certificate in form and substance reasonably satisfactory to Agent affirming that no such consents or approvals are required.            (U) Fees. Borrowers shall have paid the fees required to be paid on the Closing Date in the respective amounts specified in subsection 2.3, and shall have reimbursed Agents for all fees (including legal fees), costs and expenses of closing presented as of the Closing Date.            (V) Transaction Costs. Prior to the Closing Date, Administrative Borrower shall have delivered to Administrative Agent (with copies for each Lender) a schedule, in form satisfactory to Administrative Agent, setting forth Borrowers reasonable best estimate of the fees, costs and expenses payable by Borrowers in connection with the transactions contemplated hereby (other than fees payable to any of the Agents) and such estimate shall not exceed $7,200,000.            (W) Use of Proceeds. Administrative Borrower shall deliver a written statement to the Administrative Agent, certified by the chief financial officer of the Administrative Borrower, setting forth the debt being paid on the Closing Date and stating that the proceeds of the Loans are being used only to pay such debt and the fees and expenses associated with the transactions contemplated hereby. REPORTING RIDER         This Reporting Rider is attached and made a part of that certain Loan Agreement dated as of October 31, 2000 (the “Loan Agreement”) entered into among Recoton Corporation, a New York corporation, InterAct Accessories, Inc., a Delaware corporation, Recoton Audio Corporation, a Delaware corporation, AAMP of Florida, Inc., a Florida corporation, and Recoton Home Audio, Inc., a California corporation, the other Loan Parties party thereto and Agents and Lenders party thereto. Capitalized terms used herein but not otherwise defined herein have the meaning assigned to those terms in the Loan Agreement.               (A)  Monthly Financials. (i) As soon as available and in any event no later than thirty (30) days after the end of each April, May, July, August, October and November, Administrative Borrower will deliver to Administrative Agent (1) the consolidated and consolidating balance sheet of Borrowers and their Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                         (ii) As soon as available and in any event no later than sixty (60) days after the end of each January and February, Administrative Borrower will deliver to Administrative Agent (1) the consolidated and consolidating balance sheet of Borrowers and their Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                         (iii) No later than ten (10) days after the submission of the monthly financial statements required under clauses A (i) and A (ii) above, Administrative Borrower will deliver to Administrative Agent a statement of cash flow from the beginning of the then current Fiscal Year to the end of such month. Unless otherwise requested by the Administrative Agent there will not be a required submission of monthly financials for any month that ends on a calendar quarter.                (B)  Quarterly Financials. (i) As soon as available and in any event no later than forty-six (46) days (or if the 45th day is not a Business Day, the day immediately succeeding the date on which the SEC filing for such period is due) after the end of each of the first three calendar quarters of a Fiscal Year, Administrative Borrower will deliver to Administrative Agent (1) the consolidated and consolidating balance sheet of Borrowers and their Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such quarter of a Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                         (ii) As soon as available and in any event no later than sixty-five (65) days after the end of the fourth calendar quarter of a Fiscal Year, Administrative Borrower will deliver to Administrative Agent the consolidated and consolidating balance sheet of Borrowers and their Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders’ equity and cash flow from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Borrowers and their Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                         (iii) Together with the delivery of all financial statements pursuant to clause (B)(i), Administrative Borrower shall deliver an officer’s certificate executed by the chief executive officer, the chief financial officer or the chief operating officer certifying that Borrowers’ Accountants have reviewed all such Quarterly Financials.               (C)  Year-End Financials. As soon as available and in any event no later than ninety-one (91) days (or if the 90th day is not a Business Day, the day immediately succeeding the date on which the SEC filing for such period is due) after the end of each Fiscal Year, Administrative Borrower will deliver to Agents: (1) the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such year and the related consolidated statements of income, stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the consolidated outstanding Indebtedness of Borrowers and their Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan; and (3) a report with respect to the financial statements from Borrowers' Accountants, which report shall be unqualified as to going concern and scope of audit of Borrowers and their Subsidiaries and shall state that (a) such consolidated financial statements present fairly the consolidated financial position of Borrowers and their Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with accounting principles generally accepted in the United States of America and (b) that the examination by Borrowers' Accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; and (4) copies of the consolidating financial statements of Borrowers and their Subsidiaries, including (a) consolidating balance sheets of Borrowers and their Subsidiaries as at the end of such Fiscal Year showing intercompany eliminations and (b) related consolidating statements of income of Borrowers and their Subsidiaries showing intercompany eliminations.               (D)  Accountants' Certification and Reports. Together with each delivery of consolidated financial statements of Borrowers and their Subsidiaries pursuant to paragraph (C) above, Administrative Borrower will deliver a written statement by Borrowers' Accountants stating whether, in connection with the examination, any condition or event that constitutes a Default or an Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof. Promptly upon receipt thereof, Administrative Borrower will deliver to Agents copies of all significant reports submitted to Borrowers by Borrowers' Accountants in connection with each annual, interim or special audit of the financial statements of Borrowers made by Borrowers' Accountants, including the comment letter submitted by Borrowers' Accountants to management in connection with their annual audit.               (E)  Compliance Certificate. (i) Together with the delivery of each set of financial statements referenced in clauses (B)(i) and (C) above, Administrative Borrower will deliver to Agents a Compliance Certificate, including copies of the calculations and work-up employed to determine Borrowers' compliance or noncompliance with the financial covenants set forth in the Financial Covenants Rider. Together with the delivery of each set of financial statements referenced in clauses (A), (B)(i) and (C) above, Administrative Borrower will confirm in the Compliance Certificate that the accounts payables to third parties have been paid for the last ninety (90) days in the ordinary course of business consistent with historical customary payment practices and that the Borrowers are in compliance with all other covenants in the Loan Agreement.               (F)  Borrowing Base Certificates, Registers and Journals. (i) On each Wednesday of each week Administrative Borrower will submit to Agents an accounts receivable roll forward substantially in the form of Exhibit B, indicating therein the accounts receivable balances as of the immediately preceding week. If Wednesday is not a Business Day, Administrative Borrower shall submit such accounts receivable roll forward on the next Business Day. Such accounts receivable roll forward shall be used as the bases for updating the Accounts per the Administrative Agent's loan system.                         (ii) As soon as available, and in any event no later than fifteen (15) days after the end of each month, an executive officer of Administrative Borrower shall deliver to Agents a Consolidating Borrowing Base Certificate (“Semi-Monthly Borrowing Base Certificate”) substantially in the form of Exhibit B-1 and update the Monthly Borrowing Base Certificate (as defined below). Such updates to the Monthly Borrowing Base Certificate shall reflect: (1) the sales and collections of Borrowers per the Borrowers’ aged trial balance of all then existing Accounts for such month, (2) the Inventory on hand as of the last day of such month based on the Borrowers’ Inventory perpetual report, (3) the calculation of both the Eligible Accounts per the aged trial balance of all then existing Accounts and Eligible Inventory per the Inventory perpetual report and (4) if Administrative Agent so requests, (a) copies of invoices evidencing such sales and proofs of delivery relating thereto an invoice register or sales journal describing all sales of such Borrower, in form and substance satisfactory to Administrative Agent, (b) a cash receipts journal, (c) a credit memo journal, and (d) an adjustment journal, setting forth all adjustments to such Borrower’s accounts receivable. The Semi-Monthly Borrowing Base Certificate shall also state that to best knowledge of the undersigned the information supplied to the Agents is true, complete and correct with respect to Account, Inventory, Letters of Credit and Loan balances.                         (iii) As soon as available, and in any event no later than thirty (30) days after the end of each month, an executive officer of Administrative Borrower shall deliver to Agents a Consolidating Borrowing Base Certificate (“Monthly Borrowing Base Certificate”) substantially in the form of Exhibit B-2, setting forth (x)(1) the calculation of both the Eligible Accounts per the aged trial balance of all then existing Accounts and Eligible Inventory per the Inventory Report which shall be substantially in the form of Exhibit E to the Loan Agreement and (2) all Borrowing Base reserves as Administrative Agent in its reasonable credit judgement elects to establish unless otherwise directed by the Requisite Lenders; and (y) as of the last day of the immediately preceding month updated to reflect (1) the sales and collections of Borrowers per the Borrowers’ aged trial balance of all then existing Accounts, (2) Inventory on hand based on the Borrowers’ Inventory perpetual report, (3) Inventory in transit as set forth in the Inventory In Transit Report which report shall be substantially in the form of Exhibit E, and (4) Eligible Letter of Credit Inventory.                (G)   Reconciliation Reports, Inventory Reports and Listings and Agings. (i) As soon as available, and in any event no later than fifteen (15) days after the end of each month, Administrative Borrower shall deliver to Agents in conjunction with the submission of the Semi-Monthly Borrowing Base: (1) a summary aged trial balance of all then existing Accounts; and (2) a summary Inventory perpetual report.                         (ii) As soon as available, and in any event no later than thirty-five (35) days after the end of each month, Administrative Borrower shall deliver to Agents: (1) a Reconciliation Report duly executed by the chief executive officer, chief operating officer or chief financial officer of Administrative Borrower and substantially in the form of Exhibit F as at the last day of such period reconciling the reports submitted in clause G(i)(1) and in this clause G(i)(2) to the Accounts and Inventory balances reflected on the corresponding Monthly Financials and (2) if Administrative Agent so requests, a detailed inventory listing and cover summary report. All such reports shall be in form and substance satisfactory to Agent.              (H)  Management Report. Together with each delivery of financial statements of Borrowers and their Subsidiaries pursuant to paragraphs (B) and (C) above, Administrative Borrower will deliver to Agents the corresponding form 10-Q or 10-K, as the case may be, which forms will include management's analysis of the Borrowers' financial performance on both a consolidated basis and by business segment. Management will also provide a report comparing the financial results for the quarter than ended to the corresponding figures from the most recent Projections for the current Fiscal Year delivered to Lenders pursuant to paragraph (L) below and discuss the reasons for any significant variations. The information above shall be certified by the chief financial officer, chief operating officer or chief executive officer of Administrative Borrower and shall be presented in summary comparison form on a consolidated basis setting forth the differences in actual and projected revenue, gross profit, operating expenses and net income for such period. At the request of the Agents, Administrative Borrower will provide a detailed comparison of the foregoing information within thirty (30) days of such request.               (I)   Appraisals. From time to time, upon the request of Administrative Agent, Administrative Borrower will obtain and deliver to Administrative Agent, at Borrowers' expense, appraisal reports in form and substance and from appraisers satisfactory to Agents, stating the then current fair market and orderly liquidation values of all or any portion of the Collateral; provided, however, so long as no Default or Event of Default is continuing, Administrative Agent shall not request an appraisal as to any particular category of Collateral, except for Inventory, to be performed more than once every Loan Year at Borrowers' expense. A quarterly Inventory appraisal (conducted by an appraiser satisfactory to the Agents) shall be required under this Agreement.                (J)   Government Notices. Promptly after the receipt thereof, Administrative Borrower will deliver to Agents copies of all notices, requests, subpoenas, inquiries or other writings received from any governmental agency concerning any Employee Benefit Plan, the violation or alleged violation of any Environmental Laws, the storage, use or disposal of any Hazardous Material, the violation or alleged violation of the Fair Labor Standards Act or Borrowers' payment or non-payment of any taxes including any tax audit if the failure to timely comply or respond to any such notices, requests, subpoenas, inquiries or other writings would give such governmental agency the right to seek to impose a lien on or take other action with respect to any of Borrowers' assets.               (K)   Events of Default, etc. Promptly upon an executive officer of Administrative Borrower obtaining knowledge of any of the following events or conditions, Administrative Borrower shall deliver to Agents a certificate of Administrative Borrower's chief executive officer, chief operating officer or chief financial officer specifying the nature and period of existence of such condition or event and what action such Borrower has taken, is taking and proposes to take with respect thereto: (1) any condition or event that constitutes an Event of Default or Default; or (2) any Material Adverse Effect.               (L)   Projections. As soon as available and in any event no later than the end of each Fiscal Year of any Borrower, Administrative Borrower will deliver to Agents Projections for each Borrower and its Subsidiaries for the forthcoming Fiscal Year. Projections for the forthcoming Fiscal Year shall be on a month by month basis and on a consolidated and consolidating bases. As soon as available and in any event no later than thirty (30) days after the end of each Fiscal Year of any Borrower, Administrative Borrower will deliver to Agents Projections for the remaining Fiscal Years through the maturity of the Loans which Projections shall be on consolidated, annual, and year by year bases.               (M)   Subordinated Debt and Equity Notices. As soon as practicable, Administrative Borrower will deliver to Agents copies of all material written notices given or received by any Loan Party with respect to any Subordinated Debt or capital stock or equity interest of such Loan Party, and, within two Business Days after any Loan Party obtains knowledge of any matured or unmatured event of default with respect to any Subordinated Debt, notice of such event of default.               (N)   Litigation. Promptly upon learning thereof, Administrative Borrower will deliver to Agents in writing notice of any litigation commenced or threatened against any Loan Party that (i) seeks damages in excess of $2,000,000,(ii) seeks injunctive relief, (iii) is asserted or instituted against any Employee Benefit Plan, its fiduciaries or its assets or against any Loan Party or ERISA Affiliate in connection with any Employee Benefit Plan, (iv) alleges criminal misconduct by any Loan Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Claims or (vi) involves any product recall.               (O)   Lease Default Notices. Within two Business Days after receipt thereof, Administrative Borrower will deliver to Agents copies of (i) any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (ii) such other notices or documents as Agents may reasonably request.               (P)   SEC Filings and Press Releases. Promptly upon their becoming available, Administrative Borrower will deliver to Agents copies of: (i) all financial statements, reports, notices and proxy statements made publicly available by any Loan Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Loan Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Loan Party to the public concerning material changes or developments in the business of any such Person.               (Q)   Other Information. With reasonable promptness, Administrative Borrower will deliver to Agents such other information and data as Agents or Lenders may reasonably request from time to time.               (R) Casualty. Administrative Borrower shall promptly notify Agents of any loss, damage, or destruction to the Collateral in the amount of $250,000 or more, whether or not covered by insurance.               (S) ERISA Matters. Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, Administrative Borrower will deliver to Agents a written notice specifying the nature thereof, what action any Loan Party or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation with respect thereto. FINANCIAL COVENANTS RIDER         This Financial Covenants Rider is attached and made a part of that certain Loan Agreement dated as of October 31, 2000 (the “Loan Agreement”) entered into among Recoton Corporation, a New York corporation, InterAct Accessories, Inc., a Delaware corporation, Recoton Audio Corporation, a Delaware corporation, AAMP of Florida, Inc., a Florida corporation, and Recoton Home Audio, Inc., a California corporation, the other Loan Parties party thereto and Agents and Lenders party thereto. Capitalized terms used herein but not otherwise defined herein have the meaning assigned to those terms in the Loan Agreement.         A. Consolidated Tangible Net Worth. Recoton and its Subsidiaries shall attain a Consolidated Tangible Net Worth in the amounts set forth below at the end of each quarter of a Fiscal Year set forth below: Fiscal Quarter Ending Amount --------------------- ------ December 31, 2000 $ 76,500,000 March 31, 2001 $ 76,750,000 June 30, 2001 $ 75,000,000 September 30, 2001 $ 76,500,000 December 31, 2001 $ 92,500,000 March 31, 2002 $ 90,000,000 June 30, 2002 $ 87,500,000 September 30, 2002 $ 89,000,000 December 31, 2002 $110,250,000 March 31, 2003 $107,750,000 June 30, 2003 $105,250,000         B.  Minimum EBITDA. Recoton and its Subsidiaries, on a consolidated basis, shall attain a minimum EBITDA in the amounts set forth below for each quarter of a Fiscal Year and for any trailing four quarters period ending on the last day of each month during the periods set forth below: Amount for Amount for Trailing Fiscal Quarter Ending Fiscal Quarter Four Quarters --------------------- -------------- ------------- December 31, 2000 $21,000,000 $45,000,000 March 31, 2001 $3,500,000 $41,500,000 June 30, 2001 $6,000,000 $40,500,000 September 30, 2001 $12,250,000 $43,500,000 December 31, 2001 $29,250,000 $51,500,000 March 31, 2002 $4,000,000 $51,750,000 June 30, 2002 $6,750,000 $52,500,000 September 30, 2002 $13,500,000 $53,500,000 December 31, 2002 $32,250,000 $56,500,000 March 31, 2003 $ 4,000,000 $56,750,000 June 30, 2003 $7,000,000 $57,000,000   Notwithstanding anything to the contrary contained herein, if the actual result for an individual Fiscal Quarter ending March 31, June 30, or September 30 does not meet the required minimum for such Fiscal Quarter but the Fiscal Year-To-Date EBITDA results as of the Fiscal Quarter then ended meets or exceeds the required minimum EBITDA for the Fiscal Year-To-Date including that same period, as outlined above, the Borrowers will remain in compliance with respect to the column headed “Amount For Fiscal Quarter”. Under no circumstance, however, shall Recoton and its Subsidiaries, on a consolidated basis, fail to attain a minimum EBITDA of $21,000,000 for Fiscal Quarter ending December 31, 2000, $29,250,000 for Fiscal Quarter ending December 31, 2001 and $32,250,000 for Fiscal Quarter ending December 31, 2002.         C. Capital Expenditure Limits. The aggregate amount of all Capital Expenditures (excluding expenditures with respect to the New Information System), Capital Leases with respect to fixed assets of Borrowers and their Subsidiaries (which shall be considered to be expended in full on the date such Capital Leases are entered into) and other contracts with respect to fixed assets initially capitalized on Borrowers’ or any Subsidiary’s balance sheet prepared in accordance with GAAP (which shall be considered to be expended in full on the date such contract is entered into) (excluding, in each case, expenditures for trade-ins and replacement of assets to the extent funded with casualty insurance proceeds) will not exceed the amount set forth below for each period set forth below. The amounts set forth below not made in any period set forth below may be carried over for one year only to the next period provided, however, any carried-over amount will be deemed used only after all otherwise permitted amounts for that period have been used: Period Amount ------ ------ October 31, 2000 to December 31, 2000 $3,000,000 January 1, 2001 to December 31, 2001 $8,000,000 January 1, 2002 to December 31, 2002 $8,000,000 January 1, 2002 to December 31, 2003 $8,000,000         D. Fixed Charges Coverage. Recoton and its Subsidiaries, on a consolidated basis, shall not permit the Fixed Charges Coverage for any period ending on the last day of each quarter during the periods set forth below to be less than the amount set forth below for such periods: Ratio for Trailing Fiscal Quarter Ending Four Quarter Period --------------------- ------------------- December 31, 2000 1.0 to 1.0 March 31, 2001 1.0 to 1.0 June 30, 2001 1.0 to 1.0 September 30, 2001 1.0 to 1.0 December 31, 2001 1.1 to 1.0 March 31, 2002 1.1 to 1.0 June 30, 2002 1.1 to 1.0 September 30, 2002 1.0 to 1.0 December 31, 2002 1.0 to 1.0 March 31, 2003 1.0 to 1.0 June 30, 2003 1.0 to 1.0 SCHEDULES TO LOAN AGREEMENT Schedule 2.1(C)(i) Concentration Limitation -------------------------------------------------------------------------------- Wal-Mart Best Buy Target 25% 15% 15% Schedule 2.1(C)(ii) Locations of Inventory in Transit -------------------------------------------------------------------------------- Inventory is in transit to the following locations: 1.  Company Locations Company Address/City/State/Zip County ------- ---------------------- ------ Recoton Corporation 2950 Lake Emma Road Seminole Lake Mary, FL 32746 531 Stone Road Solano Benicia, CA 94519 c/o Bridge Terminal Transport Duval County 5100 Gordon Street Jacksonville, FL 32216 InterAct Accessories, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746 c/o Bridge Terminal Transport Duval 5100 Gordon Street Jacksonville, FL 32216 2000-2002 E. Lake Mary Blvd Seminole Sanford, FL 32773 AAMP of Florida, Inc. 13160 56th Court, Suite 508 Pinellas Clearwater, FL 33760 3041 E. Cherry Street Greene Springfield, MO 65802 750 Freeport Blvd Washoe Units 105 & 106 Sparks, NV 89431 7630 Miramar Road San Diego San Diego, CA 92121 Recoton Audio Corporation 2950 Lake Emma Road Seminole Lake Mary, FL 32746 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746 531 Stone Road Solano Benicia, CA 94510 ReCone, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746 Recoton Home Audio, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746 527 Stone Road Solano Benicia, CA 94510 531 Stone Road Solano Benicia, CA 94510 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746 Recoton International Holdings, 2950 Lake Emma Road Inc. Lake Mary, FL 32746 Seminole Recoton European Holdings, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746 Recoton Canada Ltd. 680 Granite Court NA Pickering, Ontario L1W 3J5 Canada 2.  Customs Brokers BDP International (for InterAct Accessories, Inc.) 811 Cromwell Park Drive, Suite 100 Glen Burnie, MD 21061 (410) 762-5840 DFW International (for Recoton Corporation) 3025 Roy Orr Blvd Grand Prairie, TX 75050 (972) 262-0539 Emery Customs Brokers (for Recoton Audio Corporation/Recoton Mobile Electronics and Recoton Corporation) 6940 C Engle Road Middleburg Heights, OH 44130 (440) 816-3921 Priority One International (for Recoton Audio Corporation/Recoton Mobile Electronics and Recoton Home Audio, Inc.) 3419 Trentwood Blvd. Orlando, FL 32812 (407) 855-0925 Sims Waters & Associates, Inc. (for Recoton Audio Corporation/Recoton Mobile Electronics and Recoton Home Audio Corporation) 4444 Talleyrand Avenue P.O. Box 13248 Jacksonville, FL 32206 (904) 356-4455 Tower Group International (for Recoton Audio Corporation/Recoton Mobile Electronics and Recoton Home Audio, Inc.) 150 Eastern Avenue Chelsea, MA 02150-3352 (617) 887-8656 377 Oyster Point Blvd., Unit 19 South San Francisco, CA 94008 650-829-3191 Welke Customs Brokers LTD. (for Recoton Canada Ltd.) 116 Skyway Avenue Toronto, Ontario, Canada M9W4Y9 (416) 674-0592 Eagle Air USA (for InterAct Accessories, Inc.) 9449 Benford Rd. Orlando, FL 32821 (407) 851-9070 Comet Customs Brokers, Inc. (for InterAct Accessories, Inc.) 420 W. Merrick Road Valley Stream, NY 11580 (516) 861-2160 Kuehne & Nagel (for Recoton Corporation) 8870 Boggy Creek Rd. Suite 100 Orlando, FL 32824 (407) 240-7395 UPS (for Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton Home Audio, Inc., InterAct Accessories, Inc. and AAMP of Florida, Inc.) 8500 Parkline Blvd. Suite 113 Orlando, FL 32809 (407) 856-3429 Federal Express (for Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton Home Audio, Inc., InterAct Accessories, Inc. and AAMP of Florida, Inc.) 2600 Nonconnah Blvd. Suite 191 Memphis, TN 38132 (901) 922-3656 Sack & Menendez Inc. (for AAMP of Florida, Inc.) 8442 Tradeport Drive Suite 203 Orlando, FL 32827 (407) 859-6081 3.  Drayage Yards BTT Jacksonville (for Recoton Corporation, Recoton Audio AB Trucking (for Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton Home Corporation/Recoton Mobile Electronics, Recoton Audio, Inc. and InterAct Accessories, Inc.) Home Audio, Inc. and InterAct Accessories, Inc.) 139 Eastport Rd. 1195 Middle Harbor Rd. Jacksonville, FL 32218 Oakland, CA 94607 Ph: 800-888-7413 Ph: 510-835-0930 BTT Savannah (for Recoton Corporation, Recoton Audio PRTI (for Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton Home Corporation/Recoton Mobile Electronics, Recoton Audio, Inc. and InterAct Accessories, Inc.) Home Audio, Inc. and InterAct Accessories) P.O. Box 959 1284 Caspian Way Hwy. 80 west of Hwy. 307 Long Beach, CA 90813 Pooler, GA 31332 Ph: 510-835-0930 Ph: 800-673-7359 BTT Chicago (for Recoton Corporation) PRTI (for Recoton Corporation, Recoton Audio 3759 W. 38th Street Corporation/Recoton Mobile Electronics, Recoton Chicago, IL 60632 Home Audio, Inc. and InterAct Accessories) 445 9th Ave. Oakland, CA 94606 Ph: 510-835-7784 BTT Irving (for Recoton Corporation) Intermodal Trucking (for InterAct Accessories, Inc.) 1812 Loop 12 North 9852 Boggy Creek Irving, TX 75061 Orlando, FL 32824-8408 Ph: 972-579-7711 Ph: 407-888-2446 Intermodal Trucking (for InterAct Accessories, Inc.) Hellman International (for AAMP of Florida, Inc.) 1900 South 20th Street 5901 Benjamin Center Dr., Suite 103 Tampa, FL 75061 Tampa, FL 33634 Ph: 800-908-8333 813-866-5355 Jim Parker Wes-Flo Company (for AAMP of Florida, Inc.) 5707 54th Street Tampa, FL 33610 813-626-2171 Jim Perry 4.  Ports a.  For Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton, Home Audio Corporation and InterAct Accessories Port of Oakland Port of Long Beach 530 Water Streett 952 Harbor Plaza Oakland, CA 94607 P.O. Box 570 Ph: 510-272-1305 Long Beach, CA 90801 Ph: 310-732-3508 Port of Miami Port of Savannah 1015 North American Way Hwy 17 North Miami, FL 33132 Garden City, GA 31418 Ph: 305-371-7678 Ph: 912-966-7842 b.  For AAMP of Florida, Inc. Port of Los Angeles Port of Orlando Los Angeles, CA Orlando, FL Port of Tampa Port of Miami Tampa, FL 1015 North American Way Miami,FL 33132 Ph: 305-371-7678 c.  For Recoton Canada Ltd. Port of Vancouver 343 Lower River Road P.O. Box 1180 Vancouver, WA 98666 Ph: (360) 693-3611 5.  Transload Distribution Facility HUDD Distribution (for Recoton Corporation, Recoton Audio Corporation/Recoton Mobile Electronics, Recoton Home Audio, Inc. and InterAct Accessories) 9400 Hall Rd. Downey, CA 90241 Ph. 562-803-4685 Hellman International (for AAMP of Florida, Inc.) 5901 Benjamin Center Dr., Suite 103 Tampa, FL 33634 813-886-5355 Jim Parker 6.  Rail Yards Santa Fe Dallas (for Recoton Corporation) CSX Orlando (for InterAct Accessories, Inc.) 2400 Westport Pkwy West 8850 Atlantic Ave. Haslet, TX 76052 Orlando, FL 32824 Ph: 817-224-7164 Ph: 817-224-7164 CSX Jacksonville (for Recoton Corporation, FEC (Florida Coast East) Jacksonville Recoton Audio Corporation/Recoton Mobile (for Recoton Corporation, Recoton Audio Electronics, Recoton Home Audio, Inc. and Corporation/Recotton Mobile Electronics, InterAct Accessories) Recoton Home Audio, Inc. and 5902 Sportsman Club Rd. InterAct Accessories) Jacksonville, FL 32219 6140 Phillips Hwy. Ph: 904-695-7000 Jacksonville, FL 32216 Ph: 904-773-4414 CNR (Canadian National Rail) (for Recoton CPR (Canadian Pacific Rail) (for Recoton Canada Ltd.) Canada Ltd.) 30 International Drive 6830 Rutherford Rd. Brampton, Ontario L6T 5K1 Vaughn, Ontario L0J 1C0 7.  Forwarder’s Yards Panalpina CFS (for Recoton Canada Ltd.) Paltainer (for Recoton Canada Ltd.) 7347 Kimbel Street CN Brampton Mississauga, Ontario L4T 3M6 International Drive Brampton, Ontario Paltainer (for Recoton Canada Ltd.) Paltainer (for Recoton Canada Ltd.) CO OBICO I.W.I. North Queen Street East 3380 Airway Dr. Etobicoke, Ontario Mississagua, Ontario Schedule 3 List of Closing Documents                                                             (1)  A Mortgage for each Mortgaged Property duly executed by Recoton, which shall secure the indebtedness of the Loans, together with executed copies of financing statements (UCC-1) to be filed under the Uniform Commercial Code in all jurisdictions necessary or, in the opinion of the Senior Agent, desirable to perfect the security interest created by each of the respective Mortgages.            (2)  A Phase I Environmental Site Assessment, engineering report and an MAI appraisal, each in form and content acceptable to the Agents, in its sole discretion, with respect to each of the Mortgaged Properties listed on Schedule 11.1(A).            (3)  A title insurance policy issued by a title company reasonably satisfactory to the Agents for each of the Mortgaged Properties.            (4)   A current survey for each of the Mortgaged Properties.            (5)  A certificate of occupancy for each of the Mortgaged Properties listed on Schedule 11.1(A).            (6)  A zoning certificate, zoning endorsement or zoning opinion, in form and content acceptable to the Agents, with respect to each of the Mortgaged Properties listed on Schedule 11.1(A).            (7)  Certificates of insurance evidencing the insurance required to be carried by the Loan Parties pursuant to subsection 4.14.            (8)  A favorable opinion from special counsel and each local counsel to Borrower, each dated as of the Closing Date, substantially in the form of Exhibit J, and as to such other matters as the Agents may reasonably request.            (9)  A pay-off and release letter from all lenders, in form and content reasonably acceptable to the Agents, for all obligations owed by Borrowers to such lenders under any outstanding credit facilities, letters of credit or other indebtedness along with executed releases of mortgages, in recordable form, and termination statements (UCC-3) for filing in any jurisdictions where The Chase Manhattan Bank has filed mortgages or financing statements, with respect to: (21166) (21167) (21168) (21169) (21170) Existing Credit Agreement 1997 Notes 1998 Notes MRA LIFO Documents   (21171) (21172) (21173) (21174) (21175) (21176) (21177) (21178) (21179) (21180) (21181) (21182) (21183) (21184) (21185) (21186) (21187) (21188) (21189) (21190) (21191) (21192) (21193) (21194) Warehouseman's Waivers Landlord's Consents Patent Security Agreement Trademark Security Agreement Copyright Security Agreement Guaranty Canada Guaranty Bill of Lading/Goods in Transit Documentation Pledge Agreement Security Agreement Canada Security Agreement UK Pledge Agreement German Pledge Agreement Italy Pledge Agreement Hong Kong Pledge Agreement Notes Organizational Documents Good Standing Certificates Blocked Accounts Lockbox Accounts Three Party Blocked Account Agreement Stock certificates/stock powers Intercompany Notes/allonges UCC-1 Financing Statements Schedule 4.1(A) Capitalization -------------------------------------------------------------------------------- 1. Recoton Corporation a) Authorized Shares:  40,000,000 Common Stock at $0.20 par value; 10,000,000 Preferred Stock b) Issued Shares:  12,970,854 (as of 12/31/99) c) Treasury Shares: 1,238,330 (as of 12/31/99) d) Jurisdiction of Incorporation:  New York 2. Christie Design Corporation a) Authorized Shares:  3,000 at $0.01 par value b) Issued Shares (Shareholder):  10 (Recoton) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Delaware 3. AAMP of Florida Inc., d/b/a AAMP of America, Inc. a) Authorized Shares:  200 at $1.00 par value b) Issued Shares (Shareholder):  10 (Recoton) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Florida 4. Recoton Audio Corporation a) Authorized Shares:  3,000 at $0.01 par value b) Issued Shares (Shareholder):  10 (Recoton) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Delaware e) Subsidiaries:       i)       Recoton Home Audio, Inc. a)  Authorized Shares: 1,000 at no par value b)  Issued Shares (Shareholder):  100 (Recoton Audio Corporation) c)   Treasury Shares:  None d)  Jurisdiction of Incorporation:  California       ii)      ReCone, Inc. a)  Authorized Shares:  40,000 at $1.00 par value b)  Issued Shares (Shareholder):  20,000 Series A (Recoton Audio Corporation) c)  Treasury Shares:  None d)  Jurisdiction of Incorporation:  Delaware       iii)     Recoton International Holdings, Inc. a)  Authorized Shares:  3,000 b)  Issued Shares (Shareholder):  1,000 (Recoton Audio Corporation)   c)  Treasury Shares:  None d)  Jurisdiction of Incorporation:  Delaware       iv)     Recoton Japan, Inc. a)  Authorized Shares: 1,000 b)  Issued Shares (Shareholder):   100 (Recoton International Holdings, Inc.) c)  Treasury Shares:  None d)  Jurisdiction of Incorporation:  Illinois       v)      Recoton European Holdings, Inc a)  Authorized Shares:  3,000 at $1.00 par value b)  Issued Shares (Shareholder):  1,000 (Recoton International Holdings, Inc.) c)  Treasury Shares:  None: d)  Jurisdiction of Incorporation:  Delaware       vi)      RECOTON German Holdings GmbH a)   Authorized Shares: b)  Issued Shares (Shareholder):  200,000 DM divided into two share interests of 50,000 DM            and 150,000 DM (Recoton European Holdings, Inc.) c)  Treasury Shares:  NA d)  Jurisdiction of Incorporation:  Germany       vii)     Magnat Audio-Produkte GmbH a)  Authorized Shares: b)  Issued Shares (Shareholder):  50,000 DM (RECOTON German Holdings GmbH) c)  Treasury Shares:  NA d)  Jurisdiction of Incorporation:  Germany:       viii)    Mac Audio Electronic GmbH a)  Authorized Shares: b)  Issued Shares (Shareholder):   199,000 DM, 20,000 DM, 12,000 DM and 1,000 DM           (RECOTON German Holdings GmbH) c)  Treasury Shares:  NA d)  Jurisdiction of Incorporation:  Germany       ix)      HECO Audio-Produkte GmbH a)  Authorized Shares: b)  Issued Shares (Shareholder):  50,000 DM (RECOTON German Holdings GmbH) c)  Treasury Shares:  NA d)  Jurisdiction of Incorporation:  Germany       x)       RECOTON Audio Produkte GmbH a)  Authorized Shares: b)  Issued Shares (Shareholder):   25,000 (RECOTON German Holdings, GmbH) c)  Treasury Shares:  NA d)  Jurisdiction of Incorporation:  Germany       xi)      Recoton (UK) Limited a)  Authorized shares:  35,569,714 ordinary shares at(pound)0.10 each b)  Issued Shares (Shareholder):   35,569,714 (23,120,314 in the name of The Chase Manhattan           Bank and 12,449,400 in the name of Recoton European Holdings, Inc.) c)  Treasury Shares:   None d)  Jurisdiction of Incorporation:  United Kingdom       xii)      Tambalan Limited a)  Authorized shares:  1,000 ordinary shares at(pound)1.00 each b)  Issued Shares (Shareholder):   2 (Recoton European Holdings, Inc.) c)  Treasury Shares:  None d)  Jurisdiction of Incorporation:  United Kingdom:       xiii)    Ross Consumer Products (H.K.) a)  Authorized shares: b)  Issued Shares (Shareholder):   1000 (998 in name of Recoton (UK) Limited; 2 in name of          nominee) c)  Treasury Shares:  None:   d)  Jurisdiction of Incorporation:  Hong Kong       xiv)     Recoton Italia s.r.l. a)  Authorized Shares: b)  Issued Shares (Shareholder):  Lt 3,934,813,000 (Recoton European Holdings, Inc.) c)  Treasury Shares:  None d)  Jursidiction of Incorporation:  Italy 5. InterAct Accessories, Inc. a) Authorized shares:  3,000 at $0.01 par value b) Issued Shares (Shareholder):  10 (Recoton Corporation) c) Treasury Shares:  None d) State of Incorporation:  Delaware 6. STD Technology Holding, Ltd. a) Authorized shares:  10,000 shares of HK$1.00 each b) Issued Shares (Shareholder):  100 (STD Holding Limited owns of record 99 shares which are in the process of being transferred into the name of Recoton Corporation and 1 share is registered in the name of Stephen Chu Nin Yiu) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Hong Kong e) Subsidiaries:       i)       STD Technology (Shenzhen) Limited (in formation) a)  Authorized Shares:  registered capital expected to be US$1,200,000 b)  Issued Shares (Shareholder):   c)  Treasury Shares:   d)  Jurisdiction of Incorporation:  People's Republic of China 7. Recoton (Far East) Limited a) Authorized shares:  1,000 at HK$10.00 per share b) Issued Shares (Shareholder):  1000 (349 owned by and registered in the name of Recoton Corporation, 650 owned by Recoton Corporation but still in the name of the prior legal share mortgagee, which are in the process of being reissued in the name of Recoton Corporation, and 1 in the name of Robert Borchardt as nominee for Recoton) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Hong Kong e) Subsidiaries:       i)       STD Holding Limited a) Authorized Shares:   27,733,340 (7 ordinary shares and 27,733,333 non-voting deferred shares at HK$1.00 per share) b) Issued Shares:  27,733,340 (Recoton (Far East) Limited owns 27,733,333 non-voting deferred shares and 6 ordinary shares and 1 ordinary share is owned by Stutterham Limited) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Hong Kong e) Subsidiaries: (1) STD Electronic International Limited (a) Authorized Shares:  1,750,000 at HK$1.00 per share (b) Issued Shares (Shareholder):  1,750,000 (STD Holding Limited owns of record 1,749,999 shares and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited) (c) Treasury Shares:  None (d) Jurisdiction of Incorporation:  Hong Kong (2) STD Manufacturing Limited (a) Authorized Shares:  40,000 at HK$100.00 per share (b) Issued Shares (Shareholder):  40,000 (STD Holding Limited owns 39,999 shares and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited) (c) Treasury Shasres:  None (d) Jurisdiction of Incorporation:  Hong Kong (3) Eversmart Management Limited (a) Authorized Shares:  10,000 at HK$1.00 per share (b) Issued Shares (Shareholder):  2 (STD Holding Limited owns 1 share and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited) (c) Treasury Shares:  None (d) Jurisdiction of Incorporation:  Hong Kong (4) STD Plastic Industrial Limited (in dissolution) (a) Authorized Shares: 700,000 at HK$1.00 per share (b) Issued Shares (Shareholder): 700,000 (STD Holding Limited owns 699,999 shares and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited) (c) Treasury Shares:  None (d) Jurisdiction of Incorporation:  Hong Kong (5) STD Trading Limited(in dissolution) (a) Authorized Shares:  2,320,000 at HK$1.00 per share (b) Issued Shares (Shareholder):  2,320,000 ( STD Holding Limited owns 2,319,999 shares and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited) (c) Treasury Shares:  None (d) Jurisdiction of Incorporation:  Hong Kong (6) Peak Hero Limited (in dissolution) (a) Authorized Shares:  500,000 at HK$1.00 per share (b) Issued Shares (Shareholder):  500,000 (STD Holding Limited owns 499,999 share and 1 share is owned by Recoton (Far East) Limited, as nominee for STD Holding Limited (c) Treasury Shares:  None (d) Jurisdiction of Incorporation:  Hong Kong (7) STD Industrial (Shenzhen) Limited (a) Total Investment Amount:  US$7,000,000 (b) Registered Capital:  US$5,000,000 (c) Treasury Shares:  NA (d) Jurisdiction of Incorporation:  People's Republic of China (8) STD (Tianjin) International Trade Development Company Limited (in dissolution) (a) Authorized Shares:  HK$1,750,000 (b) Issued Shares (Shareholder): (c) Treasury Shares: (d) Jurisdiction of Incorporation: People's Republic of China 8. Recoton Canada Ltd. a) Authorized Shares:  unrestricted b) Issued Shares:  300,440 (Recoton) c) Treasury Shares:  None d) Jurisdiction of Incorporation:  Ontario Schedule 4.5 Real Estate -------------------------------------------------------------------------------- Entity Address/City/State/Zip County ------ ---------------------- ------ Unless otherwise noted, all locations are leased. If an asterisk appears after an address, that indicates that the company is not an official lessee of such space but merely uses space owned by another Recoton company (which allocates a portion of its rental or other costs to the indicated company) Recoton Corporation 2950 Lake Emma Road Seminole Lake Mary, FL 32746 (owned) 1090 Emma OaksTrail Seminole Lake Mary, FL 32746 (owned) 451 Hampton Crest #305B Seminole Heathrow, FL 32746 (condo - owned) 450 Hampton Crest #305C Seminole Heathrow, FL 32746 (condo - owned) 451 Hampton Crest, # 307B Seminole Heathrow, FL 32746 (condo - owned) 451 Hampton Crest #303B Seminole Heathrow, FL 32746 (condo) 145 E. 57th Street, 10th Floor New York New York, New York 10022 840 Hinckley, Suite 111 San Mateo Burlingame, CA 94010 c/o Unlimited Supplies Nassau 61 Tec Street Hicksville, NY 11801 Recoton Electronics Outlet Maricopa Arizona Mills 5000 Arizona Mills Circle Tempe, AZ 85203 Greater Orlando Aviation Authority Orange Orlando International Airport One Airport Blvd. Orlando, FL 32887 (Foreign Trade Zone) 531 Stone Road Solano Benecia, CA 94510 Christie Design Corporation 774 Mays Blvd. #10 Washoe Incline Village, NV 89481 InterAct Accessories, Inc. 10999 McCormick Road Baltimore Hunt Valley, MD 21031 335 Clubhouse Lane Baltimore Baltimore, MD 21031 2950 Lake Emma Road Seminole Lake Mary, FL 32746* 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746* Emerald Park Office Center Broward Unit C403D 2699 Stirling Road, Ft. Lauderdale, Florida 33312 318 Clubhouse Lane Baltimore Hunt Valley, MD 21031 Bank of North Texas Building Tarrant 8701 Bedford Euless Road Hurst, TX 2000-2002 E. Lake Mary Blvd. Seminole Sanford, FL 32773 (Warehouse) AAMP of Florida, Inc. 13160 56th Court, Suite 508 Pinellas Clearwater, FL 33760 3041 E. Cherry Street Greene Springfield, MO 65802 750 Freeport Blvd., Units 105 & 106 Washoe Sparks, NV 89431 7616 Miramar Road San Diego San Diego, CA 92121 Recoton Audio Corporation 2950 Lake Emma Road Seminole Lake Mary, FL 32746* 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746* 43000 West Nine Mile Road Suite 212 Novi, MI 48375 ReCone, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746* c/o Griffin Corporate Services, Inc. New Castle 300 Delaware Avenue Wilmington, DE 19801 Recoton Home Audio, Inc. 527 Stone Road Solano Benicia, CA 94510 535 Getty Court Solano Benecia, CA 94510 (subleased) Rain Tree Business Center Benton 902A South Walton Blvd. Suite 8 Bentonville, Arkansas 72712 2950 Lake Emma Road Seminole Lake Mary, FL 32746* 1090 Emma Oaks Trail Seminole Lake Mary, FL 32746* Recoton International Holdings, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746* Recoton Japan, Inc. Sunahara Bldg, 5th Floor NA No. 1-21-13 Takadanobaba Shinjuki-ku, Tokyo 169 JAPAN Dairoku Yamichi Bldg. - 1F NA 2-5-2 Hibarigoaka-Kita Hoya Shi Tokyo, 2020 Japan Recoton European Holdings, Inc. 2950 Lake Emma Road Seminole Lake Mary, FL 32746 Recoton Canada Ltd. 680 Granite Court NA Pickering, Ontario L1W 3J5 Canada Lake Mary, FL 32746* Schedule 4.7 Taxes -------------------------------------------------------------------------------- The following tax audits are pending: 1. For Recoton Corporation, the federal corporate income tax returns for 1994, 1995 and 1996 and the 1996-1998 New York corporate income tax returns for 1996, 1997 and 1998 are being audited. 2. For Recoton Canada Limited, the 1995, 1996 and 1997 income tax returns are being audited. Schedule 4.9 Employee Benefit Plans -------------------------------------------------------------------------------- 1. 2. 3. 4. 5. 1991 Stock Option Agreement 1998 Stock Option Agreement Non-Qualified Option Stock Bonus Plan 401(k) Profit Sharing Plan Options for an aggregate of 18,500 shares of Recoton Corporation were granted to certain full-time foreign consultants of the Company in 1998 outside of the existing stock option plan since the then-operating plan did not allow grants to non-employees. The terms of such options were substantially similar to options which could have been granted under the 1991 Stock Option Plan. Schedule 4.14 Insurance -------------------------------------------------------------------------------- 1. Open Cargo Policy issued by Continental Insurance company, January 1, 2000 2. Kidnap and Ransom Policy, issued by Chubb effective from December 31, 1999 to December 31, 2000 3. Travel Accident Policy, issued by Chubb from December 31, 1999 to December 31, 2000 4. Workers Compensation and Employers Liability Insurance Policy, issued by Zurich-American Insurance Group effective from June 23, 2000 to June 23, 2001 5. Commercial Package Policy, issued by Chubb effective from December 31, 1999 to December 31, 2000 6. Employment Practices Liability Policy, issued by Chubb effective from December 31, 1999 to December 31, 2000 7. Business Auto Policy, issued by Chubb effective from December 31, 1999 to December 31, 2000 8. Credit insurance policy, issued by American Credit Indmenity Company effective from January 1, 2000 through December 31, 2000 9. Fiduciary Liability Policy issued by Chubb effective from December 31, 1999 to December 31, 2000 10. Commercial Umbrella Policy issued by Chubb effective from December 31, 1999 to December 31, 2000 11. World Network Policy issued by Chubb effective from April 1, 2000 to April 1, 2001 12. Global Group Travel Accident, issued by AIG effective from October 7, 2000 to October 7, 2001 13. Umbrella/Excess Liability Policy issued by Great American Insurance Co, effective from December 31, 1999 to December 31, 2000 14. Crime Policy, issued by Chubb Group, effective from December 31, 1999 to December 31, 2000 15. $200,000 Customs Bond, issued by Vigilant Insurance Company, effective from June 26, 2000 to June 26, 2001 16. $400,000 Customs Bond, issued by Vigilant Insurance Company, effective from June 26, 2000 to June 26, 2001 17. $50,000 Customs Bond, issued by Vigilant Insurance Company, effetive from November 4, 1991 18. $140,000 Customs Bond issued by InterCargo Insurance Company, effective from October 23, 1999 19. Utility Bond issued by Reliance Insurance Company 20. D&O Liability Insurance Policy with Chubb for $25 million from 5/25/98 to 5/25/01 21. Excess D&O Liability Insurance Policy with Great American Insurance Company for $25 million from 6/18/98 to 5/25/01 22. Title insurance policy on Florida property Schedule 4.16 Employee Matters -------------------------------------------------------------------------------- Collective Bargaining Agreements: 1. Contract and Working Agreement between Recoton Corporation and Glas, Molders, Potery, Plastics & Allied Workers, International Union, AFL-CIO and Local Union No. 184, expiring August 3, 2003 2. Collective Agreement between Recoton Canada Ltd. and National Automobile, Aerospace, Transportation and General Workers Union of Canada, expiring August 10, 2002 Written Employment Contracts: 1. Employment Agreement with Robert Borchardt 2. Employment Agreements with (a) Stephen Chu,(b) Todd Hays, (c) David Chu, (d) Patrick Ho, (e) John Leung and (f) Gary Lee 3. Employment Agreements with (a) Micah Ansley and (b) Diane Eberlein 4. Employment Agreement with Cary Christie 5. Deferred Compensation Agreements with (a) Robert Borchardt dated 7/1/82, amended 12/13/9, (b) Peter Wish dated 10/1/82 , amended 12/13/91and (c) George Calvi, dated 10/1/91 6. Split-Dollar Life Insurance Agreements with   a. Trudi Borchardt, Marvin Schlacter and Robert Borchardt for $1,500,000 policy issued by William Penn (Policy # NYU 99873) dated 2/24/89   b. Trudi Borchardt and Marvin Schlacter for policy issued by William Penn (Policy # NYU 92035) dated 2/24/89   c. Robert Borchardt for $250,000 policy issued by Executive Life (Policy # C 11613111L) dated 2/24/89   d. Robert Borchardt for $6,500,000 principal amount insurance policy issued by John Hancock Mutual Life Insurance Company on the joint lives of Robert and Trudi Borchardt dated 12/17/93   e. Robert Borchardt for $3,500,000 policy issued by Chubb Life Insurance Company of America on the joint lives of Robert and Trudi Borchardt dated 12/17/93   f. Robert Borchardt for $1,300,000 policy issued by Hartford Life and Accident Insurance Company on the life of Robert Borchardt dated 12/17/93   g. Amendment dated 11/6/98   h. Robert and Trudi Borchardt for $2,250,000 by Travelers dated 11/6/98   i. Robert and Trudi Borchardt for $2,000,000 by Occidental Life dated 11/6/98 7. Employment Agreement with Mark Finger dated 8/27/93 8. Employment Agreement with John Rogus by AAMP of Florida dated 8/14/96 9. Employment letter with Russell Bruan by InterAct dated 8/1/00 Schedule 7.1 Indebtedness -------------------------------------------------------------------------------- 1. Recoton owes $20,000,000 to Prudential Insurance Company pursuant to 1999 Subordinated Notes. 2. Recoton owes $15,000,000 to ING Barings, Inc. pursuant to 1999 Subordinated Notes. 3. See Indebtedness noted on Schedule 7.4(e). Schedule 7.2 Guarantees -------------------------------------------------------------------------------- The following Recoton subsidiaries have guaranteed the indebtedness to the lenders noted at Schedule 7.1, Items 1 and 2:   Christie Design Corporation InterAct Accessories, Inc. Recoton Audio Corporation ReCone, Inc. Recoton Home Audio, Inc. Recoton International Holdings, Inc Recoton Japan, Inc. Recoton European Holdings, Inc AAMP of Florida, Inc. Recoton Canada Ltd. Schedule 7.4(c) Loans to Employees and Former Employees -------------------------------------------------------------------------------- Loans as of September 30, 2000: Borrower Amount -------- ------ Dede Caruso $ 3,225.00 Edward McGinty 3,445.50 Harjit Singh 2,600.00 Matthew Spiro 21,794.75 Paul Nicodemo 6,700.00 Sherry McGinty 6,695.00 Jim McGail 3,604.07 Eric Wuestmann 1,086.79 Stuart Mont 542,816.36 Jay Wessel 140,000.00 Robert Neiman 9,187.03 STD/InterAct Management 1,955,500.00 advance against 1999 earned acquisition bonuses Schedule 7.4(e) Investment -------------------------------------------------------------------------------- 1. With respect to AAMP of Florida, Inc., Recoton Canada Ltd., Christie Design Corporation, Recoton European Holdings, Inc., Recoton German Holdings GmbH, InterAct International, Inc., Recoton Italia, s.r.l., Recoton Japan Inc., Recoton (Far East), Ltd., Recoton Corporation (d/b/a Recoton Mobile Electronics), STD Holding Ltd., and Recoton (UK) Limited, see attached. 2. Investments in other subsidiaries as they exist as of the date hereof cannot be separately determined at this time. Recoton Corporation and Subsidiaries Intercompany Payable Balances and Net Worth At 9/30/00 dr (cr) Shaded lines are primarily intercompany loans. Payable ----------------------------------------------------------------------------------------------------- Payable Receivable G/L# ACCOUNT DESCRIPTION Balance ----------------------------------------------------------------------------------------------------- AAMP Recone 19066 I/C REC FROM RECONE, INC-ELIM (20,095) AAMP Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (3,553,286) AAMP RME 29012 I/C PAYABLE TO RAC-ELIM (210,882) AAMP UK 19028 I/C REC FROM RECOTON UK-ELIM (92,066) ----------------------------------------------------------------------------------------------------- AAMP Total (3,876,330) ----------------------------------------------------------------------------------------------------- Canada AAMP 29054 I/C PAYABLE TO AAMP - ELIM (233,608) Canada Germany-Magnat 29038 I/CO PAYABLE TO MAGNAT-ELIM (3,589) Canada Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (908,210) Canada RHA 29018 I/C PAYABLE TO RHA-ELIM (193,650) Canada RME 29012 I/C PAYABLE TO RAC-ELIM (115,458) Canada Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (281,127) Canada Shared Services 29102 DUE TO RSS-LT (318,378) Canada Shared Services 29302 I/CO NOTES PAY TO RSS-LT (4,361,630) Canada STD 29016 I/CO PAYABLE TO STD-ELIM (8,115,642) Canada UK 19028 I/C REC FROM RECOTON UK-ELIM (16,059) Canada UK 29028 I/C PAYABLE TO REC UK-ELIM (34,247) Canada IAI IAI PC 29014 I/C PAYABLE INTERACT PC (321) Canada IAI IAI Video 29011 I/C PAYABLE TO INTERACT-ELIM (473,815) Canada IAI Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (500,430) Canada IAI Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (15) Canada IAI STD 29016 I/CO PAYABLE TO STD-ELIM (1,751,829) ------------------------------------------------------------------------------------------------------ Canada Total (17,308,008) ----------------------------------------------------------------------------------------------------- Christie Design AAMP 29054 I/C PAYABLE TO AAMP - ELIM (74,123) Christie Design Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (203,933) Christie Design STD 29051 I/C PAYABLE TO STD-ELIM (18,337) ----------------------------------------------------------------------------------------------------- Christie Design Total (296,393) ----------------------------------------------------------------------------------------------------- EH Germany-Magnat 19038 I/C REC FROM MAGNAT-ELIM (754,865) EH RME 29012 I/C PAYABLE TO RAC-ELIM (314,638) ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- EH Total (1,069,502) ----------------------------------------------------------------------------------------------------- Germany-GH EH 25810 I/C PAYABLE TO EH (13,706) Germany-GH Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (11,597,062) Germany-GH RME 26810 I/C PAYABLE TO RME (12,373,472) Germany-GH Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (152,909) Germany-Heco Christie Design 29004 I/C PAYABLE TO CHRISTIE-ELIM (109,476) Germany-Heco Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (2,909) Germany-Magnat Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (69,982) Germany-Magnat RHA 25810 I/CO PAYABLE TO RHA (949) Germany-RAP EH 25810 I/CO PAYABLE TO EH (3,687,880) Germany-RAP RHA 25810 I/CO PAYABLE TO RHA (617,419) Germany-RAP RME 29012 I/C PAYABLE TO RAC-ELIM (83,676) Germany-RAP Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (1,888) Germany-RAP UK 25810 I/CO PAYABLE TO UK (363,687) ----------------------------------------------------------------------------------------------------- Germany Total (29,075,014) ----------------------------------------------------------------------------------------------------- IAI-PC Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (11,742,394) IAI-PC STD 29016 I/CO PAYABLE TO STD-ELIM (15,580,851) IAI-Video Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (2,718,901) IAI-Video RME 19012 I/C REC FROM RAC-ELIM (3,845) IAI-Video Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (11,897,088) IAI-Video STD 29016 I/CO PAYABLE TO STD-ELIM (24,301,287) ----------------------------------------------------------------------------------------------------- IAI Total (66,244,367) ----------------------------------------------------------------------------------------------------- Italy AAMP 29054 I/C PAYABLE TO AAMP - ELIM (14,711) Italy Germany-Heco 25810 I/C PAYABLE TO GERMANY-HECO (11,426) Italy Germany-Mac Audio 25810 I/C PAYABLE TO GERMANY-MAC AUDIO (5,774) Italy Germany-Magnat 25810 I/C PAYABLE TO GERMANY-MAGNAT (96,956) Italy Germany-RAP 25810 I/C PAYABLE TO GERMANY-RAP (59,862) Italy RFE 29005 I/C PAYABLE TO RFE ELIM (4,624,410) Italy RME 25810 I/C PAYABLE TO RME (4,194) Italy Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (25,276) Italy STD 29151 I/CO PAYABLE TO STD-LT (133,896) Italy UK 25810 I/C PAYABLE TO UK (7,526) ----------------------------------------------------------------------------------------------------- Italy Total (4,984,031) ----------------------------------------------------------------------------------------------------- Japan AAMP 29054 I/C PAYABLE TO AAMP - ELIM (42,151) Japan Germany-RAP 25810 I/C PAYABLE TO GERMANY-RAP (233,502) Japan Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (15,784) Japan Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (1,111) ----------------------------------------------------------------------------------------------------- Japan Total (292,548) ----------------------------------------------------------------------------------------------------- Recoton Canada 19009 I/C REC FROM RECOTON CANADA-ELIM (10,020,924) Recoton Canada IAI 19064 I/C REC FROM RCI-IAI-ELIM (451,820) Recoton Christie 19004 I/C REC FROM CHRISTIE (RAM)-ELIM (29) Recoton IAI PC 19014 I/CO REC FROM INTERACT PC (5,136,825) Recoton Italy 19029 I/C REC FROM RECOTON ITALIA (14,983) Recoton RHA 19018 I/C REC FROM RHA-ELIM (229,790) Recoton STD 29016 I/CO PAYABLE TO STD-ELIM (3,591,411) Recoton UK 29028 I/C PAYABLE TO REC UK-ELIM (352,361) ----------------------------------------------------------------------------------------------------- Recoton Total (19,798,143) ----------------------------------------------------------------------------------------------------- RFE Recoton 29101 LT PAYABLE TO RECOTON-I/C ELIM (5,898,998) ----------------------------------------------------------------------------------------------------- RFE Total (5,898,998) ----------------------------------------------------------------------------------------------------- RHA IAI-Video 19011 I/C REC FROM INTERACT-ELIM (485) RHA RME 19012 I/C REC FROM RAC-ELIM (3,735) RHA Shared Services 29002 I/C PAYABLE TO SHARED SERV.-ELIM (5,604,528) ----------------------------------------------------------------------------------------------------- RHA Total (5,608,748) ----------------------------------------------------------------------------------------------------- RME Italy 19029 I/C REC FROM RECOTON ITALIA (8,267) RME Japan 19025 I/C REC FROM RECOTON JAPAN-ELIM (89,804) RME Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (514,965) RME RFE 29005 I/C PAYABLE TO RFE ELIM (2,368) RME UK 19028 I/C REC FROM RECOTON UK-ELIM (1,015) ----------------------------------------------------------------------------------------------------- RME Total (616,420) ----------------------------------------------------------------------------------------------------- Shared Services AAMP 19054 I/C REC FROM AAMP (6,178,426) Shared Services RME 19012 I/C REC FROM RAC-ELIM (6,380,882) ----------------------------------------------------------------------------------------------------- Shared Services Total (12,559,308) ----------------------------------------------------------------------------------------------------- STD Christie Design 29004 I/C PAYABLE TO CHRISTIE-ELIM (35,470) STD EH 29027 I/C PAYABLE FROM EURO HOLDINGS ELIM (155,371) STD Italy 19029 I/C REC FROM RECOTON ITALIA (256,383) STD RFE 29005 I/C PAYABLE TO RFE ELIM (892,599) STD RHA 29018 I/C PAYABLE TO RHA-ELIM (18,838) ----------------------------------------------------------------------------------------------------- STD Total (1,358,660) ----------------------------------------------------------------------------------------------------- UK EH 25810 I/C PAYABLE TO EH (1,459,058) UK Germany-Heco 25810 I/C PAYABLE TO GERMANY-HECO (2,262) UK Germany-MacAudio 25810 I/C PAYABLE TO GERMANY-MAC AUDIO (265,207) UK Germany-Magnat 25810 I/C PAYABLE TO GERMANY-MAGNAT (382,831) UK IAI Video 29011 I/C PAYABLE TO INTERACT-ELIM (4,045) UK Recoton 29001 I/C PAYABLE TO RECOTON-ELIM (6,745,523) UK RFE 29005 I/C PAYABLE TO RFE ELIM (515,804) UK RHA 25810 I/C PAYABLE TO RHA (438) UK STD 29051 I/C PAYABLE TO STD-ELIM (4,280,581) ------------------------------------------------------------------------------------------------------ UK Total (13,655,749) ------------------------------------------------------------------------------------------------------ Subtotal (182,642,219) ------------------------------------------------------------------------------------------------------ Intercompany Balances within Entities: ------------------------------------------------------------------------------------------------------ Canada IAI Canada 29009 I/C PAYABLE FROM RECOTON CANADA (14,094,552) Shared Services Recoton 19001 I/C REC FROM RECOTON-ELIM (328,567,238) IAI-Video IAI PC 29014 I/C PAYABLE INTERACT PC (11,102,915) (353,764,705) ------------------------------------------------------------------------------------------------------ Grand Total (536,406,923) ------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------- Payable Net Worth ----------------------------------------------------------------------- AAMP Common Stock (2,000) AAMP PIC 511,515 AAMP Retained Earnings (7,891,241) AAMP CTA (2,400) ----------------------------------------------------------------------- AAMP Total Total (7,384,126) ----------------------------------------------------------------------- Common Stock (1,999,428) Canada PIC 0 Canada Retained Earnings 2,418,613 Canada CTA 293,875 ---------------- Canada Total 713,060 Canada ================ Canada Canada Canada Canada Canada Canada Canada IAI Canada IAI Canada IAI Canada IAI Canada IAI ----------------------------------------------------------------------- Canada Total ----------------------------------------------------------------------- Christie Design Common Stock (1,000) Christie Design PIC (6,513,385) Christie Design Retained Earnings 6,064,077 CTA (3,404) ----------------------------------------------------------------------- Christie Design Total Total (453,712) ================ EH PIC (8,157,319) EH Retained Earnings (4,482,779) CTA 261,368 ----------------------------------------------------------------------- EH Total Total (12,378,730) ----------------------------------------------------------------------- Germany-GH Common Stock (56,000) Germany-GH PIC (36,000) Germany-GH Retained Earnings (8,421,656) Germany-GH CTA 526,237 Germany-Heco Total (7,987,419) Germany-Heco Germany-Magnat Germany-Magnat Germany-RAP Germany-RAP Germany-RAP Germany-RAP Germany-RAP ----------------------------------------------------------------------- Germany Total ----------------------------------------------------------------------- IAI-PC Common Stock (1,000) IAI-PC PIC (39,934,513) IAI-Video Retained Earnings (10,910,702) IAI-Video CTA (3,616) IAI-Video Total (50,849,831) IAI-Video ----------------------------------------------------------------------- IAI Total ----------------------------------------------------------------------- Italy Common Stock (2,427,780) Italy Retained Earnings 218,895 Italy CTA 1,536,538 ----------------- Italy Total (672,347) ================= Italy Italy Italy Italy Italy Italy ----------------------------------------------------------------------- Italy Total ----------------------------------------------------------------------- Japan PIC (2,215,679) Japan Retained Earnings 1,056,656 Japan CTA (700,469) ----------------- Japan Total (1,859,492) ================= ----------------------------------------------------------------------- Japan Total ----------------------------------------------------------------------- Recoton PIC (247,598,437) Recoton Retained Earnings (4,091,933) Recoton CTA (899,587) ------------------ Recoton Total (252,589,957) ================== Recoton Recoton Recoton Recoton ----------------------------------------------------------------------- Recoton Total ----------------------------------------------------------------------- RFE Common Stock (1,293) Retained Earnings (63,569,225) CTA 1,910,960 ----------------------------------------------------------------------- RFE Total Total (61,659,558) ----------------------------------------------------------------------- RHA PIC (26,205,675) RHA Retained Earnings 8,571,588 RHA CTA 18,412 ----------------------------------------------------------------------- RHA Total Total (17,615,675) ----------------------------------------------------------------------- RME Common Stock (58,592) RME PIC (35,894,616) RME Retained Earnings (38,723,864) RME CTA 2,803,681 RME Treasury Stock 636,634 ----------------------------------------------------------------------- RME Total Total (71,236,757) ----------------------------------------------------------------------- Shared Services Common Stock (2,598,344) Shared Services PIC 155,700,096 Retained Earnings (45,363,265) CTA 4,079,418 Treasury Stock 6,496,536 ----------------------------------------------------------------------- Shared Services Total Total 118,314,441 ----------------------------------------------------------------------- STD Common Stock (3,577,600) STD PIC (1,685,600) STD Retained Earnings (39,615,707) STD CTA 316,038 ----------------- STD Total (44,562,869) ----------------------------------------------------------------------- STD Total ----------------------------------------------------------------------- UK PIC (4,254,624) UK Retained Earnings 6,605,570 UK CTA 1,057,408 UK Total 3,408,354 UK UK UK UK UK ----------------------------------------------------------------------- UK Total ----------------------------------------------------------------------- Subtotal ----------------------------------------------------------------------- Intercompany Balances with Entities: ----------------------------------------------------------------------- Canada IAI Shared Services IAI-Video ----------------------------------------------------------------------- Grand Total ----------------------------------------------------------------------- Schedule 7.6 Inactive Subsidiaries --------------------------------------------------------------------------------   STD Plastic Industrial Limited Hong Kong   STD Trading Limited Hong Kong   Peak Hero Limited Hong Kong   Ever Smart Management Limited Hong Kong   STD (Tianjin) International Trade          Development Company Limited P.R of China   Tambalan Limited United Kingdom   Ross Consumer Products (HK) Ltd. Hong Kong Schedule 7.11 Subsidiaries to be Established -------------------------------------------------------------------------------- InterAct International, Inc., InterAct Holdings and InterAct Technology Holding, Inc., each of which are currently existing Delaware corporations without shareholders, directors or officers, a to-be-formed Canadian company which will acquire the STD-related assets of Recoton Canada Limited, and a Shenzhen company named STD Technology (Shenzhen) Limited which is currently in the process of formation may become Subsidiaries pursuant to or in anticipation of a restructuring of InterAct and STD as more thoroughly described on Schedule 11.1(C). Schedule 11.1(A) Mortgaged Property -------------------------------------------------------------------------------- 1. Land in Lake Mary, Florida, with the street address of 2950 Lake Emma Road, Lake Mary, FL 32746, legally described as follows:   Parcel A, consisting of (1) the East 648.00 feet of the South 155.70 feet of the Southwest ¼ of the Southwest ¼ of Section 18, Township 20 South, Range 30 East, Seminole County, Florida, Less the East 83.00 feet thereof for Lake Emma Road and (2) the East 648.00 feet of the North 480.42 feet of the Northwest ¼ of the Northwest ¼ of Section 19, Township 20 South, Range 30 East 83.00 feet there of for Lake Emma Road. 2. Land in Lake Mary, Florida, with the street address of 1090 Emma Oaks Trail, Lake Mary, FL 32746, legally described as follows:   (A) The South 873.50 feet of the North 1076.70 feet of the East 498.00 feet of Government Lot 2, Section 24, Township 20 South, Range 29 East, Seminole County, Florida, AND;   (B) The Northwest1/4of the Southwest1/4of Section 29, Township 20 South, Range 30 East, Seminole County, Florida, Less the South 460.00 feet thereof and less the East 83.00 feet thereof. Schedule 11.1(B) Other Liens -------------------------------------------------------------------------------- 1. The following financing statements related to equipment leases or purchases: Date Jurisdiction in Which Filed Filed (Number) Secured Party Property Covered Comment ----- --------------------- ------------- ---------------- ------- RECOTON CORPORATION 7/7/95 California SOS Pitney Bowes all equipment (9519461294) Credit Corporation manufactured, sold or distributed by Pitney Bowes, Inc., Monarch Marketing Systems, Inc., Pitney Bowes Credit Corp., Dictaphone Corp, VIP and subject to lease #8745416-001 5/4/98 Florida SOS Ikon Office Canon Color (980000095851) Solutions Copier; Colorbus Cyclone Print Server; Encad Printer CHRISTIE DESIGN CORPORATION 7/24/95 California SOS Material Handing Nissan electric (9520861126) Supply, assigned lift truck to NMAC 5/20/96 California SOS Material Handing Nissan RRTN-40 (9614360040) Supply, assigned to NMAC 1/21/97 California International all items SOS(9702360364) Technology purchased from the Resources, Inc. secured party 4/10/97 California SOS Nissan Motor Nissan E-50 (9710560379) Acceptance Corp. INTERACT ACCESSORIES, INC. 12/14/98 Maryland SOS The Equipment Phaser 480x Color (0039100000039214) Leasing Company Printer and related supplies noted in the Form UCC-3 RECOTON AUDIO CORPORATION 4/22/96 North Carolina SOS Ameritech Credit all Computer filed under the name International (1331780) Corporation Equipment leased Jensen Incorporated, a former name by Ameritech for the company Credit Corporation RECOTON HOME AUDIO, INC. 4/28/95 California SOS AT&T Capital Toshiba 1710 Copier filed under the name IJI Specialty (9512160535) Leasing Services, Audio, Inc., a former name for Inc. this company 2. The following are liens or other encumbrances affecting the plant owned by Recoton Corporation in Lake Mary, Florida:   a. Restrictions, reservations, covenants and conditions pursuant to that certain First Revised Declaration of Covenants and Restrictions recorded July 21, 1980, in Official Records Book 1287, Page 1048.   b. Customer Agreement to Reclaimed Water Rates between Recoton Realty Corporation and Seminole County recorded in Official Records Book 2214, Page 595.   c. Customer Reclaimed Water (Effluent) Flow, Distribution Delivery and Spray Easement between Recoton Realty Corporation and Seminole County, recorded in Official Records Book 2214, Page 599.   d. Ingress/Egress and Utility Easement in favor of Greenwood Lakes Utility Company filed January 7, 1985, and recorded in Official Records Book 1461, Page 389; and assigned to Seminole County in Official Records Book 1605, Page 1721.   e. Grant of Easement (for water, sewer and utility purposes) filed September 21, 1981 and recorded in Official Records Book 1357, page 311.   f. Distribution Easement in favor of Florida Power Corporation filed February 14, 1979, and recorded in Official Records Book 1209, Page 1317.   g. Ordinance in favor of Seminole County recorded in Official Records Book 2861, Page 1095.   h. Easement granted by Recoton Corporation to Boyd T. Marshall, Individually and as Trustee, et al., filed December 11, 1997 and recorded in Official Records Book 3186, page 20.   i. Ordinance filed December 20, 1994 and recorded in Official Records Book 2861, page 1095.   j. Agreement between Recoton Corporation and Seminole County filed April 21, 1997, and recorded in Official Records Book 3228, Page 697.   k. Agreement between Recoton Corporation and Seminole Company filed May 21, 1995 and recorded in Official Records Book 2910, page 293, filed December 18, 1985, in Official Records Book 3006, Page 1385, filed April 18, 1997, in Official Records Book 3225, Page 1968.   l. Easement to Florida Power Corporation filed August 29, 1980, and recorded in Official Records Book 1292, page 54.   m. Easement from Recoton Corporation in favor of Florida Power Corporation filed November 6, 1995, in Official Records Book 2989, Page 774.   n. Easement recorded in Official Records Book 972, page 1495. ALL OF THE ABOVE RECORDED IN THE PUBLIC RECORDS OF SEMINOLE COUNTY, FLORIDA Schedule 11.1(C) STD Restructuring -------------------------------------------------------------------------------- 1. The following is a listing of certain new and existing Recoton subsidiaries as they would exist following a proposed restructuring of the STD and InterAct companies (and a spin- off from Recoton Canada Ltd. of its current InterAct-related business in Canada):   InterAct International, Inc. ("III") - this is a Delaware corporation currently existing without shareholders, officers or directors:   a. Authorized Shares: currently 3,000 at $0.01 par value (to be increased to enable the options described below to be issued and to accommodate the InterAct IPO)   b. Stockholder: to be held by Recoton Corporation with options to be issued to certain employees of the subsidiary companies as described below and shares to be issued in a possible InterAct IPO.   c. Subsidiaries: III will own the following corporations   i) InterAct Holdings, Inc. ("IHI"), which currently exists without shareholders, officers or directors:   a) Authorized shares: 3,000 at $0.01 par value (to be increased)   b) Stockholder: to be held by III   c) Jurisdiction of Incorporation:   ii) InterAct Technologies, Inc. ("ITI"), which currently exists without shareholders, officers or directors:   a) Authorized shares: 3,000 at $0.01 par value (to be increased)   b) Stockholder: to be held by III   c) Jurisdiction of Incorporation:   iii) InterAct Accessories, Inc.   a) Authorized shares: 3,000 at $0.01 par value   b) Stockholder: currently Recoton Corporation; to be contributed by Recoton Corporation to III and by III to IHI   c) Jurisdiction of Incorporation: Delaware   iv) STD Technology Holding, Ltd. which is currently a direct subsidiary of Recoton Corporation:   a) Authorized capital: 10,000 shares at HK$1.00 each   b) Stockholders: Recoton Corporation (999 shares) and Stephen Chu as nominee for Recoton Corporation (1 share); Recoton shares to be contributed to III and by III to ITI (Stephen Chu share to be held in trust for ITI)   c) Jurisdiction of Incorporation: Hong Kong   v) STD Technology (Shenzhen) Limited (in formation)   a) Authorized capital:   b) Shareholder: STD Technology Holding, Ltd.   c) Jurisdiction of Incorporation: People's Republic of China   vi) InterAct Canada (to be formed to acquire the InterAct/STD business and assets of Recoton Canada Ltd.)   a) Authorized capital: to be determined   b) Shareholders: to be held by IHI   c) Jurisdiction of Incorporation: Ontario   vii) Recoton (Far East) Limited   a) Authorized shares: 1,000 at HK$10 per share   b) Shareholders: currently Recoton (999 shares) and Robert Borchardt as nominee for Recoton Corporation (1 share); Recoton shares to be contributed to III and by III to IHI (Robert Borchardt share to be held in trust for IHI)   c) Jurisdiction of Incorporation: Hong Kong   viii) STD Holding Limited   a) Authorized capital: HK$27,733,340 (divided into 7 ordinary shares and 27,733,333 non-voting deferred shares at HK$1.00 per share)   b) Shareholders: RFE and a beneficial holder holding for RFE   c) Jurisdiction of Incorporation: Hong Kong   d) Subsidiaries:   (1) STD Electronic International Limited   (2) STD Manufacturing Limited   (3) Eversmart Management Limited   (4) STD Plastic Industrial Limited   (5) STD Trading Limited   (6) Peak Hero Limited   (7) STD Industrial (Shenzhen) Limited   (8) STD (Tianjin) International Trade Development Company Limited 2. The following substantially describes the terms which would be agreed to with certain members of existing senior management of STD and InterAct. Such employees would receive in cancellation of certain bonus payments to which they are currently entitled and in agreement for extensions of their current employment agreements, options to acquire 7.2 million shares of InterAct International, Inc. ("III") (10% of the 72 million shares which would have previously been issued to Recoton Corporation). Such options would be exerciseable at $1 per share (subject to standard adjustments), and vest 40% at grant and 20% in each of 2002, 2003 and 2004. Such employees would also get options on an additional 1.8 million shares (21/2% of Recoton's holdings), which would vest in 2009 with such vesting accelerating to 2005 if certain to-be-agreed-upon criteria are met. The optionees would have under certain circumstances the right to put shares acquired upon exercise of such options to Recoton six months after exercise if III has not consummated a public offering of its stock by December 31, 2002. Such option would expire on the earlier of six months and one day after exercising the options or June 30, 2003. The price which Recoton would pay upon exercise of such put would be the lesser of the fair market value of such shares based on book value at the time of the put or 15% of the cumulative net after-tax profits of the STD/InterAct companies (as defined) for 2001 and 2002. Recoton has the right to pay for such shares by issuing Recoton stock. Recoton/III may lend money to the optionees to exercise the options in a cashless transaction.

Exhibit 10.(iii)H AGRILIANCE STAFF VARIABLE PAY PROGRAM 2000 I.     Purpose of the Plan The purpose of the plan is to enhance overall profitability through increased sales and margins by rewarding eligible employees for their contribution toward achievement of those goals. The plan is designed to integrate the compensation plan with key business strategies and foster a team effort in achieving overall success for Agriliance and its parent companies, Cenex Harvest States, Farmland and Land O’Lakes. II.     Eligibility in the Plan All full-time exempt, non-exempt and regularly scheduled part-time employees except for those participating in another incentive plan. Seasonal and temporary employees are not eligible. Part-time employees working at least 500 hours per fiscal year are eligible to participate at 50% of award formula. New employees must be on the payroll March 1, 2000 in order to qualify for a partial-year award. III.      Administration of the Plan The incentive plan administration is based on a fiscal year basis. For the plan year 2000 it will be based on the inception date of Agriliance, January 1, 2000 through August 31, 2000. The Presidents of Cenex Harvest States, Farmland and Land O’Lakes will be responsible for reviewing and approving the plan and receiving a report on the results. The Agriliance co-presidents will be responsible for administering the plan. IV.     Funding of the Incentive Award The funding of the Staff Incentive Award Program is based on operating results of Agriliance (including Agro Distribution) and established annualized synergy realization. The specific goals for the incentive pool are as follows. A. 60% Operating income results for Agriliance B. 40% Annualized established synergy realization Agriliance Synergy Operating Income Objective Operating Percent of Synergy Percent of Income Award Amount Award 115M 80% 11M 40% (target) 110M 70% 10M 30% 105M 60% (target) 9M 20% 90M 45% 75M 30% V.     Basis of the Incentive Award The starting point in determining the staff incentive award is the base salary as of August 31, 2000 times a payout percent. The actual financial performance and synergy attainment for Agriliance is compared to established goals. Exempt: Annual Salary as of August 31, 2000. Non-exempt: Hourly rate as of August 31, 2000 times 2080 hours. Part-time: Hourly rate as of August 31, 2000 times 2080 hours times half the pay out percent times the pro-rated time worked in fiscal year. VI.     Payment of the Award The incentive award payments will be paid as soon as practical after the close of business August 31, 2000. To be eligible for payment, employees must be actively employed by Agriliance on August 31, 2000. VII.     Special Provisions If an employee becomes permanently disabled, retires, is deceased, or meets the criteria in the severance plan applicable to them, s/he shall cease to participate in the Incentive Award Program as of the end of the month coincident with disability, retirement, death or reduction in force. The proportionate incentive award will be recommended by the co-presidents of Agriliance and will be paid as soon as practical after the fiscal year close of business. Employees accepting a regular position with a system member cooperative or Agro Distibution, LLC., may be eligible for a payout. There is nothing in the Staff Incentive Award Probram or by being an eligible participant that is intended to create an employment contract between the employee and Agriliance.

Exhibit 10(f) Contract No. 113419   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 3 DATED April 5, 2000 TO AGREEMENT DATED January 15, 1998 (Agreement)   1. [ ] Exhibit A dated April 5, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated April 5, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [X] Exhibits A and B dated April 5, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated April 5, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [X] Revise Agreement MDQ: [X] Increase [ ] Decrease In Section 2. of Agreement substitute 90,000 MMBTU for 9,000 MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [ ] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [ ] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 3 becomes effective October 15, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President     EXHIBIT A DATED: April 5, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 90,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: April 5, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 900001 09 45,000 INTERCONNECT WITH NORTH           SHORE GAS COMPANY LOCATED IN           SEC. 12-T44N-R10E, LAKE COUNTY,           ILLINOIS                                   2. PGLC/NGPL OAKTON STREET COOK COOK IL 904174 09 45,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY'S ON TRANSPORTER'S           HOWARD STREET LINE IN SEC. 26-           T41N-R13E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED April 5, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED April 5, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 27   0   F   0 28   27   F   90,000 30   28   F   45,000 39   40   F   45,000 40   28   F   45,000

Exhibit 10(r) Contract No. 117182   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 2 DATED May 1, 2000 TO AGREEMENT DATED March 16, 2000 (Agreement)   1. [X] Exhibit A dated May 1, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated May 1, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [ ] Exhibits A and B dated May 1, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated May 1, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [ ] Revise Agreement MDQ: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBTU for MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [X] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [X] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 2 becomes effective April 20, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   NORTH SHORE GAS COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Executive Vice President     EXHIBIT A DATED: May 1, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117182   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SABINEPL/NGPL HENRY PLT VERMILION LA 3592 05 5,000 VERMILION           INTERCONNECT WITH SABINE           PIPELINE COMPANY'S GAS PLANT           ON TRANSPORTER'S LOUISIANA           MAINLINE IN SEC. 21-T13S-R4E,           VERMILION PARISH, LOUISIANA.               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT C DATED May 1, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117182   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED May 1, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117182   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 23   24   B   5,000 24   0   B   0 25   23   B   5,000 26   25   F   5,000 27   26   F   5,000 28   27   F   5,000 31   28   F   5,000     EXHIBIT D - (NB Service Option) DATED May 1, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117182   FTS-NB DELIVERY POINT/S           NB           Service   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             1. PGLC/NGPL CRAWFORD COOK COOK IL 904380 08 5,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CRAWFORD METER STATION IN           SEC. 34-T39N-R13E, COOK COUNTY,           ILLINOIS.               NGPL STORAGE AGREEMENTS DEDICATED TO FTS-NB SERVICE : 117162 THIRD PARTY STORAGE PROVIDER/POINT NO.   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)   SPSSO Agreement No.* *FTS-NB Service utilizing a Third Party Storage Point (as such term is defined in Natural's Tariff) is expressly contingent upon the continuing existence of a valid SPSSO Agreement and Operational Balancing Agreement at such point.     Contract No. 117182

Exhibit 10 SEVERANCE COMPENSATION AGREEMENT THIS AGREEMENT, dated as of ________, is between Structural Dynamics Research Corporation, an Ohio corporation (the "Company") and _____________ (the "Executive"). The Company's Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control of the Company. This Agreement sets forth the severance compensation which the Company agrees it will pay to the Executive if the Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control of the Company (as defined herein). 1. Term. This Agreement shall terminate, except to the extent that any obligation of the Company hereunder remains unpaid as of such time, upon the earliest of (i) _______ 30 of any year after 20__, provided that either party has given at least 60 days prior written notice to the other party of its or his intention to terminate this Agreement under this clause (i); (ii) the termination of the Executive's employment with the Company based on death, Disability (as defined in Section 3(b)) and Retirement (as defined in Section 3(c)) or Cause (as defined in Section 3(d)) or by the Executive other than for Good Reason (as defined in Section 3(e)); and (iii) two-years from the date of a Change in Control of the Company if the Executive has not terminated his employment for Good Reason as of such time. 2. Change in Control. No compensation shall be payable under this Agreement unless and until (a) there shall have been a Change in Control of the Company, while the Executive is still an employee of the Company and (b) the Executive's employment by the Company thereafter shall have been terminated in accordance with Section 3. For purposes of this Agreement, a Change in Control of the Company shall be deemed to have occurred if: (i) there shall be consummated any consolidation or merger of the Company and, as a result of such consolidation or merger (x) less than 50% of the outstanding common shares and 50% of the voting shares of the surviving or resulting corporation are owned, immediately after such consolidation or merger, by the owners of the Company's common shares immediately prior to such consolidation or merger, or (y) any person (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of the surviving or resulting corporation's outstanding common shares, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company shall be consummated, or (iii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iv) any person (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act) shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of the company's outstanding common, or (v) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 3. Termination Following Change in Control. (a) If a Change in Control of the Company shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 4 upon the subsequent termination of the Executive's employment with the Company by the Executive or by the Company unless such termination is as a result of (i) the Executive's death; (ii) the Executive's Disability (as defined in Section 3(b) below); (iii) the Executive's Retirement (as defined in Section 3(c) below); (iv) the Executive's termination by the Company for Cause (as defined in Section 3(d) below); or (v) the Executive's decision to terminate employment other than for Good Reason (as defined in Section 3(e) below). (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties with the Company on a full-time basis for six months and within 30 days after written notice of termination is thereafter given by the Company the Executive shall not have returned to the full-time performance of the Executive's duties, the Company may terminate this Agreement for "Disability." (c) Retirement. The term "Retirement" as used in this Agreement shall mean termination by the Company or the Executive of the Executive's employment based on the Executive's having reached age 65 or such other age as shall have been fixed in any arrangement established with the Executive's consent with respect to the Executive. (d) Cause. The Company may terminate the Executive's employment for Cause. For purposes of this Agreement only, the Company shall have "Cause" to terminate the Executive's employment hereunder only on the basis of fraud, misappropriation or embezzlement on the part of the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board of Directors at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in the second sentence of this Section 3(d) and specifying the particulars thereof in detail. (e) Good Reason. The Executive may terminate the Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement "Good Reason" shall mean any of the following (without the Executive's express written consent): (i) the assignment to the Executive by the Company of duties inconsistent with the Executive's position, duties, responsibilities and status with the Company immediately prior to a Change in Control of the Company, or a change in the Executive's titles or offices as in effect immediately prior to a Change in Control of the Company, or any removal of the Executive from or any failure to reelect the Executive to any of such positions, except in connection with the termination of his employment for Disability, Retirement or Cause or as a result of the Executive's death or by the Executive other than for Good Reason; (ii) a reduction by the Company in the Executive's base salary as in effect on the Date of Termination; (iii) any failure by the Company to continue in effect any benefit plan or arrangement (including, without limitation, the Company's retirement plan, group life insurance plan, and medical, dental, accident and disability plans) in which the Executive is participating at the time of a Change in Control of the Company (or any other plans providing the Executive with substantially similar benefits) (hereinafter referred to as "Benefit Plans"), or the taking of any action by the Company which would adversely affect the Executive's participation in or materially reduce the Executive's benefits under any such Benefit Plan or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of a Change in Control of the Company; (iv) any failure by the Company to continue the Executive's eligibility to participate in annual executive bonus arrangements in which the Executive plans or arrangements providing him with substantially similar benefits) (hereinafter referred to as "Incentive Plans") or the taking of any action by the Company which would significantly reduce the Executive's opportunity to earn incentive compensation which is related to performance results as compared to performance exceptions periodically determined by the Company; (v) a relocation of the Company's principal executive offices to a location outside of Cincinnati, Ohio, or the Executive's relocation to any place other than the location at which the Executive performed the Executive's duties prior to a Change in Control of the Company, except for required travel by the Executive on the Company's business to an extent substantially consistent with the Executive's business travel obligations at the time of a Change in Control of the Company; (vi) any failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled at the time of a Change in Control of the Company; (vii) any material breach by the Company of any provision of this Agreement; (viii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of this Agreement, no such purported termination shall be effective. (f) Notice of Termination. Any termination by the Company pursuant to Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate those specific termination provisions in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. For purposes of this Agreement, such purported termination by the Company shall be effective without such Notice of Termination. (g) Date of Termination. "Date of Termination" shall mean (a) if this Agreement is terminated by the Company for Disability, 30 days Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive's duties on a full-time basis during such 30-day period) or (b) if the Executive's employment is terminated by the Company for any other reason, the date on which a Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given to the Executive by the Company the Executive notifies the Company that a dispute exists concerning the termination, the Date of Termination shall be the date the dispute is finally determined, whether by mutual agreement by the parties or upon final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 4. Compensation Under this Agreement. (a) If within two years after a Change in Control of the Company a Notice of Termination is given either by the Company to the Executive or by the Executive to the Company, and if such termination is not by reason of the Executive's death, Disability or Retirement, or by the Company for Cause, or by the Executive other than for Good Reason, the Company shall make the following payments to the Executive: (i) the full base salary to which the Executive is entitled through the Date of Termination; (ii) credit for unused vacation; (iii) an amount equal to the Executive's EICP Bonus Award under the Company's Executive Incentive Compensation Plan for the fiscal year in which the Notice of Termination is given, multiplied by the percentage determined by dividing the number of days in the Company's fiscal year that have elapsed prior to the date on which the Notice of Termination is given by the total number of days in such fiscal year. As used in this clause (iii) the Executive's Annual EICP Bonus Award means the dollar amount which would have been paid to Executive for the fiscal year in which the Notice of Termination is given under the Company's Executive Incentive Compensation Plan, based on the assumption that the Outstanding Level of performance would be reached by the Company and the Executive. (iv) an amount equal to two and one-half (2.5) times the sum of the Executive's annualized base salary and EICP Bonus Award (as defined in clause (iii) above) for the year in which the Notice of Termination is given, provided, however, that the amounts to be paid to the Executive under this clause (iv) shall be reduced by the amounts payable to the Executive under clauses (ii) and (iii) of this Section 4(a). (b) If it is finally determined under the procedures set forth in Section 4(c) that the amount of "excess parachute payments," if any, exceeds the Executive's "base amount" (as such terms are defined in Section 280G of the Internal Revenue Code of 1986 (the "Code")) by more than 3 times, the aggregate amount of the payments required to be made by the Company under clauses (iv), (iii) and (ii) of Section 4(a) that constitute excess parachute payments shall be reduced, in that order, to $100 less than the largest amount that will result in no portion of such payment being subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"). (c) The Company shall notify the Executive in writing within 10 days after a Notice of Termination is given either by the Company or the Executive, of the amount of the payments to be made by the Company under this Agreement, together with any other payments made or to be made by the Company to the Executive, that constitute "parachute payments" (as such terms are defined in Section 280G of the Code) and excess parachute payments and of the amount of the reduction, if any, required by Section 4(b). Within 20 days after the Notice of Termination is given, the Executive shall notify the Company in writing whether he agrees with the Company's calculation of the amount of parachute payments and excess parachute payments, and with the amount of any reduction. If the Executive does not agree with the Company's calculations, the Executive shall inform the Company of the amounts that he believes to be the correct amounts. If the Company and the Executive cannot agree within 30 days after the Notice of Termination is given on the amount of the parachute payments and excess parachute payments, and on the amount of any reduction, the calculation of such amounts (and any reduction ) shall be made by independent tax counsel selected by the Company's independent auditors. Such determination shall be completed within 15 days after it is submitted to such independent tax counsel and shall be conclusive and binding on the parties. (d) The amounts requires to be paid under Section 4(a), less the amount of any reduction determined by the Company under Section 4(b) and 4(c), shall be paid by the Company to the Executive in cash in a lump sum on the 10th day after the Date of Termination. If it is later determined, under the procedure set forth in Section 4(c), that the amount of any reduction is less than that initially determined by the Company, the Company shall pay the difference to the Executive in cash within five days after the amount of any reduction is finally determined. If it is later determined, under the procedures set forth in Section 4(c), that the amount of any reduction is more than that initially determined by the Company, the Executive shall repay the difference to the Company in cash within five days after the amount of any reduction is finally determined. (e) Any payments required under this Section 4 shall be paid net of applicable federal, state and local tax withholding. (f) If the Company is required to make payments to the Executive under Section 4(a), the Company, until the earlier of (i) one year after the Date of Termination or (ii) commencement of full-time employment by the Executive with a new employer, shall maintain in full force and effect, for the continued benefit of the Executive, medical and dental programs or arrangements in which the Executive was entitled to participate immediately prior to the Date of Termination, provided that continued participation by the Executive is possible under the general terms and provisions of such plans and programs. Except for the payment referred to in clause (i) of Section 4(a) none of the payments to the Executive under this Section 4 shall be counted for the purpose of computing the Executive's benefits under any pension, profit sharing, deferred compensation or other employee benefit plan maintained by the Company. (h) The parties acknowledge that Executive holds one or more stock purchase options granted under the Company's 1994 Long-Term Stock Incentive Plan (the "Plan"). The individual stock option agreements representing such options set forth the specific time periods and other terms under which the options vest (become exercisable), subject to the overall provisions of the Plan. Under the last sentence of Section 5(b) of the Plan, the Compensation Committee of the Company's Board of Directors is authorized to modify the vesting provisions of options outstanding under the Plan. Under the authority and direction of the Compensation Committee acting under Section 5(b) of the Plan, all options held by Executive under the Plan are hereby amended to include the following sentence: "Notwithstanding any other provisions of this Option, this Option shall immediately become fully vested and exercisable as to all shares covered hereby upon the occurrence of a Change in Control (as such term is defined in that certain Severance Compensation Agreement dated ______________ between the Company and the Optionee). Such immediate vesting shall occur regardless of whether the Optionee remains employed by the Company after such Change in Control or is terminated (involuntarily or voluntarily) as a result of or following such Change in Control." This Agreement shall constitute the instrument of amendment of all such options, and no other documentation or action shall be required to effect such amendments. 5. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or other contract, plan or arrangement. 6. Successor to the Company. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if such succession or assignment had not taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment for Good Reason. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. If at any time during the term of this Agreement the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, "Company" as used in Section 3, 4, 11 and 12 hereof shall in addition include such employer. In such event, the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 4 hereof. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Structural Dynamics Research Corporation Vice President, Secretary and General Counsel 2000 Eastman Drive Milford, OH 45150 If to the Executive: or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at anytime of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. 9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Legal Fees and Expenses. The Company shall pay all legal fees and expenses which the Executive may incur as a result of the Company's contesting the validity, enforceability or the Executive's interpretation of, or determinations under, this Agreement. 12. Confidentiality. The Executive shall retain in confidence any and all confidential information known to the Executive concerning the Company and its business so long as such information is not otherwise publicly disclosed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ATTEST: ________________________________ By: _____________________________ By: _____________________________ Vice President, Secretary and General Counsel

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 AMENDMENT AND RESTATEMENT OF ALLIANT TECHSYSTEMS INC. INCOME SECURITY PLAN     The Alliant Techsystems Inc. Income Security Plan previously was adopted to provide income security to certain designated individuals or groups of individuals of Alliant Techsystems Inc. and its Subsidiaries. The Board of Directors determined that it was in the best interests of the Company and its stockholders to secure the continued services, dedication and objectivity of its management in light of the potential occurrence of changes of control of the Company, without concern as to whether such individuals might be hindered or distracted by personal uncertainties and risks created by any such potential change of control. In adopting the Plan, the Board of Directors also recognized and anticipated that differing, or enhanced, severance arrangements or benefits may be in the Company's interest for particular employees, or in particular circumstances not then present or anticipated. Adoption of the Plan was not intended to address all conceivable situations in which providing such benefits would be in the Company's interest and therefore, was not intended to preclude such other arrangements. The Board of Directors now has determined that it is in the best interests of the Company and its stockholders, in order to carry out the purposes of the Plan, to amend and restate the Plan as set forth below to address current circumstances.     The Plan shall be administered by the Personnel and Compensation Committee of the Company's Board of Directors, with the approval, as to matters involving any publicly traded Subsidiary of the Company, of the compensation committee of such publicly-traded Subsidiary.     1.  Definitions.       (a) "Annual Base Salary" shall mean Participant's annual, regular rate of cash compensation excluding all other elements of compensation such as, without limitation, incentive or other bonus awards, perquisites, stock options or stock awards, and retirement and welfare benefits.     (b) "Annual Incentive Award" shall mean the greater of (i) a Participant's target annual cash incentive bonus award for the Company's fiscal year in which the Change of Control occurs (or if no such award was determined prior to the Change of Control Date, the Participant's target annual cash incentive bonus award for the Company's immediately preceding fiscal year) and (ii) the average of the Participant's actual annual cash incentive bonus payments for the last three (3) full fiscal years prior to the Change of Control (or such shorter period that the Participant was employed by the Company prior to the Change of Control).     (c) The "Board" shall mean the Board of Directors of the Company.     (d) "Cause" shall mean:     (1) a Participant's conviction of a felony (or guilty or nolo contendere plea in connection therewith) involving an actual sentence of incarceration for a period of at least three (3) months, provided that such felony relates to the Company's business or any activities engaged in by the Participant while on Company premises or while engaged in activities related to the Company's business; or     (2) a determination by the Board that a Participant has committed a material breach of the duties and responsibilities of the Participant as an officer or employee of the Company, which breach is (i) demonstrably willful and deliberate, or committed in bad faith or without reasonable belief that the activity undertaken by the Participant is in the best interests of the Company and (ii) if subject to cure, not remedied within thirty (30) days after receipt of written notice from the Company specifying such breach. 32 --------------------------------------------------------------------------------     (e) "Change of Control" shall mean:     (1) the acquisition by any "person" or group of persons (a "Person"), as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended and the regulations thereunder (the "Exchange Act") (other than the Company or a Subsidiary or any Company employee benefit plan (including its trustee)) of "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing, directly or indirectly, more than forty percent (40%) of the total number of shares of the Company's then outstanding Voting Securities;     (2) consummation of a reorganization, merger or consolidation of the Company, or the sale or other disposition of all or substantially all of the Company's assets (a "Business Combination"), in each case, unless, following such Business Combination, the individuals and entities who were the beneficial owners of the total number of shares of the Company's outstanding Voting Securities immediately prior to both (x) such Business Combination, and (y) any Change Event occurring within twelve (12) months prior to such Business Combination, beneficially own, directly or indirectly, more than sixty percent (60%) of the total number of shares of the outstanding Voting Securities of the resulting corporation, or the acquiring corporation, as the case may be, immediately following such Business Combination (including, without limitation, the outstanding Voting Securities of any corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the total number of shares of the Company's outstanding Voting Securities;     (3) the individuals who, as of the date this amendment and restatement of the Plan is adopted by the Board, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the Board; provided, however, that if the nomination for election of any new director was approved by a vote of a majority of the Incumbent Board, such new director shall, for the purposes of this definition, be considered a member of the Incumbent Board;     (4) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company; or     (5) any other circumstances (whether or not following a "Change Event") which the Board determines to be a Change of Control for purposes of this Plan after giving due consideration to the nature of the circumstances then presented and the purposes of this Plan. Any determination made under this subsection (e)(5) shall be irrevocable except by vote of a majority of the members of the Board who voted in favor of making such determination. For purposes of this subsection (e), a "Change of Control" shall not result from any transaction precipitated by the Company's insolvency, appointment of a conservator, or determination by a regulatory agency that the Company is insolvent.     (f)  "Change of Control Date" shall mean the first date on which a Change of Control occurs.     (g) "Change Event" shall mean:     (1) the acquisition after the date this Plan originally was adopted by the Board, by any Person (other than the Company or a Subsidiary, or any Company employee benefit plan (including its trustee)) of "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company directly or indirectly representing fifteen percent (15%) or more of the total number of shares of the Company's then outstanding Voting Securities (excluding the sale or issuance of such securities directly by the Company, or where the 33 -------------------------------------------------------------------------------- acquisition of such securities is made by such Person from five (5) or fewer stockholders in a transaction or transactions approved in advance by the Board); or     (2) the public announcement by any Person of an intention to acquire the Company through a tender offer, exchange offer, or other unsolicited proposal.     (h) "Committee" shall mean the Personnel and Compensation Committee of the Board.     (i)  "Company" shall mean Alliant Techsystems Inc. and its successors and assigns.     (j)  "Date of Termination" shall mean the date on which a Participant's employment with the Company or a Subsidiary terminates, including by reason of a Qualifying Termination.     (k) "Disability" means, with respect to a Participant, a determination by the Board that such Participant has become disabled within the meaning of the Company's long term disability plan as in effect immediately prior to the Change of Control Date.     (l)  "Executive Life Insurance" shall mean any life insurance policy insuring the life of a Participant which is in force as of any Change of Control Date, including policies with accumulated cash value.     (m) "Participant" shall mean an individual designated from time to time by the Committee as being entitled to the benefits provided under the Plan. The Committee may designate a group of individuals as Participants. The Committee may remove an individual as a Participant. Unless otherwise determined by the Committee, a Participant shall cease to be covered by the Plan automatically if such Participant ceases to be within a designated Participant group, provided that such change of status occurs prior to a Change of Control. Attached as Exhibit A is a list of the Participants as of the date this Plan is adopted by the Board.     (n) "Performance Cash Award" shall mean any grant, award or issuance of a cash incentive award (other than an annual cash incentive bonus award), which is intended to represent performance over a period longer than one fiscal year of the Company. Performance Cash Awards shall include, but are not limited to, grants under the Company's Cash Value Added Incentive Program.     (o) "Performance Shares" shall mean any grant, award or issuance of performance shares, which if earned, would result in the Participant receiving the Company's securities, whether under plans now existing or hereafter adopted.     (p) "Plan" shall mean the Alliant Techsystems Inc. Income Security Plan, as amended from time to time.     (q) "Qualifying Termination" shall mean any of the following:     (1) A termination of a Participant's employment by action of the Company or a Subsidiary, as applicable, within three (3) years after a Change of Control Date, for any reason other than a termination for Cause or on account of the Participant's Disability;     (2) A termination of employment by written election of a Participant, delivered within three (3) years after a Change of Control Date, for one or more of the following reasons specified by the Participant:      (i) Change of Compensation.  A reduction by the Company or a Subsidiary, as applicable, in the Participant's Annual Base Salary, Annual Incentive Award or the aggregate dollar value of the Participant's Stock Award or Performance Cash Award (determined in accordance with the Company's policies and procedures based on the Participant's Annual Base Salary and award parameters in effect immediately prior to the Change of Control Date for the fiscal year in which the Change of Control occurs), below the rate or value thereof in effect immediately prior to such Change of Control, or the failure by the Company and such Subsidiary to continue the Participant's eligibility in any Welfare Benefits or Retirement Plans 34 -------------------------------------------------------------------------------- in which the Participant was participating immediately prior to such Change of Control unless such Welfare Benefits or Retirement Plans are terminated by the Company in their entirety, and the elimination of eligibility affects all exempt employees, or the Participant is permitted to participate in other plans providing the Participant with materially comparable Welfare Benefits and in materially comparable Retirement Plans; or     (ii) Change of Location.  The Company or a Subsidiary, as applicable, requiring the Participant to be based anywhere other than the Participant's work location immediately prior to the Change of Control Date, as it may be changed thereafter with the Participant's consent, or a location within fifty (50) miles from such location; unless such relocation is agreed to in writing by both the Company and the Participant, or is permitted by the terms of the Participant's employment agreement with the Company; or     (iii) Change of Position.  The assignment to the Participant of any duties inconsistent in any respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; or     (iv) No Assumption by Successor.  The failure by the Company or a Subsidiary, as applicable, to obtain the assumption of this Plan from a successor in accordance with subsection 11(c) below. Notwithstanding the foregoing provisions of this subsection (q)(2), in the case of any such termination of employment by the Participant pursuant to paragraphs (i), (ii) or (iii) above, such termination shall not be deemed to be a Qualifying Termination unless the Company receives written notice of such Participant's claim of a Qualifying Termination within sixty (60) days after the occurrence of the events constituting the Participant's reason for such termination and the Company or Subsidiary does not within thirty (30) days after receipt of such notice cure the stated reason therefor; or     (3) A termination of a Participant's employment by the Company or a Subsidiary within twelve (12) months after a Change Event if the Participant can demonstrate that such termination or reason for termination (i) was at the specific request of a third party with which the Company or the Subsidiary had entered into negotiations or an agreement with regard to a subsequent Change of Control; or (ii) otherwise occurred in connection with, or in anticipation of, such Change of Control. In the event that upon a Change of Control the Company ceases to be a publicly-traded corporation, such event will not, in and of itself constitute a reason for a Qualifying Termination under paragraph (2) above unless one of the reasons set forth in paragraphs (i), (ii) or (iii) above also occurs. For purposes of this Plan, a termination of a Participant's employment on account of the Participant's death, Disability or Retirement shall not constitute a Qualifying Termination.     (r) "Retirement" shall mean the voluntary retirement of a Participant pursuant to the terms of a Retirement Plan.     (s) "Retirement Plan" shall mean any retirement plan of the Company (or any relevant Subsidiary) referenced in subsection 4(a)(3) or (4) below, including, but not limited to, the Pension Plan, the Thrift Plan, and the SERP.     (t)  "Stock Award" shall mean any grant, award or issuance of a stock option, restricted stock, Performance Share or similar compensatory device, which, if earned, would either result in the Participant receiving the Company's securities, or the opportunity to purchase the Company's securities, 35 -------------------------------------------------------------------------------- or which would pay a cash amount based upon the value of the Company's securities, whether under plans now existing or hereafter adopted, or which are otherwise granted to a Participant.     (u) "Subsidiary" or "Subsidiaries" shall mean (i) any person or persons that is or are directly or indirectly controlled by the Company or (ii) any other person or persons in which the Company has a significant equity interest, as determined by the Board.     (v) "Voting Securities" shall mean any shares of the capital stock or other securities of the Company that are generally entitled to vote in elections for members of the Board.     (w) "Welfare Benefits" shall mean coverage and benefits provided to a Participant under the Company's then applicable health, disability or life insurance programs generally applicable to employees of status comparable to the Participant.     2.  Obligations of Company Upon Change Event.       Upon the occurrence of a Change Event, the Board shall be prohibited from making any subsequent amendments to the Plan in its then current form unless such amendment does not adversely affect then eligible Participants with respect to any Change of Control occurring within one (1) year after such Change Event, provided, however, that notwithstanding the occurrence of a Change Event, subject to the provisions of Section 1(q)(3), the Company and any Subsidiary, as applicable, shall remain free in all respects to terminate a Participant, modify a Participant's terms of employment, change or remove a Participant from corporate offices, or otherwise take actions which would affect a Participant's compensation or benefits, whether or not an employee is or remains a Participant under the Plan, subject only to that Participant's individual employment agreement, if any. The occurrence of a Change Event shall not obligate the Company to pay any benefits pursuant to Section 4.     3.  Trust Funding.       At times, in amounts and on terms determined by the Committee, but in no event later than the Change of Control Date (the "Required Funding Date"), the Company shall establish a trust fund (the "Trust"), of which eligible Participants shall be the beneficiaries, to secure the Change of Control severance payments and benefits to be provided in the manner described in Sections 4(a) and 8. The Trust shall be funded in cash or letter of credit by the Company not later than the Required Funding Date, or an earlier date if authorized by the Committee. Interest earned on amounts deposited by the Company into the Trust shall be due to the Company, and any surplus incurred shall be retained by the Company. In the event that a Participant becomes eligible for benefits pursuant to Section 4, that Participant shall be subject to current taxation on the full amount held in the Trust for that Participant's benefit, and the Company will directly pay such taxes due from the Trust.     4.  Obligations of Company Upon Qualifying Termination.       In the event of a Qualifying Termination, then     (a) The Company shall pay to a Participant in a lump sum in cash within thirty (30) days after the Participant's Date of Termination the aggregate of the following amounts:     (1) the sum of (A) the Participant's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (B) the greater of (x) the Participant's Annual Incentive Award for the full fiscal year in which the Date of Termination occurs and (y) the Participant's annual cash incentive award for the full fiscal year in which the Date of Termination occurs, determined based on actual individual and corporate performance through the Date of Termination, (C) any compensation previously deferred by the Participant (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid and (D) an amount in lieu of and equal to the actuarial equivalent of the Participant's actual benefit, if any, under any excess or supplemental retirement plan in which the Participant participates (the 36 -------------------------------------------------------------------------------- "SERP") as of the Date of Termination, not including any amounts determined under subsection 4(a)(3) or (4) below;     (2) the amount equal to the product of (A) three (3) and (B) the sum of (x) the Participant's Annual Base Salary, (y) the Annual Incentive Award and (z) the greater of (I) the Participant's target award of Performance Shares and target Performance Cash Award for the Company's fiscal year in which the Change of Control occurs (or if no such awards were determined prior to the Change of Control Date, the Participant's target award of Performance Shares and target Performance Cash Award for the Company's immediately preceding fiscal year); and (II) the average of the Participant's actual dollar value of Performance Share and Performance Cash Award payouts for the last three (3) full fiscal years prior to the Change of Control (or for such shorter period that the Participant was employed by the Company prior to the Change of Control); and     (3) an amount equal to the excess of (A) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Pension Plan") (utilizing actuarial assumptions no less favorable to the Participant than those in effect under the Pension Plan immediately prior to the Change of Control Date), and the SERP which the Participant would receive if the Participant's employment continued for three (3) years after the Date of Termination (with respect to both the Participant's age and years of service) assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Participant's compensation in each of the three (3) years is as in effect immediately prior to a Change of Control, over (B) the actuarial equivalent of the Participant's actual benefit (paid or payable), if any, under the Pension Plan and the SERP as of the Date of Termination; and     (4) an amount equal to the additional Company matching contributions that would have been made on the Participant's behalf in the Company's defined contribution retirement plan or any successor plan (the "Thrift Plan") (assuming continued participation on the same basis as immediately prior to the Change of Control Date), plus the additional amount of any benefit the Participant would have accrued under the SERP as a result of contribution limitations in the Thrift Plan, which the Participant would receive if the Participant's employment continued for three (3) years after the Date of Termination, assuming for this purpose that the Participant's compensation in each of the three (3) years is as in effect immediately prior to a Change of Control and that the Company's matching contributions are determined pursuant to the applicable provisions of the Thrift Plan and the SERP, as in effect during the twelve (12)-month period immediately prior to the Change of Control Date.     (b) For three (3) years after a Participant's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Participant and/or Participant's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies providing Welfare Benefits if the Participant's employment had not been terminated or, if more favorable to the Participant, as in effect generally at any time thereafter with respect to other employees of the Company of a status comparable to the Participant and their families; provided, however, that if the Participant meets the requirements for current coverage under another employer-provided plan providing such benefits, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Participant for retiree benefits pursuant to such plans, practices, programs and policies, the Participant shall be considered to have remained employed until three (3) years after the Date of Termination and to have retired on the last day of such period. 37 --------------------------------------------------------------------------------     (c) For three (3) years after a Participant's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide to the Participant and/or the Participant's family fringe benefits (including perquisites) at least equal to those which would have been provided to them in accordance with the fringe benefit plans, programs, practices and policies if the Participant's employment had not been terminated or, if more favorable to the Participant, as in effect generally at any time thereafter with respect to other employees of the Company of a status comparable to the Participant and their families.     (d) Any Executive Life Insurance programs in force on the life of a Participant as of the Change of Control Date shall be continued in force for a period of three (3) years after the Participant's Date of Termination; thereafter the policy, including the cash value thereof, shall be transferred to the Participant with a lump sum cash payment sufficient to pay actual taxes due on account of such transfer.     (e) The Company shall, at its own expense as incurred, provide a Participant with outplacement services, the scope and provider of which shall be selected by the Participant in the Participant's sole discretion, provided that the aggregate cost of such services shall not exceed $50,000.     5.  Treatment of Stock Awards and Performance Cash Awards.       (a) If, as a result of a Change of Control, the Company's Common Stock ceases to be listed for trading on the New York Stock Exchange, American Stock Exchange or the National Market List of the National Association of Securities Dealers, Inc., Automated Quotation System (a "Trading System"), any Stock Award or Performance Cash Award that is unvested at the Change of Control Date shall continue to vest according to the terms and conditions of such award; provided that such award is replaced with an award for voting securities of the resulting corporation, or the acquiring corporation, as the case may be (including without limitation, the outstanding voting securities of any corporation which as a result of the Change of Control owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (the "Surviving Company") which are traded on a Trading System (a "Replacement Award"), which Replacement Award, (i) in the case of options, shall consist of options with the number of options and exercise price determined in a manner consistent with Section 424(a) of the Internal Revenue Code of 1986, as amended, with vesting continuing in the same manner as the replaced award; (ii) in the case of Performance Shares or a Performance Cash Award, shall consist of restricted stock with a value (determined using the Surviving Company's stock price as of the Change of Control Date) equal to the value of the Performance Shares and Performance Cash Award (determined assuming attainment of target performance or actual performance achieved as of the Change of Control Date, or the average of a Participant's actual dollar value of Performance Share or Performance Cash Award payouts for the last three (3) full fiscal years prior to the Change of Control (or for such shorter period that the Participant was employed by the Company prior to the Change of Control), whichever is greatest), with any restrictions on such restricted shares lapsing at the end of the measuring period over which performance for the replaced Performance Shares or Performance Cash Award was to be measured prior to the granting of the Replacement Award; and (iii) in the case of restricted stock or similar such grant, shall consist of restricted stock with a value (determined using the Surviving Company's stock price as of the Change of Control Date) equal to the value of the replaced restricted stock (determined using the Company's stock price as of the Change of Control Date), with any restrictions on such Replacement Award lapsing at the same time and manner as the replaced award; provided, however, that in the event of a Qualifying Termination, any unvested Replacement Award shall immediately vest, and in the case of options, shall be exercisable for the lesser of the normal expiration period or three (3) years after the Date of Termination; and provided further that the Participant, with respect to a Replacement Award, shall have the right to sell, and the Company shall have the obligation to purchase (unless the existence of such right and obligation would cause a transaction occurring in connection with the Change in Control to be ineligible for pooling of interests accounting treatment that would, but for the right and 38 -------------------------------------------------------------------------------- obligation, be eligible for such accounting treatment), any securities received from the exercise of options or the vesting of restricted stock at a price equal to the Surviving Company's stock price as of the Change of Control Date, which right and obligation shall continue for a period of thirty (30) days following the later of (i) the exercise of such options or the vesting of such restricted stock or (ii) the first day following such exercise or vesting in which the Participant is not restricted by federal or state securities laws from selling such securities. If Stock Awards or Performance Cash Awards that are unvested at the time of the Change of Control are not replaced with Replacement Awards, such awards shall thereupon immediately vest and, in the case of Performance Shares or Performance Cash Awards, shall vest based upon deemed attainment of target performance or actual performance achieved, or the average of a Participant's actual dollar value of Performance Share or Performance Cash Award payouts for the last three (3) full fiscal years prior to the Change of Control (or for such shorter period that the Participant was employed by the Company prior to the Change of Control), whichever is greatest.     (b) If, as a result of a Change of Control, the Company's Common Stock continues to be listed for trading on the New York Stock Exchange, American Stock Exchange or the National Market List of the National Association of Securities Dealers, Inc., Automated Quotation System (a "Trading System"), any unvested Stock Award or Performance Cash Award shall continue to vest according to the terms and conditions of such award; provided however, that, in the event of a Qualifying Termination, any Stock Award or Performance Cash Award that is unvested at the time of the Change of Control shall thereupon immediately vest and (i) in the case of options, shall be exercisable for the lesser of the normal expiration period or three (3) years after the Date of Termination and (ii) in the case of Performance Shares or a Performance Cash Award, shall vest as of the Date of Termination based upon deemed attainment of target performance or actual performance achieved, or the average of a Participant's actual dollar value of Performance Share or Performance Cash Award payouts for the last three (3) full fiscal years prior to the Change of Control (or for such shorter period that the Participant was employed by the Company prior to the Change of Control), whichever is greatest; and provided further that the Participant, with respect to such Stock Award, shall have the right to sell, and the Company shall have the obligation to purchase from the Participant, any Voting Securities received from the exercise of options or the vesting of Performance Shares or restricted stock at a price equal to the Company's stock price as of the date of the Change of Control, which right and obligation shall continue for a period of thirty (30) days following the later of (i) the exercise of such options or the vesting of such Performance Shares or restricted stock or (ii) the first day following such exercise or vesting in which the Participant is not restricted by federal or state securities laws from selling such securities.     6.  Non-exclusivity of Rights.       Other than as specifically set forth herein, nothing in this Plan shall prevent or limit a Participant's continuing or future participation in any plan, program, policy or practice (collectively, an "Arrangement") provided by the Company or a Subsidiary and for which the Participant may qualify, nor shall anything in this Plan limit or otherwise affect such rights as the Participant may have under any contract or agreement (collectively, "Agreement") with the Company or a Subsidiary. Unless otherwise agreed in writing by the Company and a Participant, and subject to the terms and conditions of subsection 4(b), whenever a Participant would be entitled to payment of any salary, incentive bonus, Welfare Benefits, or other compensation or benefits under an Arrangement or Agreement other than this Plan, the Participant shall be entitled to receive (including by way of partial application of each of this Plan and such other Arrangement and/or Agreement) the payments and Welfare Benefits most favorable to the Participant (as determined in good faith by the Participant and evidenced in a written election by the Participant delivered to the Company within ten (10) business days after the Date of Termination), provided, however, that nothing herein shall be construed or shall operate in such a 39 -------------------------------------------------------------------------------- manner as shall permit a Participant to receive the same type of payment or Welfare Benefit under more than one of this Plan or such other Arrangement and/or Agreement.     7.  Full Settlement.       The Company's obligation to make the payments provided for in this Plan and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against a Participant or others. In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment. The Company agrees to reimburse the Participant, to the full extent permitted by law, for all legal fees and related expenses which a Participant may incur as a result of any contested denial by the Company of the benefits set forth herein (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan) regardless of the outcome thereof. In addition, the Company agrees to pay to the Participant a cash payment sufficient to pay actual taxes due on account of such reimbursement. Any payments made by the Company to a Participant pursuant to this Section 7 shall be paid within thirty (30) days of notification by the Participant of payment of such fees, expenses, or taxes. It may be made a condition of payments hereunder that a Participant deliver a full and complete release of the Company from all claims other than for the making of payments and the performance of obligations hereunder.     8.  Certain Additional Payments by the Company.       Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of a Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Section 8 (a "Payment")) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes on the Gross-Up Payment including, without limitation, any income taxes, employment taxes, excise taxes, and interest and penalties imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.     9.  Confidential Information.       A Participant shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company, which shall have been obtained by the Participant during the Participant's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Plan). After termination of a Participant's employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.     10.  Non-Compete.       In order for any Participant to become eligible for receipt of the payments and benefits set forth herein, the Participant shall agree and acknowledge that, during the one year following Participant's Date of Termination, said Participant shall not, in any capacity whatsoever, compete with the business of the Company as carried on by the Company, in any geographic area in which the Company is doing or has done business. In the event the provisions of this Section 10 are found to be invalid or 40 -------------------------------------------------------------------------------- unenforceable as set forth herein, then this Section 10 shall be thereupon deemed amended to the extent and in the manner necessary to render its provisions valid and enforceable.     11.  Successors.       (a) This Plan is personal to the Participants and without the prior written consent of the Company shall not be assignable by a Participant otherwise than by will or the laws of descent and distribution. This Plan shall inure to the benefit of and be enforceable by a Participant's legal representatives.     (b) This Plan shall inure to the benefit of and be binding upon the Company and its successors and assigns.     (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Company shall notify all Participants of any breach of the obligation described in the immediately preceding sentence within thirty (30) days of such breach. As used in this Plan, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Plan by operation of law, or otherwise.     12.  Scope of Plan.       The Participants and the Company acknowledge that, except as may otherwise be provided under any other written agreement between a Participant and the Company, the employment of a Participant by the Company is "at will" and prior to the Change of Control Date (but subject to Section 2), a Participant's employment may be terminated by either the Participant or the Company at any time prior to the Change of Control Date, in which case the Participant shall have no further rights under this Plan. In addition, in the event a Participant's employment is terminated as a result of the Participant's death or Disability, the Participant shall have no further rights under this Plan. From and after the Change of Control Date, this Plan shall supersede any other agreement, plan, program, policy or arrangement between the Company (or a Subsidiary) and the Participants with respect to the subject matter hereof.     13.  Changes to Plan; Waiver of Terms.       This Plan may be altered, amended or modified at any time by the Board subject only to Section 2; provided, however, that the Board shall be prohibited from making any amendments to the Plan after the Change of Control Date to the extent such amendment adversely affects one or more Participants who has not waived any term, covenant, agreement or condition otherwise contained in the Plan. A waiver of any term, covenant, agreement, or condition contained in this Plan shall not be deemed a waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant, agreement or condition shall not be deemed a waiver of any later default or of any other term, covenant, agreement or condition. 41 -------------------------------------------------------------------------------- Exhibit A LIST OF INCOME SECURITY PLAN PARTICIPANTS ALL ATK ELECTED OFFICERS Don L. Stickinski(1) -------------------------------------------------------------------------------- (1)Mr. Sticinski resigned from his position with the Company effective September 19, 2000. However, under the terms of the Separation Agreement between the Company and Mr. Sticinski, he is a Participant in the Plan until September 1, 2001, his Termination Date. 42 -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT AND RESTATEMENT OF ALLIANT TECHSYSTEMS INC. INCOME SECURITY PLAN Exhibit A LIST OF INCOME SECURITY PLAN PARTICIPANTS

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 b EXECUTION COPY      THIRD AMENDED AND RESTATED LOAN AGREEMENT AMONG RURAL CELLULAR CORPORATION; THE FINANCIAL INSTITUTIONS WHOSE NAMES APPEAR AS LENDERS ON THE SIGNATURE PAGES HEREOF; AND TORONTO DOMINION (TEXAS), INC. AS ADMINISTRATIVE AGENT WITH TD SECURITIES (USA) INC., AS BOOK RUNNER AND LEAD ARRANGER; FIRST UNION NATIONAL BANK AND PNC BANK, NATIONAL ASSOCIATION AS CO-SYNDICATION AGENTS AND BANK OF AMERICA SECURITIES, LLC AS DOCUMENTATION AGENT Dated as of June 29, 2000 Powell, Goldstein, Frazer & Murphy LLP Atlanta, Georgia -------------------------------------------------------------------------------- TABLE OF CONTENTS         Page -------------------------------------------------------------------------------- ARTICLE 1   DEFINITIONS   2   ARTICLE 2       LOANS       18     Section 2.1       The Loans.       18   Section 2.2   Manner of Borrowing and Disbursement   19   Section 2.3   Interest   21   Section 2.4   Commitment Fees   23   Section 2.5   Mandatory Commitment Reductions   23   Section 2.6   Voluntary Commitment Reductions   25   Section 2.7   Prepayments and Repayments   26   Section 2.8   Notes; Loan Accounts   29   Section 2.9   Manner of Payment   29   Section 2.10   Reimbursement   30   Section 2.11   Pro Rata Treatment   31   Section 2.12   Capital Adequacy   32   Section 2.13   Lender Tax Forms   32   Section 2.14   Incremental Facility Advances   33   Section 2.15   Replacement of Lenders   34   Section 2.16   Swing Line Loans   34   ARTICLE 3       CONDITIONS PRECEDENT       36     Section 3.1       Conditions Precedent to Effectiveness of Agreement       36   Section 3.2   Conditions Precedent to Each Advance   36   ARTICLE 4       REPRESENTATIONS AND WARRANTIES       37     Section 4.1       Representations and Warranties       37   Section 4.2   Survival of Representations and Warranties, etc.   42   ARTICLE 5       GENERAL COVENANTS       42     Section 5.1       Preservation of Existence and Similar Matters       42   Section 5.2   Business; Compliance with Applicable Law   42   Section 5.3   Maintenance of Properties   42   Section 5.4   Accounting Methods and Financial Records   42   Section 5.5   Insurance   43   Section 5.6   Payment of Taxes and Claims   43   Section 5.7   Compliance with ERISA   43   Section 5.8   Visits and Inspections   44   Section 5.9   Payment of Indebtedness; Loans   45   Section 5.10   Use of Proceeds   45   Section 5.11   Real Estate   45   Section 5.12   Indemnity   46   Section 5.13   Interest Rate Hedging   46   Section 5.14   Covenants Regarding Formation of Subsidiaries and Acquisitions; Partnership, Subsidiaries   47   Section 5.15   Payment of Wages   47   Section 5.16   Further Assurances   47 i --------------------------------------------------------------------------------   ARTICLE 6       INFORMATION COVENANTS       47     Section 6.1       Quarterly Financial Statements and Information       48   Section 6.2   Annual Financial Statements and Information   48   Section 6.3   Performance Certificates   48   Section 6.4   Copies of Other Reports   48   Section 6.5   Notice of Litigation and Other Matters   49   ARTICLE 7       NEGATIVE COVENANTS       50     Section 7.1       Indebtedness of the Borrower and its Subsidiaries       50   Section 7.2   Limitation on Liens   50   Section 7.3   Amendment and Waiver   51   Section 7.4   Liquidation, Merger, or Disposition of Assets   51   Section 7.5   Limitation on Guaranties   51   Section 7.6   Investments and Acquisitions   51   Section 7.7   Restricted Payments and Purchases   53   Section 7.8   Total Leverage Ratio   53   Section 7.9   Senior Leverage Ratio   54   Section 7.10   Annualized Operating Cash Flow to Pro Forma Debt   54   Section 7.11   Annualized Operating Cash Flow to Interest Expense   54   Section 7.12   Fixed Charge Coverage Ratio   54   Section 7.13   Affiliate Transactions   55   Section 7.14   Real Estate   55   Section 7.15   ERISA Liabilities   55   ARTICLE 8       DEFAULT       55     Section 8.1       Events of Default       55   Section 8.2   Remedies   58   Section 8.3   Payments Subsequent to Declaration of Event of Default   58   ARTICLE 9       THE AGENTS       59     Section 9.1       Appointment and Authorization       59   Section 9.2   Interest Holders   59   Section 9.3   Consultation with Counsel   59   Section 9.4   Documents   59   Section 9.5   Administrative Agent and Affiliates   59   Section 9.6   Responsibility of the Administrative Agent.   60   Section 9.7   Collateral   60   Section 9.8   Action by Administrative Agent   60   Section 9.9   Notice of Default or Event of Default   60   Section 9.10   Responsibility Disclaimed   61   Section 9.11   Indemnification   61   Section 9.12   Credit Decision   61   Section 9.13   Successor Administrative Agent.   62   Section 9.14   Delegation of Duties   62   Section 9.15   No Responsibilities of Agents   62 ii --------------------------------------------------------------------------------   ARTICLE 10       CHANGE IN CIRCUMSTANCES AFFECTING LIBOR ADVANCES       62     Section 10.1       LIBOR Basis Determination Inadequate or Unfair       62   Section 10.2   Illegality   62   Section 10.3   Increased Costs   63   Section 10.4   Effect On Other Advances   64   ARTICLE 11       MISCELLANEOUS       64     Section 11.1       Notices       64   Section 11.2   Expenses   65   Section 11.3   Waivers   65   Section 11.4   Set-Off   66   Section 11.5   Assignment   66   Section 11.6   Accounting Principles   68   Section 11.7   Counterparts   69   Section 11.8   Governing Law   69   Section 11.9   Severability   69   Section 11.10   Interest   69   Section 11.11   Table of Contents and Headings   70   Section 11.12   Amendment and Waiver   70   Section 11.13   Entire Agreement   70   Section 11.14   Other Relationships   70   Section 11.15   Directly or Indirectly   70   Section 11.16   Reliance on and Survival of Various Provisions   70   Section 11.17   Senior Debt   71   Section 11.18   Obligations Several   71   Section 11.19   Confidentiality   71   ARTICLE 12       WAIVER OF JURY TRIAL       71     Section 12.1       Waiver of Jury Trial       71 iii -------------------------------------------------------------------------------- EXHIBITS Exhibit A   —   Form of Borrower's Pledge Agreement Exhibit B   —   Form of Certificate of Financial Condition Exhibit C   —   Form of Notice of Incremental Facility Commitment Exhibit D   —   Form of Request for Advance Exhibit E   —   Form of Revolving Loan Note Exhibit F   —   Form of Security Agreement Exhibit G   —   Form of Subsidiary Guaranty Exhibit H   —   Form of Subsidiary Pledge Agreement Exhibit I   —   Form of Subsidiary Security Agreement Exhibit J   —   Form of Term Loan A Note Exhibit K   —   Form of Term Loan B Note Exhibit L   —   Form of Term Loan C Note Exhibit M   —   Form of Incremental Facility Note Exhibit N   —   Form of Borrower's Loan Certificate Exhibit O       Form of Subsidiary Loan Certificate Exhibit P   —   Form of Opinion of FCC Counsel to the Borrower Exhibit Q   —   Form of Opinion of General Counsel to the Borrower Exhibit R   —   Form of Performance Certificate Exhibit S   —   Form of Assignment and Assumption Agreement Exhibit T   —   Form of Request for Swing Line Advance Exhibit U   —   Form of Swing Line Note SCHEDULES Schedule 1   —   Licenses Schedule 2   —   Liens Existing on the Agreement Date Schedule 3   —   Subsidiaries Schedule 4   —   Permitted Exceptions Schedule 5   —   Litigation Schedule 6   —   Affiliate Agreements Schedule 7   —   Addresses of Lenders iv -------------------------------------------------------------------------------- THIRD AMENDED AND RESTATED LOAN AGREEMENT AMONG RURAL CELLULAR CORPORATION, AS BORROWER; THE FINANCIAL INSTITUTIONS WHOSE NAMES APPEAR AS LENDERS ON THE SIGNATURE PAGES HEREOF; TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT WITH TD SECURITIES (USA) INC., AS BOOK RUNNER AND LEAD ARRANGER; AND FIRST UNION NATIONAL BANK AND PNC BANK, NATIONAL ASSOCIATION AS CO-SYNDICATION AGENTS AND BANK OF AMERICA SECURITIES, LLC AS DOCUMENTATION AGENT W I T N E S S E T H:     WHEREAS, the Borrower, the financial institutions whose names appeared as Lenders on the signature pages thereof and the Administrative Agent are all parties to that certain Second Amended and Restated Loan Agreement dated as of April 3, 2000 (the "Prior Loan Agreement"); and     WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders consent to certain amendments to the Prior Loan Agreement, as more fully set forth in this Third Amended and Restated Loan Agreement; and     WHEREAS, the Administrative Agent and the Lenders have agreed to amend and restate the Prior Loan Agreement in its entirety as set forth herein; and     WHEREAS, the Borrower acknowledges and agrees that the security interest granted to the Administrative Agent, for itself and on behalf of the Lenders pursuant to the Prior Loan Agreement and the Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith shall remain outstanding and in full force and effect in accordance with the Prior Loan Agreement and shall continue to secure the Obligations (as defined therein); and     WHEREAS, the Borrower acknowledges and agrees that (i) the Obligations (as defined herein) represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the Obligations (as defined in the Prior Loan Agreement) arising in connection with the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith; (ii) the parties hereto intend that the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith and the collateral pledged thereunder shall secure, without interruption or impairment of any kind, all existing Indebtedness under the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith as so amended, restated, restructured, renewed, extended, consolidated and modified hereunder, together with all other Obligations hereunder; (iii) all Liens evidenced by the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith are hereby ratified, confirmed -------------------------------------------------------------------------------- and continued; and (iv) the Loan Documents (as defined herein) are intended to restructure, restate, renew, extend, consolidate, amend and modify the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith; and     WHEREAS, the parties hereto intend that (i) the provisions of the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith, to the extent restructured, restated, renewed, extended, consolidated, amended and modified hereby, are hereby superseded and replaced by the provisions hereof and of the Loan Documents (as defined herein); and (ii) the Notes (as hereinafter defined) amend, renew, extend, modify, replace, are substituted for and supersede in their entirety, but do not extinguish the indebtedness arising under the promissory notes issued pursuant to the Prior Loan Agreement;     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties hereby amend and restate the Prior Loan Agreement as follows: ARTICLE 1 Definitions     For the purposes of this Agreement:     "2000 Senior Preferred Stock" shall mean those 25,000 shares of 113/8% Senior Exchangeable Preferred Stock of the Borrower, together with any additional Senior Preferred Stock issued as payment in kind dividends thereon.     "Acquisition" shall mean (whether by purchase, lease, exchange, issuance of stock or other equity or debt securities, merger, reorganization or any other method) (i) any acquisition by the Borrower or any of its Subsidiaries of any other Person, which Person shall then become consolidated with the Borrower or any such Subsidiary in accordance with GAAP or (ii) any acquisition by the Borrower or any of its Subsidiaries of all or any substantial part of the assets of any other Person.     "Administrative Agent" shall mean Toronto Dominion (Texas), Inc., in its capacity as Administrative Agent for the Lenders and the Swing Line Lender or any successor Administrative Agent appointed pursuant to Section 9.13 hereof.     "Administrative Agent's Office" shall mean the office of the Administrative Agent located at 909 Fannin Street, Suite 1700, Houston, Texas 77010, or such other office as may be designated pursuant to the provisions of Section 11.1 hereof.     "Advance" shall mean amounts advanced by the Lenders and the Swing Line Lender to the Borrower pursuant to Article 2 hereof on the occasion of any borrowing and having the same Interest Rate Basis and Interest Period; and "Advances" shall mean more than one Advance.     "Affiliate" shall mean, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such first Person. For purposes of this definition, "control" when used with respect to any Person includes, without limitation, the direct or indirect beneficial ownership of more than ten percent (10%) of the voting securities or voting equity of such Person or the power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.     "Agents" shall mean, collectively, the Administrative Agent, the Lead Arranger, the Co-Syndication Agents and the Documentation Agent.     "Agreement" shall mean this Third Amended and Restated Loan Agreement, as amended, supplemented, restated or otherwise modified from time to time. 2 --------------------------------------------------------------------------------     "Agreement Date" shall mean June 29, 2000.     "Annualized Operating Cash Flow" shall mean, as of any date, the Operating Cash Flow for the immediately preceding two (2) fiscal quarters multiplied by two (2); provided that, for all calculations of Annualized Operating Cash Flow (a) from and including the Agreement Date through the date on which the Borrower files its Form 10-Q for the quarter ended March 31, 2000 (the "10-Q Date"), Annualized Operating Cash Flow shall be Operating Cash Flow for the quarters ended September 30, 1999 and December 31, 1999 (after giving pro forma effect to the Triton Acquisition) multiplied by two (2), (b) from the 10-Q Date through June 29, 2000, Annualized Operating Cash Flow shall be Operating Cash Flow for the four (4) quarters ended March 31, 2000 (after giving effect to the Triton Acquisition) and (c) from and including June 30, 2000 through September 29, 2000, Annualized Operating Cash Flow shall be Operating Cash Flow for the quarter ended June 30, 2000, multiplied by four (4).     "Applicable Law" shall mean, in respect of any Person, all provisions of constitutions, statutes, rules, regulations and orders of governmental bodies or regulatory agencies applicable to such Person, including, without limiting the foregoing, the Licenses, the Communications Act and all Environmental Laws, and all orders, decisions, judgments and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party or by which it is bound.     "Applicable Margin" shall mean the interest rate margin applicable to Base Rate Advances and LIBOR Advances under the applicable Loans, as the case may be, in each case determined in accordance with Section 2.3(f) hereof (or, with respect to Incremental Facility Advances, as set forth in the Notice of Incremental Facility Commitment).     "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.     "Authorized Signatory" shall mean such senior personnel of a Person as may be duly authorized and designated in writing by such Person to execute documents, agreements and instruments on behalf of such Person.     "Available Revolving Loan Commitment" shall mean, as of any particular date, (a) the Revolving Loan Commitments minus (b) the sum of (i) the Revolving Loans then outstanding, plus (ii) the Swing Line Loans then outstanding.     "Available Swing Line Commitment" shall mean, at any time, the lesser of (a) (i) the Swing Line Commitment, minus (ii) Swing Line Advances then outstanding, and (b) the Available Revolving Loan Commitment.     "Base Rate" shall mean, at any time, a fluctuating interest rate per annum equal to the higher of (a) the rate of interest quoted from time to time by the Administrative Agent as its "prime rate" or "base rate" and (b) the sum of (i) the Federal Funds Rate and (ii) one-half of one percent (1/2%). The Base Rate is not necessarily the lowest rate of interest charged to borrowers of the Administrative Agent.     "Base Rate Advance" shall mean an Advance which the Borrower requests to be made as a Base Rate Advance or is Converted to a Base Rate Advance, in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $500,000, and in an integral multiple of $100,000.     "Base Rate Basis" shall mean a simple interest rate equal to the sum of (i) the Base Rate and (ii) the Applicable Margin for Base Rate Advances with respect to the applicable Loans. The Base Rate Basis shall be adjusted automatically as of the opening of business on the effective date of each 3 -------------------------------------------------------------------------------- change in the Base Rate to account for such change, and shall also be adjusted to reflect changes in the Applicable Margin applicable to Base Rate Advances.     "Borrower" shall mean Rural Cellular Corporation, a Minnesota corporation.     "Borrower's Pledge Agreement" shall mean that certain Second Amended and Restated Borrower's Pledge Agreement dated as of April 3, 2000 between the Borrower and the Administrative Agent, substantially in the form of Exhibit A attached hereto, pursuant to which the Borrower has pledged to the Administrative Agent, for itself and on behalf of the Lenders, all of the Borrower's stock ownership or membership interests in each of its Subsidiaries.     "BTA" shall mean any "basic trading area" as defined and modified by the FCC for the purpose of licensing personal communications services telecommunications systems.     "Business Day" shall mean a day on which banks and foreign exchange markets are open for the transaction of business required for this Agreement in Houston, Texas, New York, New York and London, England, as relevant to the determination to be made or the action to be taken.     "Capital Expenditures" shall mean for any period, expenditures (including, without limitation, the aggregate amount of Capitalized Lease Obligations required to be paid during such period) incurred by any Person to acquire or construct fixed assets, plant and equipment (including, without limitation, renewals, improvements and replacements, but excluding repairs and maintenance) during such period, that would be required to be capitalized on the balance sheet of such Person in accordance with GAAP on a consolidated basis for the Borrower and its Subsidiaries; provided, that for all calculations hereunder which include periods prior to the Agreement Date, Capital Expenditures hereunder shall include Capital Expenditures by Triton with respect to the assets acquired from Triton during such period.     "Capital Stock" shall mean, as applied to any Person, any capital stock of such Person, regardless of class or designation, and all warrants, options, purchase rights, conversion or exchange rights, voting rights, calls or claims of any character with respect thereto.     "Capitalized Lease Obligation" shall mean that portion of any obligation of a Person as lessee under a lease which at the time would be required to be capitalized on the balance sheet of such lessee in accordance with GAAP.     "Cellular System" means a cellular mobile radio telephone system constructed and operated in an MSA or an RSA, or a PCS System constructed and operated in a BTA and shall include, if operated in connection with (or in the same general service area as) any of the foregoing systems, (a) a microwave system or a paging system and (b) land line telephone systems.     "Certificate of Financial Condition" shall mean a certificate, substantially in the form of Exhibit B attached hereto, signed by the chief financial officer of the Borrower, together with any schedules, exhibits or annexes appended thereto.     "Class M Stock" shall mean those 110,000 shares of Convertible Voting Preferred Stock of the Borrower issued on April 3, 2000 in connection with the Triton Acquisition.     "Class T Stock" shall mean those (a) 2,176.875 Series A shares and (b) 5,363.214 Series B shares, in each case of Preferred Stock of the Borrower issued on April 3, 2000 to Telephone & Data Systems, Inc. in exchange for certain of their Class A and Class B Common Stock of the Borrower issued, together with any additional stock of this class issued as payment in kind dividends thereon.     "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985 and any amendments thereto.     "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 4 --------------------------------------------------------------------------------     "Collateral" shall mean any property of any kind constituting collateral for the Obligations under any of the Security Documents.     "Commitments" shall mean, collectively, the Revolving Loan Commitments, the Term Loan A Commitments, the Term Loan B Commitments, the Term Loan C Commitments and, as applicable, the Incremental Facility Commitments; and "Commitment" shall mean any of the foregoing Commitments.     "Commitment Ratios" shall mean the percentages in which the Lenders are severally bound to fund their respective portion of Advances to the Borrower under the Commitments set forth on Schedule 7, attached hereto, (together with dollar amounts) as of April 3, 2000 (and which may change from time to time in accordance with Sections 2.15 and 11.5 hereof).     "Communications Act" shall mean the Communications Act of 1934, and any similar or successor federal statute, and the rules and regulations of the FCC thereunder, all as the same may be in effect from time to time.     "Continue", "Continuation" and "Continued" shall mean the continuation pursuant to Article 2 hereof of a LIBOR Advance as a LIBOR Advance from one Interest Period to a different Interest Period.     "Convert", "Conversion" and "Converted" shall mean a conversion pursuant to Article 2 hereof of a LIBOR Advance into a Base Rate Advance or of a Base Rate Advance into a LIBOR Advance, as applicable.     "Cooperative Lender" shall mean CoBank, ACB.     "Co-Syndication Agents" shall mean First Union National Bank and PNC Bank, National Association.     "Debt Service" shall mean, with respect to the Borrower and its Subsidiaries, for any period, the sum of (a) Scheduled Loan Payments with respect to the Revolving Loans during such period; (b) scheduled payments of principal on all Indebtedness for Money Borrowed (other than the Revolving Loans) during such period and (c) Interest Expense during such period.     "Default" shall mean any Event of Default, and any of the events specified in Section 8.1 hereof, regardless of whether there shall have occurred any passage of time or giving of notice, or both, that would be necessary in order to constitute such event an Event of Default.     "Default Rate" shall mean, as of any date, a simple per annum interest rate equal to the sum of (a) the Base Rate, (b) the Applicable Margin for Base Rate Advances (calculated using the highest Applicable Margin for Base Rate Advances for the applicable Loans as set forth in Section 2.3(f) hereof without giving effect to the Total Leverage Ratio then in effect), and (c) two percent (2%).     "Deposit Account" shall have the meaning ascribed thereto in Section 2.11(c) hereof.     "Documentation Agent" shall mean Bank of America Securities, LLC.     "EBITDA" shall mean, with respect to any Person for any period, the earnings before interest, taxes, depreciation and amortization expenses for such period, all as determined in accordance with GAAP.     "Employee Pension Plan" shall mean any Plan which is (a) maintained by the Borrower, any of its Subsidiaries or any of its ERISA Affiliates and (b) subject to Part 3 of Title I of ERISA.     "Environmental Laws" shall mean all applicable federal, state or local laws, statutes, rules, regulations or ordinances, codes, common law, consent agreements, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to public health, safety or the pollution or protection of the environment, including, without limitation, those relating to releases, 5 -------------------------------------------------------------------------------- discharges, emissions, spills, leaching, or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, crude oil or any fraction thereof, or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited, or regulated substances, including, without limitation, any such provisions under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. § 6901 et seq.).     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time.     "ERISA Affiliate" shall mean any Person, including a Subsidiary or an Affiliate of the Borrower, that is a member of any group of organizations (within the meaning of Code Sections 414(b), (c), (m) or (o)) of which the Borrower is a member.     "Eurodollar Reserve Percentage" shall mean the percentage which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System, as such regulation may be amended from time to time ("Regulation D"), as the maximum reserve requirement applicable with respect to Eurocurrency Liabilities (as that term is defined in Regulation D), whether or not any Lender has any such Eurocurrency Liabilities subject to such reserve requirement at that time.     "Event of Default" shall mean any of the events specified in Section 8.1 hereof, provided that any requirement for notice or lapse of time has been satisfied.     "Excess Cash Flow" shall mean, as of the end of any fiscal year of the Borrower based on the audited financial statements provided under Section 6.2 hereof for such fiscal year, the remainder of (a) Operating Cash Flow for such fiscal year, minus (b) the sum of (i) Capital Expenditures made during such fiscal year exclusive of Investments by the Borrower in Wireless Alliance permitted hereunder, (ii) Scheduled Loan Payments made during such period, (iii) cash taxes paid by the Borrower and its Subsidiaries during such fiscal year, (iv) Interest Expense during such fiscal year, (v) principal payments in respect of Indebtedness for Money Borrowed (other than with respect to the Revolving Loans) paid by the Borrower and its Subsidiaries during such year and (vi) $1,000,000.     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.     "FCC" shall mean the Federal Communications Commission, or any other similar or successor agency of the federal government administering the Communications Act.     "Federal Funds Rate" shall mean, as of any date, the weighted average of the rates on overnight federal funds transactions with the members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three (3) federal funds brokers of recognized standing selected by the Administrative Agent.     "GAAP" shall mean, as in effect from time to time, generally accepted accounting principles in the United States, consistently applied.     "Guaranty" or "Guaranteed," as applied to an obligation, shall mean and include (a) a guaranty, direct or indirect, in any manner, of all or any part of such obligation, and (b) any agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, any reimbursement obligations as to amounts drawn down by beneficiaries of outstanding letters of credit or capital call requirements. 6 --------------------------------------------------------------------------------     "Headquarter's Mortgage" shall mean those certain Mortgages in favor of the Administrative Agent (on behalf of the Lenders) and pertaining to the Borrower's headquarter's properties located in Alexandria, Minnesota.     "Incremental Facility Advance" shall mean an Advance made by any Lender holding an Incremental Facility Commitment pursuant to Section 2.14 hereof.     "Incremental Facility Commitment" shall mean the commitment of any Lender or Lenders to make advances to the Borrower in accordance with Section 2.14 hereof (the Borrower may obtain Incremental Facility Commitments from more than one Lender, which commitments shall be several obligations of each such Lender); and "Incremental Facility Commitments" shall mean the aggregate of the Incremental Facility Commitments of each Lender.     "Incremental Facility Commitment Ratios" shall mean percentages in which the Lenders holding an Incremental Facility Commitment are severally bound to fund their respective portions of Advances to the Borrower under the Incremental Facility Commitments which are set forth in the Notice of Incremental Facility Commitment.     "Incremental Facility Loans" shall mean the amounts advanced by the Lenders holding an Incremental Facility Commitment to the Borrower as Incremental Facility Loans under the Incremental Facility Commitment, and evidenced by the Incremental Facility Notes.     "Incremental Facility Maturity Date" shall mean that date specified in the Notice of Incremental Facility Commitment as the maturity date of an Incremental Facility Advance.     "Incremental Facility Notes" shall mean those certain Incremental Facility Notes described in Section 2.14 hereof.     "Indebtedness" shall mean, with respect to any Person, and without duplication, (a) all items, except items of shareholders' and partners' equity or capital stock or surplus or general contingency or deferred tax reserves, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person, including, without limitation, to the extent of the higher of the book value or fair market value of the property or asset securing such obligation (if less than the amount of such obligation), secured non-recourse obligations of such Person, (b) all direct or indirect obligations of any other Person secured by any Lien to which any property or asset owned by such Person is subject, but only to the extent of the higher of the fair market value or the book value of the property or asset subject to such Lien (if less than the amount of such obligation) if the obligation secured thereby shall not have been assumed, (c) to the extent not otherwise included, all Capitalized Lease Obligations of such Person and all obligations of such Person with respect to leases constituting part of a sale and lease-back arrangement, (d) all reimbursement obligations with respect to outstanding letters of credit, and (e) to the extent not otherwise included, all obligations subject to Guaranties of such Person or its Subsidiaries, and (f) all obligations of such Person under Interest Hedge Agreements.     "Indebtedness for Money Borrowed" shall mean, with respect to any Person, Indebtedness for money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, all Indebtedness upon which interest charges are customarily paid, all Capitalized Lease Obligations, all reimbursement obligations with respect to outstanding letters of credit, all Indebtedness issued or assumed as full or partial payment for property or services (other than trade payables arising in the ordinary course of business, but only if and so long as such accounts are payable on customary trade terms), whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed, purchase money indebtedness and, without duplication, Guaranties of any of the foregoing but excluding Preferred Stock. For purposes of this definition, interest which is accrued but 7 -------------------------------------------------------------------------------- not paid on the scheduled due date for such interest shall be deemed Indebtedness for Money Borrowed.     "Indemnitee" shall have the meaning ascribed thereto in Section 5.12 hereof.     "Interest Expense" shall mean, for any period, all cash interest expense (including imputed interest with respect to Capitalized Lease Obligations) with respect to any Indebtedness for Money Borrowed of the Borrower and its Subsidiaries on a consolidated basis during such period pursuant to the terms of such Indebtedness for Money Borrowed, together with all fees payable in respect thereof, all as calculated in accordance with GAAP (including, without limitation, all cash interest paid on any Subordinated Indebtedness) and dividends paid in cash with respect to the Preferred Stock; provided, however, that for all calculations of Interest Expense (a) from and including April 3, 2000 through June 29, 2000 shall be calculated with respect to the Loans assuming that the Loans advanced on April 3, 2000 were outstanding for the relevant period at the interest rates in effect for such Loans (and giving effect to Advances made subsequent to April 3, 2000, if applicable), (b) from and including June 30, 2000 through September 29, 2000, shall be Interest Expense for the quarter ended June 30, 2000, multiplied by four (4), (c) from and including September 30, 2000, through December 30, 2000, shall be Interest Expense for the two quarter period ended September 30, 2000 multiplied by two (2), and (d) from and including December 31, 2000 through March 30, 2001, shall be Interest Expense for the three (3) quarters ending December 31, 2000 multiplied by 4/3.     "Interest Hedge Agreements" shall mean the obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.     "Interest Period" shall mean (a) in connection with any Base Rate Advance, the period beginning on the date such Advance is made and ending on the last day of the calendar quarter in which such Advance is made; provided, however, that if a Base Rate Advance is made on the last day of any calendar quarter, it shall have an Interest Period ending on, and its Payment Date shall be, the last day of the following calendar quarter, and (b) in connection with any LIBOR Advance, the term of such Advance selected by the Borrower or otherwise determined in accordance with this Agreement. Notwithstanding the foregoing, however, (i) any applicable Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless, with respect to LIBOR Advances only, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any applicable Interest Period, with respect to LIBOR Advances only, which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end shall (subject to clause (i) above) end on the last day of such calendar month, and (iii) the Borrower shall not select an Interest Period which extends beyond the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date or Incremental Facility Maturity Date, as applicable or such earlier date as would interfere with the Borrower's repayment obligations under Section 2.4, 2.6 or 2.7 hereof. Interest shall be due and payable with respect to any Advance as provided in Section 2.3 hereof.     "Interest Rate Basis" shall mean the Base Rate Basis or the LIBOR Basis, as appropriate. 8 --------------------------------------------------------------------------------     "Investment" shall mean, with respect to the Borrower or any of its Subsidiaries, (a) any loan, advance or extension of credit (other than to customers in the ordinary course of business) by such Person to, or any Guaranty or other contingent liability with respect to the capital stock, Indebtedness or other obligations of, or any contributions to the capital of, any other Person, or any ownership, purchase or other acquisition by such Person of any interest in any capital stock, limited partnership interest, general partnership interest, or other securities of any such other Person, other than an Acquisition, (b) any acquisition by the Borrower or any of its Subsidiaries of any assets relating to the wireless communications business, and (c) all expenditures by the Borrower or any of its Subsidiaries relating to the foregoing. "Investment" shall also include the total cost of any future commitment or other obligation binding on any Person to make an Investment or any subsequent Investment.     "Junior Preferred Stock" shall mean those 140,000 shares of 121/4% Junior Exchangeable Preferred Stock of the Borrower issued February 11, 2000, together with any additional Junior Preferred Stock issued as payment in kind dividends thereon.     "Known to the Borrower" or "to the knowledge of the Borrower" shall mean known by or reasonably should have been known by the executive officers of the Borrower (which shall include, without limitation, the chief executive officer, the chief financial officer, the general counsel, or any vice president of the Borrower).     "Lead Arranger" shall mean TD Securities (USA) Inc.     "Lenders" shall mean the Persons whose names appear as "Lenders" on the signature pages hereof and any other Person which becomes a "Lender" hereunder after April 3, 2000; and "Lender" shall mean any one of the foregoing Lenders; and for the purposes of the Security Documents, "Lenders" shall include other holders of Obligations hereunder.     "LIBOR" shall mean, for any Interest Period, the average (rounded upward to the nearest one-hundredth (1/100th) of one percent (1%)) of the interest rates per annum at which deposits in United States Dollars for such Interest Period are offered to The Toronto-Dominion Bank, in the London interbank borrowing market at approximately 11:00 a.m. (London, England time), two (2) Business Days before the first day of such Interest Period, in an amount approximately equal to the principal amount of, and for a length of time approximately equal to the Interest Period for, the LIBOR Advance sought by the Borrower.     "LIBOR Advance" shall mean an Advance which the Borrower requests to be made as, Converted to or Continued as a LIBOR Advance, in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000 and in an integral multiple of $1,000,000.     "LIBOR Basis" shall mean a simple per annum interest rate equal to the sum of (a) the quotient of (i) LIBOR divided by (ii) one (1) minus the Eurodollar Reserve Percentage, if any, stated as a decimal, plus (b) the Applicable Margin for LIBOR Advances for the applicable Loans. The LIBOR Basis shall apply to Interest Periods of one (1), two (2), three (3), six (6) months, and, subject to availability as determined by the Administrative Agent, nine (9) and twelve (12) months and, once determined, shall remain unchanged during the applicable Interest Period, except for changes to reflect adjustments in the Eurodollar Reserve Percentage and the Applicable Margin as adjusted pursuant to Section 2.3(f) hereof. The LIBOR Basis for any LIBOR Advance shall be adjusted as of the effective date of any change in the Eurodollar Reserve Percentage.     "Licenses" shall mean any cellular telephone, microwave, personal communications or other license, authorization, certificate of compliance, franchise, approval or permit, whether for the construction or the operation of any Cellular System, granted or issued by the FCC and held by the Borrower or any of its Subsidiaries, all of which are listed as of April 3, 2000 on Schedule 1 hereto. 9 --------------------------------------------------------------------------------     "Lien" shall mean, with respect to any property, any mortgage, lien, pledge, negative pledge or other agreement not to pledge, assignment, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether created by statute, contract, the common law or otherwise, and whether or not choate, vested or perfected.     "Loan Documents" shall mean this Agreement, the Notes, the Security Documents, all fee letters, all Requests for Advance, all Requests for Swing Line Advances, all Interest Hedge Agreements between the Borrower, on the one hand, and the Administrative Agent or any of the Lenders (or any of their Affiliates) on the date such Interest Hedge Agreement was entered into, or any of them, on the other hand, all Notices of Incremental Facility Commitments, and all other certificates, documents, instruments and agreements executed or delivered in connection with or contemplated by this Agreement or any other Loan Document.     "Loans" shall mean, collectively, the Term Loans, the Revolving Loans, and, if applicable, the Incremental Facility Loans and the Swing Line Loans; and "Loan" shall mean any one of the foregoing Loans.     "Materially Adverse Effect" shall mean (a) any material adverse effect upon the business, assets, liabilities, financial condition, results of operations, properties, or business prospects of the Borrower and its Subsidiaries on a consolidated basis, taken as a whole, or (b) a material adverse effect upon the binding nature, validity, or enforceability of this Agreement and the Notes, or upon the ability of the Borrower and its Subsidiaries to perform the payment obligations or other material obligations under this Agreement or any other Loan Document, or upon the value of the Collateral or upon the rights, benefits or interests of the Lenders in and to the Loans or the rights of the Administrative Agent and the Lenders in the Collateral; in either case, whether resulting from any single act, omission, situation, status, event or undertaking, or taken together with other such acts, omissions, situations, statuses, events or undertakings.     "MSA" shall mean any "metropolitan statistical area" as defined and modified by the FCC for the purpose of licensing public cellular radio telecommunications service systems.     "Multiemployer Plan" shall mean a multiemployer pension plan as defined in Section 3(37) of ERISA to which the Borrower, any of its Subsidiaries, or any of its ERISA Affiliates is or has been required to contribute subsequent to September 25, 1980.     "Necessary Authorizations" shall mean all approvals and licenses from, and all filings and registrations with, any governmental or other regulatory authority, including, without limitation, the Licenses and all approvals, licenses, filings and registrations under the Communications Act, necessary in order to enable the Borrower and its Subsidiaries to own, construct, maintain, and operate Cellular Systems and to invest in other Persons who own, construct, maintain, and operate Cellular Systems.     "Net Income" shall mean, for the Borrower and its Subsidiaries on a consolidated basis, for any period, net income determined in accordance with GAAP.     "Net Proceeds" shall mean, with respect to any sale, lease, transfer or other disposition of assets by, or insurance or condemnation proceedings with respect to the assets of the Borrower or any of its Subsidiaries, the aggregate amount of cash received for such assets (including, without limitation, any payments received by the Borrower or any of its Subsidiaries for non-competition covenants, consulting or management fees in connection with such sale, and any portion of the amount received evidenced by a promissory note or other evidence of Indebtedness issued by the purchaser), net of (i) amounts reserved, if any, for taxes payable with respect to any such sale (after application (assuming application, to the extent permitted by Applicable Law, first to such reserves) of any available losses, credits or other offsets), (ii) reasonable and customary transaction costs properly attributable to such transaction or proceeding and payable by the Borrower or any of its Subsidiaries (other than to an Affiliate) in 10 -------------------------------------------------------------------------------- connection with such transaction or proceeding, including, without limitation, commissions, and (iii) until actually received by the Borrower or any of its Subsidiaries, any portion of the amount (x) received held in escrow or (y) evidenced by a promissory note or other evidence of Indebtedness issued by a purchaser or non-compete agreement or covenant or (z) otherwise for which compensation is paid over time. Upon receipt by the Borrower or any of its Subsidiaries of (A) amounts referred to in item (iii) of the preceding sentence, or (B) if there shall occur any reduction in the tax reserves referred to in item (i) of the preceding sentence resulting in a payment to the Borrower, such amounts shall then be deemed to be "Net Proceeds."     "Non-U.S. Bank" shall have the meaning ascribed thereto in Section 2.8(a) hereof.     "Notes" shall mean, collectively, the Term Loan Notes, the Revolving Loan Notes, if applicable, the Incremental Facility Notes, the Swing Line Note and any other promissory note issued by the Borrower to evidence the Term Loans, Revolving Loans or the Swing Line Loans pursuant to this Agreement, and any extensions, renewals, or amendments to, or replacements of, the foregoing; and "Note" shall mean any one of the foregoing Notes.     "Notice of Incremental Facility Commitment" shall mean the notice by the Borrower of the Incremental Facility Commitment, which notice shall be substantially in the form of Exhibit C attached hereto and shall be delivered to the Administrative Agent and the Lenders.     "Obligations" shall mean all payment and performance obligations of every kind, nature and description of the Borrower, its Subsidiaries, and any other obligors to the Lenders, the Swing Line Lender, the Administrative Agent, or any of them, under this Agreement and the other Loan Documents (including, without limitation, any interest, fees and other charges on the Loans or otherwise under the Loan Documents that would accrue but for the filing of a bankruptcy action with respect to the Borrower, whether or not such claim is allowed in such bankruptcy action and including Obligations to the Lenders pursuant to Section 5.13 hereof) as they may be amended from time to time, or as a result of making the Loans, whether such obligations are direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, now existing or hereafter arising.     "Operating Cash Flow" shall mean, with respect to the Borrower and its Subsidiaries on a consolidated basis as of the end of any period, (a) Net Income for such period (after eliminating any extraordinary gains and losses, including, without limitation, gains and losses from the sale of assets), plus (b) to the extent deducted in determining Net Income, the sum of the following for such period: (i) depreciation and amortization expense, (ii) Interest Expense, (iii) tax expense, and (iv) all other non-cash items (which shall include non-cash interest expense, if any), minus (c) the sum of (i) non-cash credits to Net Income and (ii) EBITDA of Wireless Alliance. In the case of an Acquisition permitted hereunder, Operating Cash Flow of the Borrower and its Subsidiaries for the applicable test period during which such Acquisition occurs shall be adjusted (A) to give effect to such Acquisition, as if such Acquisition had occurred on the first day of such test period, by excluding the Operating Cash Flow of such Acquisition during such test period prior to the date of such Acquisition and adding to the Operating Cash Flow of the Borrower, if positive, or subtracting from such Operating Cash Flow, if negative, the product of (i) the actual Operating Cash Flow of such Acquisition for that portion of such test period from the date of such Acquisition to the last day of such period, times (ii)  a fraction the numerator of which is the number of calendar days in such test period and the denominator of which is the number of days in such test period from and including the date of such Acquisition through the last day of such test period, and (B) by adding to the Operating Cash Flow of the Borrower such expenses incurred by the Borrower and its Subsidiaries as the Required Lenders may agree relate to such Acquisition. For purposes of calculating Operating Cash Flow in connection with an Advance for any such Acquisition, Operating Cash Flow for the Borrower and its Subsidiaries as of the last day of the 11 -------------------------------------------------------------------------------- immediately preceding calendar quarter shall include Operating Cash Flow for the Acquisition for the same period and shall exclude any dispositions of assets during the same period.     "Payment Date" shall mean the last day of any Interest Period.     "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto.     "PCS System" shall mean any broad band personal communications services telecommunications system operating on radio spectrum in a BTA, or a License to operate such a system.     "Permitted Liens" shall mean, as applied to any Person:     (a) Any Lien in favor of the Administrative Agent given to secure the Obligations;     (b) (i) Liens on real estate or other property for taxes, assessments, governmental charges or levies not yet delinquent and (ii) Liens for taxes, assessments, judgments, governmental charges or levies or claims the non-payment of which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been set aside on such Person's books, but only so long as no foreclosure, distraint, sale or similar proceedings have been commenced with respect thereto;     (c) Liens of carriers, warehousemen, mechanics, laborers and materialmen incurred in the ordinary course of business for sums not yet due or being diligently contested in good faith, if reserves or appropriate provisions shall have been made therefor;     (d) Liens incurred in the ordinary course of business in connection with workers' compensation and unemployment insurance which are not overdue for more than sixty (60) days;     (e) Restrictions on the transfer of the Licenses or assets of the Borrower or its Subsidiaries imposed by any of the Licenses as presently in effect or by the Communications Act and any regulations thereunder;     (f)  Easements, rights-of-way, and other similar encumbrances on the use of real property which do not materially interfere with the ordinary conduct of the business of such Person or the use of such property;     (g) Liens securing Indebtedness to the extent permitted pursuant to Sections 7.1(g) and (i) hereof;     (h) Liens reflected by Uniform Commercial Code financing statements filed in respect of Capitalized Lease Obligations permitted pursuant to Section 7.1(i) hereof and true leases of the Borrower or any of its Subsidiaries; and     (i)  Liens set forth on Schedule 2 attached hereto.     "Person" shall mean an individual, corporation, limited liability company, association, partnership, joint venture, trust or estate, an unincorporated organization, a government or any agency or political subdivision thereof, or any other entity.     "Plan" shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA or any other employee benefit plan maintained for employees of the Borrower or any ERISA Affiliate of the Borrower, including the Subsidiaries.     "Preferred Stock" shall mean the Previous Senior Preferred Stock, the 2000 Senior Preferred Stock, the Junior Preferred Stock, the Class M Stock and the Class T Stock.     "Previous Senior Preferred Stock" shall mean those 125,000 shares of 113/8% Senior Exchangeable Preferred Stock of the Borrower, issued on May 14, 1998, together with additional 113/8% Senior Exchangeable Preferred Stock of the Borrower issued as payment in kind dividends thereon. 12 --------------------------------------------------------------------------------     "Pro Forma Debt Service" shall mean, with respect to the Borrower and its Subsidiaries, for any period, the sum of (a) Pro Forma Scheduled Principal Payments with respect to the Revolving Loans during such period, (b) scheduled payments of principal with respect to the Term Loans during such period, and (c) scheduled payments on all other Indebtedness for Money Borrowed during such period.     "Pro Forma Scheduled Principal Payments" shall mean for any period (a) the outstanding principal amount of the Revolving Loans on the date of determination minus (b) the Revolving Loan Commitment scheduled to be available on the last day of such period after giving effect to the reductions set forth in Section 2.5(a) hereof.     "Refinancing Date" shall mean that date six months prior to the May 2008 maturity date of the Subordinated Notes.     "Register" shall have the meaning ascribed to such term in Section 11.5(g) hereof.     "Registered Noteholder" shall mean each Non-U.S. Bank that requests or holds a Registered Note pursuant to Section 2.8(a) hereof or registers its Loans pursuant to Section 11.5(g) hereof.     "Registered Notes" shall mean, collectively, those certain Notes that have been issued in registered form in accordance with Sections 2.8(a) and 11.5(g) hereof and each of which bears the following legend: "This is a Registered Note, and this Registered Note and the Loans evidenced hereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer on the Register and in compliance with all other requirements provided for in the Loan Agreement."     "Regulations" shall have the meaning ascribed thereto in Section 4.1(n) hereof.     "Reportable Event" shall mean, with respect to any Employee Pension Plan, an event described in Section 4043(b) of ERISA.     "Request for Advance" shall mean a certificate designated as a "Request for Advance," signed by an Authorized Signatory of the Borrower requesting an Advance hereunder, which shall be in substantially the form of Exhibit D attached hereto, and shall, among other things, (i) specify the date of the Advance, which shall be a Business Day, the amount of the Advance, the type of Advance (LIBOR or Base Rate), and, with respect to LIBOR Advances, the Interest Period selected by the Borrower, (ii) state that, to the knowledge of the Person signing such request, there shall not exist, on the date of the requested Advance and after giving effect thereto, a Default, as of the date of such Advance and after giving effect thereto, (iii) the Applicable Margin, and (iv) designate the amount of the Revolving Loan Commitments and, if applicable, the Term Loan A Commitments, Term Loan B Commitments, Term Loan C Commitments and the Incremental Facility Commitments, being drawn.     "Request for Swing Line Advance" shall mean any certificate signed by an Authorized Signatory of the Borrower requesting a Swing Line Advance hereunder which will increase the aggregate amount of the Swing Line Loans outstanding, which certificate shall be denominated a "Request for Swing Line Advance," shall be in substantially the form of Exhibit T attached hereto and shall, among other things, (a) specify the date of the Swing Line Advance, which shall be a Business Day, (b) specify the amount of the Swing Line Advance and certify that the use of the proceeds thereof will be in compliance with the terms of this Agreement, (c) state that there shall not exist, on the date of the requested Swing Line Advance and after giving effect thereto, a Default or an Event of Default, (d) state that all conditions precedent to the making of the Swing Line Advance have been satisfied and (e) certify that the aggregate amount of the Swing Line Loans and the Loans, together with the amount of the Swing Line Advance, does not exceed the Available Swing Line Commitment.     "Required Lenders" shall mean collectively, (a) if there are no Loans outstanding, Lenders the total of whose Commitment Ratios equals or exceeds fifty-one percent (51%) of the Commitment Ratios of all Lenders entitled to vote hereunder or (b) if there are any Loans outstanding, Lenders the total of whose Commitment Ratios for Revolving Loans (and Incremental Facility Commitment Ratios as 13 -------------------------------------------------------------------------------- applicable) and Term Loans A Loans, Term Loan B Loans and Term Loan C Loans outstanding equals or exceeds fifty-one percent (51%) of the Commitment Ratios for Revolving Loans (and Incremental Facility Commitment Ratios as Applicable) and Term Loan A Loans, Term Loan B Loans, and Term Loan C Loans of all Lenders entitled to vote hereunder.     "Restricted Payment" shall mean any direct or indirect cash distribution, dividend, cash interest payment or other payment to any Person (other than to the Borrower or any majority-owned Subsidiary of the Borrower) on account of (a) any general or limited partnership or membership interest in, or shares of Capital Stock or other securities of, the Borrower or any of its Subsidiaries (other than dividends payable solely in stock of such Person and stock splits), including, without limitation, any direct or indirect distribution, dividend or other payment to any Person (other than to the Borrower or any Subsidiary of the Borrower) on account of any warrants or other rights or options to acquire shares of capital stock of the Borrower or any of its Subsidiaries and (b) Subordinated Indebtedness.     "Restricted Purchase" shall mean any payment (including, without limitation, any sinking fund payment, prepayment or installment payment) on account of the purchase, redemption or other acquisition or retirement of any general or limited partnership or membership interest in, or shares of capital stock or other securities of the Borrower or any of the Borrower's Subsidiaries, including, without limitation, any warrants or other rights or options to acquire shares of capital stock of the Borrower or any of the Borrower's Subsidiaries or any loan, advance, release or forgiveness of Indebtedness by the Borrower or its Subsidiaries to any partner, shareholder or Affiliate of any such Person.     "Revolving Loan Commitments" shall mean the several obligations of the Lenders to advance to the Borrower an aggregate amount of up to $275,000,000 at any one time outstanding, in accordance with their respective Commitment Ratios for Revolving Loans as set forth in the definition of "Commitment Ratios" pursuant to the terms hereof, and as such obligations may be reduced from time to time pursuant to the terms hereof.     "Revolving Loan Maturity Date" shall mean April 3, 2008, or as the case may be, such earlier date as payment of the Obligations shall be due (whether by acceleration, reduction of the Commitments to zero or otherwise); provided, however, that if the Subordinated Notes are not repaid or refinanced prior to the Refinancing Date, the Revolving Loan Maturity Date shall accelerate to that Refinancing Date.     "Revolving Loan Notes" shall mean, collectively, those certain revolving promissory notes in the aggregate original principal amount of the Revolving Loan Commitments and one issued by the Borrower to each of the Lenders holding a Revolving Loan Commitment, each substantially in the form of Exhibit E attached hereto, and any extensions, modifications, renewals or replacements of, or amendments to, any of the foregoing.     "Revolving Loans" shall mean the amounts advanced by each Lender having a Revolving Loan Commitment to the Borrower as Revolving Loans, and evidenced by the Revolving Loan Notes.     "RSA" shall mean any "rural service area" as defined and modified by the FCC for the purpose of licensing public cellular radio telecommunications service systems.     "Saco River" shall mean Saco River Telegraph and Telephone Company, a Maine corporation.     "Saco River Acquisition" shall mean the Acquisition by the Borrower of substantially all of the stock of Saco River.     "Saco River Agreement" shall mean that certain Agreement and Plan of Merger dated as of June 20, 2000 by and between the Borrower, Saco River and certain stockholders of Saco River.     "Scheduled Loan Payments" shall mean, for any period, with respect to the Revolving Loans, the excess, if any, of (i) the highest amount of the Revolving Loans outstanding at any time during such 14 -------------------------------------------------------------------------------- period, over (ii) the amount of the Revolving Loan Commitments on the last day of such period (after giving effect to any reduction in the Revolving Loan Commitments on such date pursuant to Section 2.5 hereof).     "Security Agreement" shall mean that certain Second Amended and Restated Security Agreement dated as of April 3, 2000 by and between the Borrower and the Administrative Agent, for itself and on behalf of the Lenders, substantially in the form of Exhibit F attached hereto.     "Security Documents" shall mean the Borrower's Pledge Agreement, the Security Agreement, each Subsidiary Guaranty, each Subsidiary Pledge Agreement, each Subsidiary Security Agreement, the Headquarter's Mortgage, any other agreement or instrument providing Collateral for the Obligations whether now or hereafter in existence, and any filings (including, without limitation, financing statements), instruments, agreements, and documents related thereto or to this Agreement, and providing the Administrative Agent, for the benefit of the Lenders, with Collateral for the Obligations.     "Security Interest" shall mean all Liens in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, created hereunder or under any of the Security Documents to secure the Obligations.     "Subordinated Indebtedness" shall mean Indebtedness for Money Borrowed of the Borrower which is subordinated to the Obligations on terms and conditions acceptable to the Required Lenders and shall include, without limitation, the Subordinated Notes.     "Subordinated Notes" shall mean those $125,000,000 (95/8%) Senior Subordinated Notes due 2008 of the Borrower.     "Subsidiary" shall mean, as applied to any Person, (a) any corporation of which more than fifty percent (50%) of the outstanding stock (other than directors' qualifying shares) having ordinary voting power to elect a majority of its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such voting power by reason of the happening of any contingency, or any partnership or limited liability company of which more than fifty percent (50%) of the outstanding partnership or membership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, or (b) any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. Notwithstanding the foregoing, Subsidiary shall not include Wireless Alliance.     "Subsidiary Guaranty" shall mean that certain Second Amended and Restated Master Subsidiary Guaranty dated as of April 3, 2000 in substantially the form of Exhibit G attached hereto in favor of the Administrative Agent and the Lenders, given by each Subsidiary of the Borrower, and shall include any similar agreements executed pursuant to Section 5.14 hereof.     "Subsidiary Pledge Agreement" shall mean that certain Second Amended and Restated Master Subsidiary Pledge Agreement dated as of April 3, 2000 in substantially the form of Exhibit F attached hereto by and between each Subsidiary of the Borrower having one or more of its own Subsidiaries, on the one hand, and the Administrative Agent, for itself and on behalf of the Lenders, on the other hand, and shall include any similar agreements executed pursuant to Section 5.14 hereof.     "Subsidiary Security Agreement" shall mean that certain Second Amended and Restated Master Subsidiary Security Agreement dated as of April 3, 2000 in substantially the form of Exhibit G attached hereto by and between each of the Borrower's Subsidiaries, on the one hand, and the Administrative Agent, for itself and on behalf of the Lenders, on the other hand, and shall include any similar agreements executed pursuant to Section 5.14 hereof. 15 --------------------------------------------------------------------------------     "Swing Line Advance" or "Swing Line Advances" shall mean amounts advanced by the Swing Line Lender to the Borrower pursuant to Section 2.16 hereof on the occasion of any borrowing which Swing Line Advance shall be in a principal amount of at least $500,000 and in an integral multiple of $500,000.     "Swing Line Commitment" shall mean the obligation of the Swing Line Lender to advance funds in the aggregate sum of up to $10,000,000.00 to the Borrower pursuant to the terms hereof.     "Swing Line Lender" shall mean any Lender agreed to by the Borrower and such Lender with the consent of the Administrative Agent, such consent not to be unreasonably withheld, which Lender shall become a party to this Agreement as the "Swing Line Lender" by assignment or otherwise.     "Swing Line Loans" shall mean the aggregate principal amount of all Swing Line Advances.     "Swing Line Note" shall mean that certain promissory note in the principal amount of $10,000,000.00 issued by the Borrower to the Swing Line Lender, substantially in the form of Exhibit U attached hereto, any other Swing Line Note issued pursuant to this Agreement in respect of the Swing Line Commitment, and any extensions, modifications, renewals, or replacements of, or amendments to any of the foregoing.     "Term Loan A Commitments" shall mean the several obligations of the Lenders having a Term Loan A Commitment to advance to the Borrower an aggregate amount of up to $450,000,000 at any one time outstanding, in accordance with their respective Commitment Ratios for Term Loan A Loans, and as such obligations may be reduced from time to time in each case, pursuant to the terms hereof; and "Term Loan A Commitment" shall mean the individual commitment of each such Lender to advance Term Loan A Loans hereunder.     "Term Loan A Loans" shall mean the amounts advanced by the Lenders holding a Term Loan A Commitment to the Borrower as Term Loan A Loans and evidenced by the Term Loan A Notes.     "Term Loan A Maturity Date" shall mean April 3, 2008, or as the case may be, such earlier date as payment of the Obligations shall be due (whether by acceleration, reduction of the Commitments to zero or otherwise); provided, however, that if the Subordinated Notes are not repaid or refinanced prior to the Refinancing Date, the Term Loan A Maturity Date shall accelerate to that Refinancing Date.     "Term Loan A Notes" shall mean, collectively, those certain term promissory notes in the aggregate original principal amount of the Term Loan A Commitments, and one issued by the Borrower to each of the Lenders having a Term Loan A Commitment, each substantially in the form of Exhibit J attached hereto, and any extensions, modifications, renewals or replacements of, or amendments to, any of the foregoing.     "Term Loan B Commitments" shall mean the several obligations of the Lenders having a Term Loan B Commitment to advance to the Borrower an aggregate amount of up to $237,500,000 at any time outstanding, in accordance with their respective Commitment Ratios for Term Loan B Loans pursuant to the terms hereof, and as such obligations may be reduced from time to time pursuant to the terms hereof; and "Term Loan B Commitment" shall mean the individual commitment of each such Lender to advance Term Loan B Loans hereunder.     "Term Loan B Loans" shall mean the amounts advanced by the Lenders holding a Term Loan B Commitment to the Borrower as Term Loan B Loans and evidenced by the Term Loan B Notes.     "Term Loan B Maturity Date" shall mean October 3, 2008, or as the case may be, such earlier date as payment of the Obligations shall be due (whether by acceleration, reduction of the Commitments to zero or otherwise).     "Term Loan B Notes" shall mean, collectively, those certain term promissory notes in the aggregate original principal amount of Term Loan B Commitment, and one issued by the Borrower to each of the 16 -------------------------------------------------------------------------------- Lenders having a Term Loan B Commitment, each substantially in the form of Exhibit K attached hereto, and any extensions, modifications, renewals or replacements of, or amendments to, any of the foregoing.     "Term Loan C Commitments" shall mean the several obligations of the Lenders having a Term Loan Commitment to advance to the Borrower an aggregate amount of up to $237,500,000 at any one time outstanding, in accordance with their respective Commitment Ratios for Term Loan C Loans pursuant to the terms hereof; and as such obligations may be reduced from time to time pursuant to the terms hereof; and "Term Loan C Commitment" shall mean the individual commitment of each such Lender to advance Term Loan C Loans hereunder.     "Term Loan C Loans" shall mean the amounts advanced by the Lenders holding a Term Loan C Commitment to the Borrower as Term Loan C Loans and evidenced by the Term Loan C Notes.     "Term Loan C Maturity Date" shall mean April 3, 2009, or as the case may be, such earlier date as payment of the Obligations shall be due (whether by acceleration, reduction of the Commitments to zero or otherwise).     "Term Loan C Notes" shall mean, collectively, those certain term promissory notes in the aggregate original principal amount of the Term Loan C Commitments, and one issued by the Borrower to each of the Lenders having a Term Loan C Commitment, each substantially in the form of Exhibit L attached hereto, and any extensions, modifications, renewals or replacements of, or amendments to, any of the foregoing.     "Term Loan Notes" shall mean, collectively, the Term Loan A Notes, the Term Loan B Notes and the Term Loan C Notes.     "Term Loans" shall mean, collectively, Term Loan A Loans, Term Loan B Loans and Term Loan C Loans.     "Total Debt" shall mean, for the Borrower and its Subsidiaries on a consolidated basis as of any date, the sum of (without duplication) (i) the outstanding principal amount of the Loans, (ii) the aggregate amount of Capitalized Lease Obligations and Indebtedness for Money Borrowed of such Persons, and (iii) the aggregate amount of all Guarantees of Indebtedness for Money Borrowed by such Persons.     "Total Leverage Ratio" shall mean, as of any date, the ratio of (a) the Total Debt (for purposes hereof, Total Debt shall not include the principal amount of any Indebtedness for Money Borrowed equal to the amount of any cash balance maintained by the Borrower in a segregated deposit account or escrow account which is designated solely for repayments of such Indebtedness for Money Borrowed) of the Borrower and its Subsidiaries on a consolidated basis on such date, to (b) Annualized Operating Cash Flow of the Borrower and its Subsidiaries on a consolidated basis as of the calendar quarter end being tested or the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be.     "Triton" shall mean Triton Cellular Partners, L.P.     "Triton Acquisition" shall mean the Acquisition by the Borrower of substantially all of the assets of Triton Cellular Partners, L.P.     "Triton Asset Purchase Agreement" shall mean that certain Asset Purchase Agreement dated as of November 6, 1999 among Triton Communications L.L.C., the Other Triton Parties and the Borrower.     "Triton Kansas Properties" shall mean all assets acquired in Kansas RSA's 1, 2, 6, 7, 11, 12 and 13. 17 --------------------------------------------------------------------------------     "Unreinvested Net Proceeds" shall mean the aggregate Net Proceeds from the sale, transfer or other disposition of an asset in the ordinary course for the Borrower or any of its Subsidiaries with respect to which (a) the Borrower has notified the Administrative Agent in writing that the Borrower intends to use any or all of such Net Proceeds to acquire or purchase an asset as a substitute or replacement of the asset disposed of within twelve (12) months of the date of the sale or disposition of the assets (so long as the Borrower is in compliance with all terms and conditions of this Agreement) and (b) the Borrower uses or irrevocably commits to be used within such twelve (12) month period; provided, however, that once applied to reduce the Commitments or repay Loans hereunder, such Unreinvested Net Proceeds shall cease to be Unreinvested Net Proceeds.     "Wireless Alliance" shall mean Wireless Alliance, L.L.C., a Minnesota limited liability company.     Each definition of an agreement in this Article 1 shall include such agreement as modified, amended or supplemented from time to time in accordance herewith. ARTICLE 2 Loans     Section 2.1  The Loans.       (a)  Revolving Loan Commitment.  The Lenders having Revolving Loan Commitments agree, severally, in accordance with their respective Commitment Ratios for Revolving Loans, and not jointly, upon the terms and subject to the conditions of this Agreement, to lend and relend to the Borrower from time to time, amounts which do not exceed, in the aggregate, at any one time outstanding the Available Revolving Loan Commitment as in effect from time to time. The Borrower hereby acknowledges that all "Obligations" in respect of "Revolving Loans" outstanding on the Agreement Date under the "Revolving Loan Commitments" (as such terms as defined in the Prior Loan Agreement) shall be deemed to have been made to the Borrower as Advances under the Revolving Loan Commitments hereunder and shall constitute a portion of the Obligations. Subject to the terms and conditions hereof, Advances under the Revolving Loan Commitments may be repaid and reborrowed from time to time on a revolving basis. In no case will the Lenders be required to fund a Request for Advance under their Revolving Loan Commitments if such funding would increase the aggregate amount of all Revolving Loans outstanding to an amount in excess of the Revolving Loan Commitments or the amount of such requested Advance exceeds the Available Revolving Loan Commitment before giving effect to such Advance.     (b)  Term Loan A Loans.  The Lenders who issued a "Term Loan A Commitment" under, and as defined in, the Prior Loan Agreement have previously lent to the Borrower the amount in the aggregate of $450,000,000.00 of which $450,000,000.00 is outstanding on the Agreement Date. The Borrower hereby acknowledges that all "Obligations" in respect of the "Term Loan A Loans" outstanding under the "Term Loan A Commitment" (as such terms are defined in the Prior Agreement) shall be deemed to have been made to the Borrower as Advances under the Term Loan A Commitments hereunder and shall constitute a portion of the Obligations. Subject to the terms and conditions hereof, the Borrower may from time to time (i) Convert a Base Rate Advance into a LIBOR Advance or a LIBOR Advance into a Base Rate Advance or (ii) Continue a LIBOR Advance as a LIBOR Advance; provided, however, that there shall be no increase in the principal amount of the Term Loan A Loans outstanding after the Agreement Date.     (c)  Term Loan B Loans.  The Lenders who issued a "Term Loan B Commitment" under, and as defined in, the Prior Loan Agreement have previously lent to the Borrower the amount in the aggregate of $237,500,000.00 of which $237,500,000.00 is outstanding on the Agreement Date. The Borrower hereby acknowledges that all "Obligations" in respect of the "Term Loan B Loans" outstanding under the "Term Loan B Commitment" (as such terms are defined in the Prior 18 -------------------------------------------------------------------------------- Agreement) shall be deemed to have been made to the Borrower as Advances under the Term Loan B Commitments hereunder and shall constitute a portion of the Obligations. Subject to the terms and conditions hereof, the Borrower may from time to time (i) Convert a Base Rate Advance into a LIBOR Advance or a LIBOR Advance into a Base Rate Advance or (ii) Continue a LIBOR Advance as a LIBOR Advance; provided, however, that there shall be no increase in the principal amount of the Term Loan B Loans outstanding after the Agreement Date.     (d)  Term Loan C Loans.  The Lenders who issued a "Term Loan C Commitment" under, and as defined in, the Prior Loan Agreement have previously lent to the Borrower the amount in the aggregate of $237,500,000.00 of which $237,500,000.00 is outstanding on the Agreement Date. The Borrower hereby acknowledges that all "Obligations" in respect of the "Term Loan C Loans" outstanding under the "Term Loan C Commitment" (as such terms are defined in the Prior Agreement) shall be deemed to have been made to the Borrower as Advances under the Term Loan C Commitments hereunder and shall constitute a portion of the Obligations. Subject to the terms and conditions hereof, the Borrower may from time to time (i) Convert a Base Rate Advance into a LIBOR Advance or a LIBOR Advance into a Base Rate Advance or (ii) Continue a LIBOR Advance as a LIBOR Advance; provided, however, that there shall be no increase in the principal amount of the Term Loan C Loans outstanding after the Agreement Date.     (e)  Swing Line Loans by Swing Line Lender.  Subject to the terms and conditions of this Agreement, the Swing Line Lender agrees upon the terms and subject to the conditions of this Agreement to lend and relend to the Borrower, prior to the Revolving Loan Maturity Date, Swing Line Advances which in the aggregate at any one time outstanding do not exceed the Swing Line Commitment. In no case will the Swing Line Lender be required to fund a Request for Swing Line Advance under its Swing Line Commitment if such funding would increase the aggregate amount of all Swing Line Loans outstanding to an amount in excess of the Swing Line Commitment or the amount of such requested Swing Line Advance exceeds the Available Swing Line Commitment before giving effect to such Swing Line Advance.     Section 2.2  Manner of Borrowing and Disbursement.       (a)  Choice of Interest Rate, Etc.  Any Advance (excluding Swing Line Advances) shall, at the option of the Borrower, be made as a Base Rate Advance or a LIBOR Advance; provided, however, that at such time as there shall have occurred and be continuing a Default hereunder, the Borrower shall not have the right to receive or Continue a LIBOR Advance or to Convert a Base Rate Advance to a LIBOR Advance. Any notice given to the Administrative Agent in connection with a requested Advance hereunder shall be given to the Administrative Agent prior to 11:00 a.m. (New York, New York time) in order for such Business Day to count toward the minimum number of Business Days required.     (b)  Base Rate Advances.        (i) Advances. The Borrower shall give the Administrative Agent in the case of Base Rate Advances (excluding Swing Line Advances) at least one (1) Business Day's irrevocable prior written notice in the form of a Request for Advance, or telephonic notice followed immediately by a Request for Advance; provided, however, that the Borrower's failure to confirm any telephonic notice with a Request for Advance shall not invalidate any notice so given if acted upon by the Administrative Agent.     (ii) Conversions. The Borrower may, without regard to the applicable Payment Date and upon at least three (3) Business Days' irrevocable prior telephonic notice followed by a Request for Advance, Convert all or a portion of the principal of a Base Rate Advance (excluding Swing Line Advances) to a LIBOR Advance. On the date indicated by the Borrower, such Base Rate Advance 19 -------------------------------------------------------------------------------- shall be so Converted. The failure to give timely notice hereunder with respect to the Payment Date of any Base Rate Advance shall be considered a request for a Base Rate Advance.     (c)  LIBOR Advances.        (i) Advances. Upon request, the Administrative Agent, whose determination shall be conclusive, shall determine the available LIBOR Bases and shall notify the Borrower of such LIBOR Bases. The Borrower shall give the Administrative Agent in the case of LIBOR Advances (excluding Swing Line Advances) at least three (3) Business Days' irrevocable prior written notice in the form of a Request for Advance, or telephonic notice followed immediately by a Request for Advance; provided, however, that the Borrower's failure to confirm any telephonic notice with a Request for Advance shall not invalidate any notice so given if acted upon by the Administrative Agent.     (ii) Conversions and Continuations. At least three (3) Business Days prior to the Payment Date for each LIBOR Advance (excluding Swing Line Advances), the Borrower shall give the Administrative Agent telephonic notice followed by written notice specifying whether all or a portion of such LIBOR Advance (A) is to be Continued in whole or in part as one or more LIBOR Advances, (B) is to be Converted in whole or in part to a Base Rate Advance, or (C) is to be repaid. The failure to give such notice shall preclude the Borrower from Continuing such Advance as a LIBOR Advance on its Payment Date and shall be considered a request to Convert such Advance to a Base Rate Advance. Upon such Payment Date such LIBOR Advance will, subject to the provisions hereof, be so Continued, Converted or repaid, as applicable.     (d)  Notification of Lenders.  Upon receipt of a Request for Advance, or a notice from the Borrower with respect to any outstanding Advance (excluding Swing Line Advances and including a notice of Conversion or Continuation) prior to the Payment Date for such Advance, the Administrative Agent shall promptly but no later than the close of business on the day of such notice notify each Lender (or, in the case of an Advance under the Incremental Facility Commitment, each Lender having an Incremental Facility Commitment) by telephone or telecopy of the contents thereof and the amount of such Lender's portion of the Advance. Each Lender (or, in the case of an Advance under the Incremental Facility Commitment, each Lender having an Incremental Facility Commitment) shall, not later than 1:00 p.m. (New York, New York time) on the date of borrowing specified in such notice, make available to the Administrative Agent at the Administrative Agent's Office, or at such account as the Administrative Agent shall designate, the amount of its portion of any Advance which represents an additional borrowing hereunder in immediately available funds.     (e)  Disbursement.        (i) Prior to 2:00 p.m. (New York, New York time) on the date of an Advance (excluding Swing Line Advances) hereunder, the Administrative Agent shall, subject to the satisfaction of the conditions set forth in Article 3 hereof, disburse the amounts made available to the Administrative Agent by the Lenders in like funds by (A) transferring the amounts so made available by wire transfer pursuant to the Borrower's instructions, or (B) in the absence of such instructions, crediting the amounts so made available to the account of the Borrower maintained with the Administrative Agent.     (ii) Unless the Administrative Agent shall have received notice from a Lender prior to 12:00 noon (New York, New York time) on the date of any Advance (excluding Swing Line Advances) that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Advance, the Administrative Agent may assume that such Lender has made or will make such portion available to the Administrative Agent on the date of such Advance and the Administrative Agent may in its sole discretion and in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent the Lender 20 -------------------------------------------------------------------------------- does not make such ratable portion available to the Administrative Agent, such Lender agrees to repay to the Administrative Agent on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Federal Funds Rate.     (iii) If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's portion of the applicable Advance for purposes of this Agreement. If such Lender does not repay such corresponding amount immediately upon the Administrative Agent's demand therefor, the Administrative Agent shall notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent, with interest at the Federal Funds Rate. The failure of any Lender to fund its portion of any Advance shall not relieve any other Lender of its obligation, if any, hereunder to fund its respective portion of the Advance on the date of such borrowing, but no Lender shall be responsible for any such failure of any other Lender.     (iv) In the event that, at any time when the Borrower is not in Default and has otherwise satisfied each of the conditions in Section 3.2 hereof, a Lender for any reason fails or refuses to fund its portion of an Advance (excluding Swing Line Advances) and such failure shall continue for a period in excess of thirty (30) days, then, until such time as such Lender has funded its portion of such Advance (which late funding shall not absolve such Lender from any liability it may have to the Borrower), or all other Lenders have received payment in full from the Borrower (whether by repayment or prepayment) or otherwise of the principal and interest due in respect of such Advance, such non-funding Lender shall not have the right (A) to vote regarding any issue on which voting is required or advisable under this Agreement or any other Loan Document, and such Lender's portion of the Loans shall not be counted as outstanding for purposes of determining "Required Lenders" hereunder, and (B) to receive payments of principal, interest or fees from the Borrower, the Administrative Agent or the other Lenders in respect of its portion of the Loans.     Section 2.3  Interest.       (a)  On Base Rate Advances.  Interest on each Base Rate Advance shall be computed on the basis of a year of 365/366 days (or, to the extent based on the Federal Funds Rate, 360 days) for the actual number of days elapsed and shall be payable at the Base Rate Basis for such Advance, in arrears on the applicable Payment Date. Interest on Base Rate Advances then outstanding shall also be due and payable on the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable.     (b)  On LIBOR Advances.  Interest on each LIBOR Advance shall be computed on the basis of a 360-day year for the actual number of days elapsed and shall be payable at the LIBOR Basis for such Advance, in arrears on the applicable Payment Date, and, in addition, if the Interest Period for a LIBOR Advance exceeds three (3) months, interest on such LIBOR Advance shall also be due and payable in arrears on every three-month anniversary of the beginning of such Interest Period. Interest on LIBOR Advances then outstanding shall also be due and payable on the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable.     (c)  Interest if No Notice of Selection of Interest Rate Basis.  If the Borrower fails to give the Administrative Agent timely notice of its selection of a LIBOR Basis, or if for any reason a determination of a LIBOR Basis for any Advance is not timely concluded, the Base Rate Basis shall apply to such Advance.     (d)  Interest Upon Default.  Immediately upon the occurrence of an Event of Default hereunder, the outstanding principal balance of the Loans shall bear interest at the Default Rate. Such interest 21 -------------------------------------------------------------------------------- shall be payable on demand by the Required Lenders and shall accrue until the earlier of (i) waiver or cure of the applicable Event of Default, (ii) agreement by the Required Lenders (or, if applicable to the underlying Event of Default, the Lenders) to rescind the charging of interest at the Default Rate, or (iii) payment in full of the Obligations.     (e)  LIBOR Contracts.  At no time may the number of outstanding LIBOR Advances together with any outstanding Base Rate Advances exceed eight (8). For the purposes of this Section 2.3(e), all outstanding Base Rate Advances shall be deemed to be a single Base Rate Advance.     (f)  Applicable Margin.        (i) Revolving Loans and Term Loan A Loans. With respect to any Advance under the Revolving Loan Commitments or the Term Loan A Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows: Total Leverage Ratio --------------------------------------------------------------------------------   Base Rate Advance Applicable Margin --------------------------------------------------------------------------------   LIBOR Advance Applicable Margin --------------------------------------------------------------------------------   A.   Greater than 7.50:1.00   1.750 % 2.750 %   B.       Greater than 7.00:1.00, but less than or equal to 7.50:1.00       1.625   %   2.625   %   C.       Greater than 6.50:1.00, but less than or equal to 7.00:1.00       1.500   %   2.500   %   D.       Greater than 6.00:1.00, but less than or equal to 6.50:1.00       1.250   %   2.250   %   E.       Greater than 5.00:1.00, but less than or equal to 6.00:1.00       1.000   %   2.000   %   F.       Greater than 4.00:1.00, but less than or equal to 5.00:1.00       0.750   %   1.750   %   G.       Less than or equal to 4.00:1.00       0.500   %   1.500   %                                     (ii) Term Loan B Loans. With respect to any Advance under the Term Loan B Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows: Total Leverage Ratio --------------------------------------------------------------------------------   Base Rate Advance Applicable Margin --------------------------------------------------------------------------------   LIBOR Advance Applicable Margin --------------------------------------------------------------------------------   A.  Greater than 7.00:1.00   2.000 % 3.000 %   B.  Less than or equal to 7.00:1.00       1.750   %   2.750   %     (iii) Term Loan C Loans. With respect to any Advance under the Term Loan C Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most 22 -------------------------------------------------------------------------------- recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows: Total Leverage Ratio --------------------------------------------------------------------------------   Base Rate Advance Applicable Margin --------------------------------------------------------------------------------   LIBOR Advance Applicable Margin --------------------------------------------------------------------------------   A.  Greater than 7.00:1.00   2.250 % 3.250 %   B.  Less than or equal to 7.00:1.00       2.000   %   3.000   %     (iv) The Applicable Margin on the Agreement Date shall be based on the Annualized Operating Cash Flow on the Agreement Date (with appropriate adjustment for any Acquisitions or dispositions as provided in the definition of "Operating Cash Flow") for the Borrower and the Total Debt as of the Agreement Date.     (v) Subject to the last sentence hereof, with respect to Section 2.3(f)(i), (ii) and (iii), changes to the Applicable Margin shall be effective as of the second (2nd) Business Day after the day on which the financial statements are delivered to the Administrative Agent and the Lenders pursuant to Section 6.1 or 6.2 hereof, as the case may be. Upon the occurrence and during the continuance of an Event of Default, the Applicable Margins shall not be subject to downward adjustment and shall automatically revert to the Applicable Margins set forth in, (A) with respect to Section 2.3(f)(i), part A of the table in Section 2.3(f)(i) above, (B) with respect to Section 2.3(f)(ii), part (A) of Section 2.3(f)(ii) above and (C) with respect to Section 2.3(f)(iii), part A of Section 2.3(f)(iii) above, in each case, until such time as such Event of Default is cured or waived.     Section 2.4  Commitment Fees.  Commencing on and at all times after the Agreement Date, the Borrower agrees to pay to the Administrative Agent for the account of each of the Lenders (except for the Swing Line Lender if the Swing Line Lender is a Lender having a Revolving Loan Commitment hereunder only to the extent that such Swing Line Lender has Swing Line Loans outstanding) having Revolving Loan Commitments in accordance with their respective Commitment Ratios for Revolving Loans, a commitment fee on the aggregate unborrowed balance of the Revolving Loan Commitments (excluding Swing Line Loans) for each day from the Agreement Date until the Revolving Loan Maturity Date, (a) at all times that the Total Leverage Ratio is greater than 6.50 to 1.00, at a rate of one-half of one percent (0.500%) per annum and (b) at all times that Total Leverage Ratio is equal to or less than 6.50 to 1.00, at a rate of three-eighths of one percent (0.375%) per annum. Such commitment fee shall be computed on the basis of a year of 365/366 days for the actual number of days elapsed, shall be payable quarterly in arrears on the last day of each calendar quarter, and shall be fully earned when due and non-refundable when paid. A final payment of any commitment fee then payable shall also be due and payable on the Revolving Loan Maturity Date.     Section 2.5  Mandatory Revolving Loan Commitment Reductions.       (a)  Scheduled Reductions of Revolving Loan Commitments.  Commencing on June 30, 2003, and on the last day of each calendar quarter ending during the periods set forth below, the Revolving Loan Commitments as of June 29, 2003 shall be automatically and permanently reduced by the percentage 23 -------------------------------------------------------------------------------- amount set forth below (which reductions are in addition to those set forth in Sections 2.5(b) and (c) and 2.6 hereof): Dates of Revolving Loan Commitment Reduction --------------------------------------------------------------------------------   Quarterly Percentage for Reduction of Revolving Loan Commitments as of June 29, 2003 --------------------------------------------------------------------------------   June 30, 2003, September 30, 2003, December 31, 2003 and March 31, 2004   3.125 %   June 30, 2004, September 30, 2004, December 31, 2004 and March 31, 2005       4.375   %   June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006       5.000   %   June 30, 2006, September 30, 2006, December 31, 2006 and March 31, 2007       6.250   %   June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2008       6.250   %                     (b)  Reduction From Excess Cash Flow.  On or prior to March 31, 2004, and on or prior to each March 31st thereafter during the term of this Agreement, the Revolving Loan Commitments shall be automatically and permanently reduced by an amount equal to the repayment of Revolving Loans (and, if applicable, the Incremental Facility Loans) required under Section 2.7(b)(v) hereof; provided, however, that if there are no Loans then outstanding or if fifty percent (50%) of Excess Cash Flow for such period exceeds the Loans then outstanding, the Revolving Loan Commitments (and, if applicable, the Incremental Facility Commitments) shall be reduced by an aggregate amount equal to fifty percent (50%) of Excess Cash Flow for such period, or the excess of fifty percent of the Excess Cash Flow for such period over the Loans, which reduction shall be in addition to the reduction set forth in the first part of this Section 2.5(b), as applicable, regardless of any repayment of the Revolving Loans. Reductions under this Section 2.5(b) to the Revolving Loan Commitments shall be applied to the reductions set forth in Section 2.5(a) hereof (and, if applicable, to the Incremental Facility Commitments shall be applied to the reductions set forth in the Notice of Incremental Facility Commitments) in inverse order of the reductions set forth therein.     (c)  Reductions From Permitted Asset Sales.  At any time after the aggregate Unreinvested Net Proceeds from all sales, transfers or other dispositions of assets of the Borrowers and their Subsidiaries, or from any insurance or condemnation proceeding in respect of such assets, after the Agreement Date exceeds $15,000,000, the Revolving Loan Commitments and, if applicable, the Incremental Facility Commitments shall be automatically and permanently reduced by an amount equal to the repayment of Revolving Loans and, if applicable, the Incremental Facility Loans required under Section 2.7(b)(vi) hereof; provided, however, that if there are no Loans then outstanding, or if the Unreinvested Net Proceeds exceeds the Loans then outstanding, the Revolving Loan Commitments and, if applicable, the Incremental Facility Commitments shall be reduced on a pro rata basis by an aggregate amount equal to such Unreinvested Net Proceeds, or the excess of such Unreinvested Net Proceeds over the Loans (which reduction shall be in addition to the reduction set forth in the first part of this Section 2.5(c)), as applicable, regardless of any repayment of the Revolving Loans (or, if applicable, the Incremental Facility Loans); provided further, however, that, prior to the occurrence or continuance of a Default of Event or Default, there shall be no reduction of the Revolving Loan Commitments hereunder with respect to a disposition of assets (i) the Net Proceeds of which do not exceed (A) $5,000,000 for any single transaction (or series of related transactions), and (B) $15,000,000 in the aggregate during the term hereof, (ii) in the event that Borrower delivers to the Administrative 24 -------------------------------------------------------------------------------- Agent evidence that the Net Proceeds of such disposition have been used by the Borrower or its Subsidiaries for any sale/leaseback or similar arrangement involving the cellular towers owned by the Borrower or its Subsidiaries, (iii) to the extent that the Total Leverage Ratio is less than 6.0 to 1.0 (before and after giving effect to the application to such proceeds), and the after-tax Net Proceeds of which are used to retire in whole or in part the Junior Preferred Stock or (iv) the Net Proceeds of which were realized from the sale of the Triton Kansas Properties in excess of 7.00 times EBITDA of such properties, provided that such sale is consummated within twelve (12) months of the acquisition of the Triton Kansas Properties. Reductions under this Section 2.5(c) to the Revolving Loan Commitments shall be applied to the reductions set forth in Section 2.5(a) hereof (and, if applicable, to the Incremental Facility Commitments shall be applied to the reductions set forth in the Notice of Incremental Facility Commitments) in inverse order of the reductions set forth therein.     Section 2.6  Voluntary Commitment Reductions.  The Borrower shall have the right, at any time and from time to time after the Agreement Date and prior to the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable, upon at least three (3) Business Days' prior written notice to the Administrative Agent, without premium or penalty, to cancel or reduce permanently all or a portion of the Revolving Loan Commitments (or the Incremental Facility Commitments) on the basis of the respective Revolving Loan Commitment Ratios (or the Incremental Facility Commitment Ratios) of the Lenders applicable to the Revolving Loan Commitments (or the Incremental Facility Commitments); provided, however, that the Borrower shall reimburse the Lenders and the Administrative Agent, on demand by the applicable Lender or the Administrative Agent, for any loss or out-of-pocket expense incurred by any Lender or the Administrative Agent in connection with such prepayment, as set forth in Section 2.10 hereof; provided further, however, that Borrower's failure to confirm any telephonic notice with a written notice, shall not invalidate any notice so given if acted upon by the Administrative Agent; provided further, however, that any such partial reduction shall be made in an amount not less than $1,000,000 and in integral multiples of not less than $1,000,000. As of the date of cancellation or reduction set forth in such notice, the Revolving Loan Commitments (or the Incremental Facility Commitments) shall be permanently reduced to the amount stated in the Borrower's notice for all purposes herein, and the Borrower shall pay to the Administrative Agent for the Lenders the amount necessary to reduce the principal amount of the Revolving Loans and the Swing Line Loans (or Incremental Facility Loans) then outstanding under the Revolving Loan Commitments (or the Incremental Facility Commitments) to not more than the amount of the Revolving Loan Commitments (or the Incremental Facility Commitments) as so reduced, together with accrued interest on the amount so prepaid and commitment fees accrued through the date of the reduction with respect to the amount reduced. Reductions in the Revolving Loan Commitments pursuant to this Section shall be applied pro rata to the then remaining reductions set forth in Section 2.5(a) hereof in inverse order of the reductions set forth therein. 25 --------------------------------------------------------------------------------     Section 2.7  Prepayments and Repayments.       (a)  Prepayment.  The principal amount of any Base Rate Advance may be prepaid in full or ratably in part at any time, without penalty and without regard to the Payment Date for such Advance. LIBOR Advances may be prepaid prior to the applicable Payment Date, upon three (3) Business Days' prior written notice, or telephonic notice followed immediately by written notice, to the Administrative Agent; provided, however, that the Borrower shall reimburse the Lenders and the Administrative Agent, on demand by the applicable Lender or the Administrative Agent, for any loss or out-of-pocket expense incurred by any Lender or the Administrative Agent in connection with such prepayment, as set forth in Section 2.10 hereof; provided further, however, that Borrower's failure to confirm any telephonic notice with a written notice, shall not invalidate any notice so given if acted upon by the Administrative Agent. Any prepayment hereunder shall be in amounts of not less than $500,000 and in integral multiples of $100,000. Amounts prepaid pursuant to this Section 2.7 may be reborrowed, subject to the terms and conditions hereof. Amounts prepaid shall be paid together with accrued interest on the amount so prepaid and commitment fees accrued through the date of the reduction with respect to the amount reduced. Amounts prepaid pursuant to this Section 2.7(a) shall be applied to Term Loan A Loans, Term Loan B Loans, Term Loan C Loans or Revolving Loans as the Borrower may direct; provided, that, if the Borrower shall direct amounts prepaid pursuant to this Section 2.7(a) to be applied to Term Loan A Loans, Term Loan B Loans or Term Loan C Loans, such amount shall be applied to the scheduled payments for such Loans in Section 2.7(b) hereof in inverse order of maturity.     (b)  Repayments.       (i)  Scheduled Repayments of the Term Loan A Loans.  Commencing June 30, 2003, the principal balance of the Term Loan A Loans outstanding on June 29, 2003 shall be repaid in consecutive quarterly installments on the last day of each calendar quarter ending during the periods set forth below until paid in full in such amounts as follows: Repayment Dates --------------------------------------------------------------------------------   Percentage of Principal of Term Loan A Loans Outstanding on June 29, 2003 Due on Last Day of Each Quarter --------------------------------------------------------------------------------   June 30, 2003, September 30, 2003, December 31, 2003 and March 31, 2004   3.125 %   June 30, 2004, September 30, 2004, December 31, 2004 and March 31, 2005       4.375   %   June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006       5.000   %   June 30, 2006, September 30, 2006, December 31, 2006 and March 31, 2007       6.250   %   June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2008       6.250   %                     (ii)  Scheduled Repayments of Term Loan B Loans.  Commencing June 30, 2003, the principal balance of the Term Loan B Loans outstanding on June 29, 2003 shall be repaid in consecutive 26 -------------------------------------------------------------------------------- quarterly installments on the last day of each calendar quarter ending during the periods set forth below until paid in full in such amounts as follows: Repayment Dates --------------------------------------------------------------------------------   Percentage of Principal of Term Loan B Loans Outstanding on June 29, 2003 Due on Last Day of Each Quarter --------------------------------------------------------------------------------   June 30, 2003, September 30, 2003, December 31, 2003 and March 31, 2004   0.250 %   June 30, 2004, September 30, 2004, December 31, 2004 and March 31, 2005       0.250   %   June 30, 2005, September 30, 2005, December 31, 2005 and March 31, 2006       0.250   %   June 30, 2006, September 30, 2006, December 31, 2006 and March 31, 2007       0.250   %   June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2008       0.250   %   June 30, 2008 and September 30, 2008       47.50   %     (iii)  Scheduled Repayments of Term Loan C Loans.  Commencing June 30, 2003, the principal balance of the Term Loan C Loans outstanding on June 29, 2003 shall be repaid in consecutive quarterly installments on the last day of each calendar quarter ending during the periods set forth below until paid in full in such amounts as follows: Repayment Dates --------------------------------------------------------------------------------   Percentage of Principal of Term Loan C Loans Outstanding on June 29, 2003 Due on Last Day of Each Quarter --------------------------------------------------------------------------------   June 30, 2003, September 30, 2003 December 31, 2003 and March 31, 2004   0.250 %   June 30, 2004, September 30, 2004 December 31, 2004 and March 31, 2005       0.250   %   June 30, 2005, September 30, 2005 December 31, 2005 and March 31, 2006       0.250   %   June 30, 2006, September 30, 2006 December 31, 2006 and March 31, 2007       0.250   %   June 30, 2007, September 30, 2007 December 31, 2007 and March 30, 2008       0.250   %   June 30, 2008, September 30, 2008 December 31, 2008 and March 31, 2009       23.75   %     (iv)  Loans in Excess of Revolving Loan Commitments (and/or Incremental Facility Commitments).  If, at any time, the amount of the Revolving Loans (or the Incremental Facility Loans) then outstanding shall exceed the Revolving Loan Commitment (or the Incremental Facility Commitment), the Borrower shall, on such date and subject to Sections 2.10 and 2.11 hereof, make 27 -------------------------------------------------------------------------------- a repayment of the principal amount of the Revolving Loans (or the Incremental Facility Loans) in an amount equal to such excess, together with any accrued interest and fees with respect thereto.     (v)  Excess Cash Flow.  On March 31, 2004, and on each March 31st thereafter, the Borrower shall make a repayment of the Loans then outstanding in an amount equal to fifty percent (50%) of the Borrower's Excess Cash Flow for the immediately preceding calendar year. Subject to Section 2.7(b)(xii) hereof, the amount of the Excess Cash Flow required to be repaid under this Section 2.7(b)(v) shall be applied first to the Term Loans then outstanding (on a pro rata basis for all Term Loans) in inverse order of maturity for each Term Loan, second to the Revolving Loans and then, if applicable, to the Incremental Facility Loans. Accrued interest on the principal amount of the Loans being prepaid pursuant to this Section 2.7(b)(iii) to the date of such prepayment will be paid by the Borrower concurrently with such principal prepayment.     (vi)  Asset Sales.  On the twelve (12) calendar month anniversary of the date of any disposition or sale of any assets by the Borrower or any of its Subsidiaries in accordance with Section 7.4 hereof, the Borrower shall make a repayment of the Loans then outstanding in an amount equal to such Net Proceeds; provided, however, that prior to the occurrence or continuance of a Default of Event or Default, the Borrower shall not be required to make a repayment hereunder with respect to a sale of assets (i) in the ordinary course of the Borrower's or its Subsidiaries' businesses, (ii) the Net Proceeds of which have been used by the Borrower or its Subsidiaries to acquire or purchase an asset or assets within twelve (12) months of the date of such asset disposition so long as the Borrower is in compliance with all terms and conditions of this Agreement, (iii) the Net Proceeds of which do not exceed (A) $5,000,000 for any single transaction (or series of related transactions), and (B) $15,000,000 in the aggregate during the term hereof, (iv) in the event that Borrower delivers to the Administrative Agent evidence that the Net Proceeds of such disposition have been used by the Borrower or its Subsidiaries for any sale/leaseback or similar arrangement involving the Borrower's towers, (v) to the extent that the Total Leverage Ratio is less than 6.0 to 1.0 (before and after giving effect to the application of such proceeds), and the after-tax Net Proceeds of which are used to retire in whole or in part the Junior Preferred Stock or (vi) the Net Proceeds of which were realized from the sale of the to-be-acquired Triton Kansas Properties in excess of 7.00 to 1.00 EBITDA, provided that such sale is consummated within twelve (12) months of the acquisition of such properties. Subject to Section 2.7(b)(xii) hereof, the amount of the Net Proceeds required to be repaid under this Section 2.7(b)(vi) shall be applied to the Term Loans then outstanding (on a pro rata basis for all Term Loans) in inverse order of maturity for each Term Loan, second to the Revolving Loans and then, if applicable, to the Incremental Facility Loans. Accrued interest on the principal amount of the Loans being prepaid pursuant to this Section 2.7(b)(iv) to the date of such prepayment will be paid by the Borrower concurrently with such principal prepayment.     (vii)  Revolving Loan Maturity Date.  In addition to the foregoing, a final payment of all Revolving Loans and Swing Line Loans, together with accrued interest and fees with respect thereto, shall be due and payable on the Revolving Loan Maturity Date.     (viii)  Term Loan A Maturity Date.  In addition to the foregoing, a final payment of the Term Loan A Loans, together with accrued interest and fees with respect thereto, shall be due and payable on the Term Loan A Maturity Date.     (ix)  Term Loan B Maturity Date.  In addition to the foregoing, a final payment of Term Loan B Loans, together with accrued interest and fees with respect thereto, shall be due and payable on the Term Loan B Maturity Date.     (x)  Term Loan C Maturity Date.  In addition to the foregoing, a final payment of Term Loan C Loans, together with accrued interest and fees with respect thereto and all other Obligations 28 -------------------------------------------------------------------------------- then outstanding, other than the Incremental Facility Loans, if any, shall be due and payable on the Term Loan C Maturity Date.     (xi)  Incremental Facility Maturity Date.  If applicable, in addition to the foregoing, a final payment of the Incremental Facility Loans, together with accrued interest and fees with respect thereto, shall be due and payable on the Incremental Facility Maturity Date.     (xii)  Prepayments upon Default or Event of Default.  After the occurrence of and during the continuation of any Default or an Event of Default, all amounts received from the Borrower under Sections 2.7(b)(v) and (vi) hereunder shall be applied as set forth in Section 8.3 hereunder.     Section 2.8  Notes; Loan Accounts.       (a) The Loans shall be repayable in accordance with the terms and provisions set forth herein and shall be evidenced by the Notes (and, if applicable, the Incremental Facility Notes). One (1) Term Loan A Note, one (1) Term Loan B Note, one (1) Term Loan C Note, one (1) Revolving Loan Note and, if applicable, one (1) Incremental Facility Note shall be payable to the order of each Lender, in accordance with such Lender's applicable Commitment Ratio for Term Loan A Loans, Term Loan B Loans, Term Loan C Loans, Revolving Loans and, if applicable, the Incremental Facility Loans, as the case may be and a Swing Line Note shall be payable to the order of the Swing Line Lender in accordance with the Swing Line Commitment. The Notes shall be issued by the Borrower to the Lenders and shall be duly executed and delivered by one or more Authorized Signatories. Any Lender (i) which is not a U.S. Person (a "Non-U.S. Bank") and (ii) which could become completely exempt from withholding of United States federal income taxes in respect of payment of any obligations due to such Lender hereunder relating to any of its Loans if such Loans were in registered form for United States federal income tax purposes may request the Borrower (through the Administrative Agent), and the Borrower agrees thereupon, to register such Loans as provided in Section 11.5(g) hereof and to issue to such Lender Notes evidencing such Loans as Registered Notes or to exchange Notes evidencing such Loans for new Registered Notes, as applicable. Registered Notes may not be exchanged for Notes that are not in registered form.     (b) Each Lender may open and maintain on its books in the name of the Borrower a loan account with respect to its portion of the Loans and interest thereon. Each Lender which opens such a loan account shall debit such loan account for the principal amount of its portion of each Advance made by it and accrued interest thereon, and shall credit such loan account for each payment on account of principal of or interest on its Loans. The records of a Lender with respect to the loan account maintained by it shall be prima facie evidence of its portion of the Loans and accrued interest thereon absent manifest error, but the failure of any Lender to make any such notations or any error or mistake in such notations shall not affect the Borrower's repayment obligations with respect to such Loans.     Section 2.9  Manner of Payment.       (a) Except for payments with respect to any Swing Line Loan (which manner of payment is set forth in Section 2.16 hereof), each payment (including, without limitation, any prepayment) by the Borrower on account of the principal of or interest on the Loans, commitment fees and any other amount owed to the Lenders or the Administrative Agent or any of them under this Agreement or the Notes shall be made not later than 1:00 p.m. (New York, New York time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office, for the account of the Lenders or the Administrative Agent, as the case may be, in lawful money of the United States of America in immediately available funds. Any payment received by the Administrative Agent after 1:00 p.m. (New York, New York time) shall be deemed received on the next Business Day. Receipt by the Administrative Agent of any payment intended for any Lender or Lenders hereunder prior to 1:00 p.m. (New York, New York time) on any Business Day shall be deemed to constitute 29 -------------------------------------------------------------------------------- receipt by such Lender or Lenders on such Business Day. In the case of a payment for the account of a Lender, the Administrative Agent will promptly, but no later than the close of business on the date such payment is deemed received, thereafter distribute the amount so received in like funds to such Lender. If the Administrative Agent shall not have received any payment from the Borrower as and when due, the Administrative Agent will promptly notify the Lenders accordingly. In the event that the Administrative Agent shall fail to make distribution to any Lender as required under this Section 2.9, the Administrative Agent agrees to pay such Lender interest from the date such payment was due until paid at the Federal Funds Rate.     (b) The Borrower agrees to pay principal, interest, fees and all other amounts due hereunder or under the Notes or the other Loan Documents without set-off or counterclaim or any deduction whatsoever, including withholding taxes, excluding, (i) in the case of each Lender and the Administrative Agent taxes measured by its net income, and franchise taxes imposed on it by the jurisdiction under the laws of which it is organized or any political subdivision thereof, (ii) in the case of each Lender, taxes (including, but not limited to, the Branch Profits Tax under Section 884 of the Code) measured by its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's applicable lending office or any political subdivision thereof and (iii) in the case of any Lender organized under the laws of a jurisdiction outside the United States, United States federal withholding tax payable with respect to payments by the Borrower which would not have been imposed had such Lender, to the extent then required thereunder, delivered to the Borrower and the Administrative Agent the forms prescribed by Section 2.13 hereof.     (c) Prior to the declaration of an Event of Default under Section 8.2 hereof, if some but less than all amounts due from the Borrower are received by the Administrative Agent with respect to the Obligations, the Administrative Agent shall distribute such amounts in the following order of priority, all on a pro rata basis to the Lenders: (i) to the payment on a pro rata basis of any fees or expenses then due and payable to the Administrative Agent, the Lenders, or any of them; (ii) to the payment of interest then due and payable on the Loans and the Swing Line Loans; (iii) to the payment of all other amounts not otherwise referred to in this Section 2.9(c) then due and payable to the Administrative Agent or the Lenders, the Swing Line Lender or any of them, hereunder or under the Notes or any other Loan Document; and (iv) to the payment of principal then due and payable on the Loans and the Swing Line Loans.     (d) Subject to any contrary provisions in the definition of Interest Period, if any payment under this Agreement or any of the other Loan Documents is specified to be made on a day which is not a Business Day, it shall be made on the next Business Day, and such extension of time shall in such case be included in computing interest and fees, if any, in connection with such payment.     Section 2.10  Reimbursement.       (a) Whenever any Lender shall sustain or incur any losses or reasonable out-of-pocket expenses in connection with (i) failure by the Borrower to borrow, Convert or Continue any LIBOR Advance after having given notice of its intention to borrow, Convert or Continue in accordance with Section 2.2 hereof (whether by reason of the Borrower's election not to proceed or the non-fulfillment of any of the conditions set forth in Article 3 hereof), or (ii) prepayment (or failure to prepay after giving notice thereof) of any LIBOR Advance in whole or in part for any reason, the Borrower agrees to pay to such Lender, upon such Lender's demand, an amount sufficient to compensate such Lender for all such losses and out-of-pocket expenses. Such Lender's good faith determination of the amount of such losses or reasonable out-of-pocket expenses, as set forth in writing and accompanied by calculations in reasonable detail demonstrating the basis (which need not reflect the purchase of deposits in the relevant market bearing interest at the rate applicable to such Advance and having a maturity identical to the Interest Period for such Advance) for its demand, shall be presumptively correct absent manifest error. 30 --------------------------------------------------------------------------------     (b) Losses subject to reimbursement hereunder shall include, without limiting the generality of the foregoing, lost margins, expenses incurred by any Lender or any participant of such Lender permitted hereunder in connection with the re-employment of funds prepaid, paid, repaid, not borrowed, or not paid, as the case may be, and will be payable whether the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable is changed by virtue of an amendment hereto (unless such amendment expressly waives such payment) or as a result of acceleration of the Obligations.     Section 2.11  Pro Rata Treatment.       (a)  Advances.  Each Advance (other than a Swing Line Advance) under the Revolving Loan Commitments from the Lenders hereunder shall be made pro rata on the basis of the applicable Commitment Ratios of the Lenders having a Revolving Loan Commitment. Each Advance under the Term Loan A Commitment shall be made pro rata on the basis of the applicable Commitment Ratios of the Lenders having Term Loan A Commitments. Each Advance under the Term Loan B Commitment shall be made pro rata on the basis of the applicable Commitment Ratios of the Lenders having Term Loan B Commitments. Each Advance under the Term Loan C Commitment shall be made pro rata on the basis of the applicable Commitment Ratios of the Lenders having Term Loan C Commitments.     (b)  Payments.  Each payment and prepayment of principal of the Loans (other than Swing Line Loans), and, except as provided in Section 2.2(e) and Article 10 hereof, each payment of interest on the Loans (other than Swing Line Loans), shall be made to the Lenders having interest in the Loans being paid pro rata on the basis of their respective unpaid principal amounts outstanding under the Notes (including, if applicable, the Incremental Facility Notes) immediately prior to such payment or prepayment. If any Lender shall obtain any payment (whether involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans in excess of its ratable share of the Loans under its Commitment Ratio, such Lender shall forthwith purchase from the other Lenders such participations in the portion of the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.11(b) may, to the fullest extent permitted by law, exercise all its rights of payment (including, without limitation, the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If the Swing Line Lender shall obtain any payment (whether involuntary or otherwise) on account of the Swing Line Loans in excess of the Swing Line Loans then outstanding and the Swing Line Lender's share of any expenses, fees and other items due and payable to it hereunder, the Swing Line Lender shall forthwith return such excess payment to the Administrative Agent, as appropriate, for distribution (i) if an amount is due and payable to the Lenders hereunder among the Lenders based on the provisions of this Section and (ii) in all other cases, to the Borrower.     (c) At the election of the Borrower, amounts to be applied, pursuant to Sections 2.7(b)(iv), (v) or (vi) hereof, to prepayment of principal bearing interest at the LIBOR Basis may be remitted into a specifically designated "Deposit Account" and shall not be applied to such prepayment until the end of the Interest Period ending after the date such payment would otherwise be required, so as to avoid incurrence of costs required pursuant to Section 2.10 which might otherwise be incurred upon prepayment. In the event the aggregate amount to be prepaid by reason of Section 2.7(b)(iv),(v) or (vi) hereof exceeds the amount of principal to be prepaid at the end of the first such Interest Period to terminate after the relevant date of reduction, the excess shall remain in such specifically designated Deposit Account until the end of the next Interest Period, and so on, until the full amount required to be repaid under Section 2.7(b)(iv),(v) or (vi) hereof has been applied to the Loans. As used herein, the 31 -------------------------------------------------------------------------------- aforesaid "Deposit Account" shall be an interest-bearing account maintained with the Administrative Agent as part of the Collateral, and Borrower hereby authorizes the Administrative Agent to apply as set forth above or, at any time during the continuance of an Event of Default, without further authorization from the Borrower, the balance of said Deposit Account to the prepayments required hereunder.     (d)  Commitment Reductions.  Any reduction of the Revolving Loan Commitments required or permitted hereunder shall reduce, as applicable, the Revolving Loan Commitment of each Lender having such a commitment on a pro rata basis based on the Commitment Ratio of such Lender for such commitment.     Section 2.12  Capital Adequacy.  If after the date hereof, the adoption of any Applicable Law regarding the capital adequacy of banks or bank holding companies, or any change in Applicable Law (whether adopted before or after the Agreement Date) or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or the bank holding company of such Lender) or the Swing Line Lender with any directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on any Lender's or the Swing Line Lender's capital as a consequence of its obligations hereunder with respect to the Loans and the Commitments or the Swing Line Loans and the Swing Line Commitment to a level below that which it could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or Swing Line Lender's policies with respect to capital adequacy immediately before such adoption, change or compliance and assuming that such Lender's or Swing Line Lender's capital was fully utilized prior to such adoption, change or compliance) by an amount reasonably deemed by such Lender or the Swing Line Lender to be material, then, if such Lender or the Swing Line Lender exercises its capital adequacy protection rights (if any) generally for borrowers situated similarly to the Borrower and upon demand by such Lender or the Swing Line Lender, the Borrower shall promptly pay to such Lender or the Swing Line Lender such additional amounts as shall be sufficient to compensate such Lender or the Swing Line Lender for such reduced return, together with interest on such amount from the fourth (4th) Business Day after the date of demand or the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable, until payment in full thereof at the Default Rate. A certificate of such Lender or the Swing Line Lender setting forth the amount to be paid to such Lender or the Swing Line Lender by the Borrower as a result of any event referred to in this paragraph and supporting calculations in reasonable detail shall be presumptively correct absent manifest error.     Section 2.13  Lender Tax Forms.  On or prior to the Agreement Date or on or prior to the date such Lender becomes a party hereto pursuant to Section 11.5 hereof, and on or prior to the first Business Day of each calendar year thereafter, each Lender which is organized in a jurisdiction other than the United States or state thereof shall provide each of the Administrative Agent and the Borrower with a properly executed originals of Form 4224 or 1001 (or any successor form) prescribed by the Internal Revenue Service or other documents satisfactory to the Borrower and the Administrative Agent, and/or properly executed Internal Revenue Service Form W-8 or W-9, as the case may be, to the extent permitted under Applicable Law, certifying (i) as to such Lender's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to such Lender hereunder and under the Notes or (ii) that all payments to be made to such Lender hereunder and under the Notes are subject to such taxes at a rate reduced to zero by an applicable tax treaty. Each such Lender agrees to provide the Administrative Agent and the Borrower with new forms prescribed by the Internal Revenue Service upon the expiration or obsolescence of any 32 -------------------------------------------------------------------------------- previously delivered form, or after the occurrence of any event requiring a change in the most recent forms delivered by it to the Administrative Agent and the Borrower.     Section 2.14  Incremental Facility Advances.       (a) Subject to the terms and conditions of this Agreement, the Borrower may request the Incremental Facility Commitment on any Business Day; provided, however, that the Borrower may not request the Incremental Facility Commitment or an Incremental Facility Advance after the occurrence and during the continuance of a Default, including, without limitation, any Event of Default that would result after giving effect to any Incremental Facility Advance; and provided, further, that the Borrower may request only three (3) Incremental Facility Commitments (although such commitments may be from more than one Lender) and must request a minimum Incremental Facility Commitment of $75,000,000. The aggregate amount of the Incremental Facility Commitment and outstanding Incremental Facility Advances shall not exceed $275,000,000. The maturity date for the Incremental Facility Advances shall be no earlier than twelve (12) calendar months after the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date and Term Loan C Maturity Date, as applicable. The decision of any Lender to make an Incremental Facility Commitment to the Borrower shall be at such Lender's sole discretion and shall be made in writing. The Incremental Facility Commitment (x) may be in the form of a revolving credit facility, (y) must not require principal repayment earlier, or in amount larger (or percentage greater), than those set forth in, the repayment schedule for the Term Loans or the Revolving Loans as set forth in Section 2.7(b) hereof and (z) must be governed by this Agreement and the other Loan Documents and be on terms and conditions no more restrictive than those set forth herein and therein. Each Lender shall have the right, but not the obligation, to participate in any Incremental Facility Commitment on a pro rata basis.     (b) Prior to the effectiveness of the Incremental Facility Commitment, the Borrower shall (i) deliver to the Administrative Agent and the Lenders a Notice of Incremental Facility Commitment in substantially the form of Exhibit C attached hereto; and (ii) provide revised projections to the Administrative Agent and the Lenders, which shall be in form and substance reasonably satisfactory to the Administrative Agent and which shall demonstrate the Borrower's ability to timely repay such Incremental Facility Commitment and any Incremental Facility Advances thereunder and to comply with the covenants contained in Sections 7.8, 7.9, 7.10, 7.11 and 7.12 hereof.     (c) No Incremental Facility Commitment shall by itself result in any reduction of the Commitment or of the Commitment Ratio of the Lender making such Incremental Facility Commitment.     (d) Incremental Facility Advances (i) shall bear interest at the Base Rate Basis or the LIBOR Basis; (ii) subject to Section 2.14(a) hereof, shall be repaid as agreed to by the Borrower and the Lender making such Incremental Facility Advances; (iii) shall for all purposes be Loans and Obligations hereunder and under the Loan Documents; (iv) shall be represented by an Incremental Facility Note in substantially the form of Exhibit M attached hereto; and (v) shall rank pari passu with the other Loans for purposes of Sections 2.9 and 8.2 hereof.     (e) Incremental Facility Advances shall be requested by the Borrower pursuant to a request (which shall be in substantially the form of a Request for Advance) delivered in the same manner as a Request for Advance, but shall be funded pro rata only by those Lenders holding the Incremental Facility Commitment. 33 --------------------------------------------------------------------------------     Section 2.15  Replacement of Lenders.  The Borrower shall have the right, if no Default then exists, to replace any Lender (the "Replaced Lender") with one or more other assignees permitted under Section 11.5 hereof reasonably acceptable to the Administrative Agent (the "Replacement Lender") if (x) such Lender is charging the Borrower increased costs pursuant to Section 10.3 hereof in excess of those being charged generally by the other Lenders or such Lender becomes incapable of making LIBOR Advances as provided in Section 10.3 hereof and/or (y) such Lender fails to fund a properly requested Advance at a time when there does not exist a Default or Event of Default; provided, however, that (i) at the time of any replacement pursuant to this Section 2.15, the Replacement Lender and the Replaced Lender shall enter into one or more assignment agreements (and with all fees payable pursuant to said Section 11.5 hereof to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender, an amount equal to the sum of (A) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (B) all accrued, but theretofore unpaid, fees, owing to the Replaced Lender pursuant to Section 2.4 hereof, and (ii) all obligations of the Borrower owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid, but including any amounts which would be paid to a Lender pursuant to Section 2.7 hereof if Borrower were prepaying a LIBOR Advance) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective assignment agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of Notes executed by Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder and be released of all its obligations as a Lender, except with respect to indemnification provisions applicable to the Replaced Lender under this Agreement, which shall survive as to such Replaced Lender.     Section 2.16  Swing Line Loans.       (a)  Swing Line Advances.  Subject to and upon the terms and conditions set forth herein, at any time and from time to time on and after the date on which the Swing Line Lender becomes party to this Agreement by assignment or otherwise and prior to the Revolving Loan Maturity Date, the Borrower, prior to 1:00 p.m. (New York time) or such earlier time if agreed to by the Swing Line Lender on the Business Day of funding any Swing Line Advance, shall give to the Swing Line Lender an irrevocable written notice in the form of a Request for Swing Line Advance or telephonic notice followed immediately by a Request for Swing Line Advance; provided, however, that the failure by the Borrower to confirm any telephonic notice with a Request for Swing Line Advance shall not invalidate any notice so given.     (b)  Prepayment and Repayment.        (i) Upon demand of the Swing Line Lender, if such demand is delivered prior to 10:00 a.m. (New York time) on a Business Day, the Borrower shall on the following Business Day make a repayment of the Swing Line Loans then outstanding in the amount so requested by the Swing Line Lender; provided, however, that if such demand is delivered to the Borrower at or after 10:00 a.m. (New York time) on a Business Day, the Borrower shall on the second (2nd) Business Day following receipt of such demand make such repayment. In order to facilitate repayment of the Swing Line Loans, the Borrower hereby irrevocably requests the Lenders having Revolving Loan Commitments, and the Lenders having Revolving Loan Commitments hereby severally agree, on the terms and conditions of this Agreement (other than as provided in Article 2 hereof with respect to the amounts of, the time of requests for and the repayment of Advances hereunder and in Article 3 hereof with respect to conditions precedent to Advances hereunder), with respect to Swing Line Loans outstanding, upon request of the Swing Line Lender or the Borrower (including, without limitation, after and during the continuation of any Default or Event of Default, but prior 34 -------------------------------------------------------------------------------- to the occurrence of an event described in clauses (f) or (g) of Section 8.1 hereof), to make an Advance to the Borrower in the amount of such outstandings and to pay the proceeds of such Advance directly to the Administrative Agent to reimburse the Swing Line Lender for the amount of the Swing Line Loans then outstanding; provided, however, that no Lender having a Revolving Loan Commitment shall be required to make such Advance if, at the time that the Swing Line Lender agreed to fund any Swing Loan Advance, the Swing Line Lender had knowledge of the existence of a Default. Each Lender having a Revolving Loan Commitment shall pay its share of such Advance by paying its portion of such Advance to the Administrative Agent in accordance with Section 2.2(e) hereof and its Commitment Ratio for Revolving Loans, without reduction for any set-off or counterclaim of any nature whatsoever and regardless of whether any Default or Event of Default (other than with respect to an event described in clauses (f) or (g) of Section 8.1 hereof) then exists or would be caused thereby. If at any time that the Swing Line Loans are outstanding, any of the events described in clauses (f) or (g) of Section 8.1 hereof shall have occurred and be continuing, then each Lender having a Revolving Loan Commitment shall, automatically upon the occurrence of any such event and without any action on the part of the Swing Line Lender, the Borrower, the Administrative Agent or the Lenders, or any of them, be deemed to have purchased an undivided participation in the then outstanding principal amount of the Swing Line Loans then outstanding in an amount equal to such Lender's Commitment Ratio for Revolving Loans, times the principal amount of the Swing Line Loans then outstanding, and each Lender having a Revolving Loan Commitment shall, notwithstanding such Event of Default, immediately pay to the Administrative Agent for the account of the Swing Line Lender, in immediately available funds, the amount of such Lender's participation (and the Swing Line Lender shall deliver to such Lender having a Revolving Loan Commitment a written confirmation of such loan participation dated the date of the occurrence of such event and in the amount of such Lender's Commitment Ratio, times the principal amount of the Swing Line Loans then outstanding).     (ii) The Borrower agrees to pay principal, interest, fees and all other amounts due hereunder or under the Swing Line Note without set-off or counterclaim or any deduction whatsoever and free clear of all taxes (other than taxes based on the income of the Swing Line Lender), levies and withholding.     (iii) If the Borrower is required by Applicable Law to deduct any taxes from or in respect of any sum payable to the Swing Line Lender hereunder, under the Swing Line Note or under any other Loan Document: (i) the sum payable hereunder or thereunder, as applicable, shall be increased to the extent necessary to provide that, after making all required deductions (including, without limitation, deductions applicable to additional sums payable under this Section 2.16(b)), the Swing Line Lender receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Borrower shall make such deductions from such sums payable hereunder or thereunder, as applicable, and pay the amount so deducted to the relevant taxing authority as required by Applicable Law; and (iii) the Borrower shall provide the Swing Line Lender with evidence satisfactory to the Swing Line Lender that such deducted amounts have been paid to the relevant taxing authority. Before making any such deductions, the Swing Line Lender shall designate a different lending office and shall take such alternative courses of action if such designation or alternative courses of action will avoid the need for such deductions and will not in the good faith judgment of the Swing Line Lender be otherwise disadvantageous to the Swing Line Lender.     (c)  Interest Period; Interest and Payments on Swing Line Advances.  Interest on each Swing Line Advance shall be, at the option of the Borrower, either (i) computed in the same manner as interest on each Base Rate Advance, or (ii) such rate as the Borrower and the Swing Line Lender shall agree upon provided however such rate payable on the Swing Line Advances shall not exceed the highest rate 35 -------------------------------------------------------------------------------- payable on Loans hereunder after giving effect to the relevant Applicable Margin, and in each case, shall be payable on the same terms as interest on each Base Rate Advance.     (d)  Amendments to Swing Line.  Subject to Section 11.12 hereof, the parties hereto hereby agree that the provisions of Section 2.16 hereof may be modified or waived only by a writing signed by the Borrower, the Administrative Agent, and the Swing Line Lender and that the terms "Swing Line Commitment" and "Available Swing Line Commitment" may only be modified or amended by a writing signed by the Borrower, the Administrative Agent and the Swing Line Lender, provided that any changes to the provisions of Section 2.16 hereof which affect the obligations thereunder of the Lenders having Revolving Loan Commitments shall require the consent of the Required Lenders and the Swing Line Lender (increases to the Swing Line Commitment shall be deemed to be changes which do not affect such obligations).     (e)  Notice of Outstandings.  The Swing Line Lender shall give the Administrative Agent notice of the aggregate amount of outstanding Swing Line Loans at intervals agreed upon by the Swing Line Lender and the Administrative Agent. ARTICLE 3 Conditions Precedent     Section 3.1  Condition Precedent to Effectiveness of Agreement.  The obligation of the Lenders to undertake the Commitments, and the effectiveness of this Agreement are subject to the receipt by the Administrative Agent of executed signature pages to this Agreement from the Required Lenders.     Section 3.2  Conditions Precedent to Each Advance.  The obligation of the Lenders to make each Advance and the Swing Line Lender to make Swing Line Advances on or after the Agreement Date which increases the principal amount of the Loans outstanding is subject to the fulfillment of each of the following conditions immediately prior to or contemporaneously with such Advance or Swing Line Advance:     (a) All of the representations and warranties of the Borrower under this Agreement and the other Loan Documents (including, without limitation, all representations and warranties with respect to the Borrower's Subsidiaries), which, pursuant to Section 4.2 hereof, are made at and as of the time of such Advance, shall be true and correct at such time in all material respects, both before and after giving effect to the application of the proceeds of such Advance, and after giving effect to any updates to information provided to the Lenders in accordance with the terms of such representations and warranties, and no Default hereunder shall then exist or be caused thereby;     (b) The Administrative Agent shall have received a duly executed Request for Advance which shall contain evidence satisfactory to the Administrative Agent that the Borrower is, as of the date of such Advance and after giving effect thereto, in compliance with Sections 7.8, 7.9, 7.10, 7.11 and 7.12 hereof;     (c) Each of the Administrative Agent and the Lenders shall have received all such other certificates, reports, statements, opinions of counsel (if such Advance is in connection with an Acquisition) or other documents as the Administrative Agent or any Lender may reasonably request;     (d) With respect to any Advance relating to any Acquisition or the formation of any Subsidiary which is permitted hereunder, the Administrative Agent and the Lenders shall have received such documents and instruments relating to such Acquisition or formation of a new Subsidiary as are described in Section 5.14 hereof or otherwise required herein; and     (e) No Materially Adverse Effect shall have occurred and no event shall have occurred which, in the reasonable opinion of the Required Lenders, may be expected to have a Materially Adverse Effect. 36 -------------------------------------------------------------------------------- ARTICLE 4 Representations and Warranties     Section 4.1  Representations and Warranties.  The Borrower hereby agrees, represents and warrants, upon the Agreement Date, and at all times thereafter as required pursuant to the terms hereof, in favor of the Administrative Agent, the Swing Line Lender and each Lender that:     (a)  Organization; Ownership; Power; Qualification.  The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. The Borrower has the corporate power and authority to own its properties and to carry on its business as now being and as proposed hereafter to be conducted. Each Subsidiary of the Borrower is a corporation or partnership duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation, as the case may be, and has the corporate or partnership power, as the case may be, and authority to own its properties and to carry on its business as now being and as proposed hereafter to be conducted. The Borrower and each of its Subsidiaries are duly qualified, in good standing and authorized to do business in each jurisdiction in which the character of their respective properties or the nature of their respective businesses requires such qualification or authorization.     (b)  Authorization; Enforceability.  The Borrower has the corporate power and has taken all necessary corporate action to authorize it to borrow hereunder, to execute, deliver and perform this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms, and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Borrower and is, and each of the other Loan Documents to which the Borrower is a party is, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law; (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (iii) a court, on equitable grounds, may decline to enforce certain provisions or allow the exercise of certain remedies based upon the facts and circumstances that may exist at the time the enforcement or exercise is sought.     (c)  Subsidiaries; Authorization; Enforceability.  The Borrower's Subsidiaries and the Borrower's direct and indirect ownership thereof as of the Agreement Date are as set forth on Schedule 3 attached hereto, and to the extent such Subsidiaries are corporations, the Borrower has the unrestricted right to vote the issued and outstanding shares of the Subsidiaries shown thereon and such shares of such Subsidiaries have been duly authorized and issued and are fully paid and nonassessable. Each Subsidiary of the Borrower has the corporate or partnership power and has taken all necessary corporate or partnership action to authorize it to execute, deliver and perform each of the Loan Documents to which it is a party in accordance with their respective terms and to consummate the transactions contemplated by this Agreement and by such Loan Documents. Each of the Loan Documents to which any Subsidiary of the Borrower is a party is a legal, valid and binding obligation of such Subsidiary enforceable against such Subsidiary in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law; (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of any such Subsidiary) and (iii) a court, on equitable grounds, may decline to enforce certain provisions or allow the exercise of certain remedies based upon the facts and circumstances that may exist at the 37 -------------------------------------------------------------------------------- time the enforcement or exercise is sought. The Borrower's ownership interest in each of its Subsidiaries represents a direct or indirect controlling interest of such Subsidiary for purposes of directing or causing the direction of the management and policies of each Subsidiary.     (d)  Compliance with Other Loan Documents and Contemplated Transactions.  The execution, delivery and performance, in accordance with their respective terms, by the Borrower of this Agreement and the Notes, and by the Borrower and its Subsidiaries of each of the other Loan Documents to which they are respectively party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) require any consent or approval, governmental or otherwise, not already obtained, (ii) violate any Applicable Law respecting the Borrower or any of its Subsidiaries, (iii) conflict with, result in a breach of, or constitute a default under the certificate or articles of incorporation or by-laws or partnership agreements, as the case may be, as amended, of the Borrower or any of its Subsidiaries, or under any material indenture, agreement, or other instrument, including, without limitation, the Licenses, to which the Borrower or any of its Subsidiaries is a party or by which any of them or their respective properties may be bound, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any of its Subsidiaries, except for Permitted Liens.     (e)  Business.  The Borrower, together with its Subsidiaries, is engaged in the business of owning, constructing, managing, operating and investing in Cellular Systems and other wireless communications and related businesses.     (f)  Licenses, etc.  The Licenses have been duly issued and are in full force and effect. The Borrower and its Subsidiaries are in compliance in all material respects with all of the provisions thereof. The Borrower and its Subsidiaries have secured all Necessary Authorizations and all such Necessary Authorizations are in full force and effect. Except as set forth in Schedule 4 attached hereto, neither any License nor any Necessary Authorization is the subject of any pending or, to the best of the Borrower's or any of its Subsidiaries' knowledge, threatened revocation.     (g)  Compliance with Law.  The Borrower and its Subsidiaries are in compliance with all Applicable Laws in all material respects, except where the failure to be in compliance would not, individually or in the aggregate, have a Materially Adverse Effect.     (h)  Title to Assets.  As of the Agreement Date, the Borrower and its Subsidiaries have good, legal and marketable title to, or a valid leasehold interest in, all of its material assets. None of the properties or assets of the Borrower or any of its Subsidiaries is subject to any Liens, except for Permitted Liens. Except for financing statements evidencing Permitted Liens, no financing statement under the Uniform Commercial Code as in effect in any jurisdiction and no other filing which names the Borrower or any of its Subsidiaries as debtor or which covers or purports to cover any of the assets of the Borrower or any of its Subsidiaries is currently effective and on file in any state or other jurisdiction, and neither the Borrower nor any of its Subsidiaries has signed any such financing statement or filing or any security agreement authorizing any secured party thereunder to file any such financing statement or filing.     (i)  Litigation.  There is no action, suit, proceeding or investigation pending against, or, to the knowledge of the Borrower, threatened against or in any other manner relating adversely to, the Borrower or any of its Subsidiaries or any of their respective properties, including without limitation the Licenses, in any court or before any arbitrator of any kind or before or by any governmental body (including without limitation the FCC) except as set forth on Schedule 5 attached hereto (as such schedule may be updated with the consent of the Required Lenders from time to time). No such action, suit, proceeding or investigation (i) calls into question the validity of this Agreement or any other Loan Document, or (ii) individually or collectively involves the possibility of any judgment or 38 -------------------------------------------------------------------------------- liability not fully covered by insurance which, if determined adversely to the Borrower or any of its Subsidiaries, would have a Materially Adverse Effect.     (j)  Taxes.  All federal, state and other tax returns of the Borrower and each of its Subsidiaries required by law to be filed have been duly filed and all federal, state and other taxes, including, without limitation, withholding taxes, assessments and other governmental charges or levies required to be paid by the Borrower or any of its Subsidiaries or imposed upon the Borrower or any of its Subsidiaries or any of their respective properties, income, profits or assets, which are due and payable, have been paid, except any such taxes (i) (x) the payment of which the Borrower or any of its Subsidiaries is diligently contesting in good faith by appropriate proceedings, (y) for which adequate reserves have been provided on the books of the Borrower or its Subsidiaries involved, and (z) as to which no Lien other than a Permitted Lien has attached and no foreclosure, distraint, sale or similar proceedings have been commenced, or (ii) which may result from audits not yet conducted. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes are, in the judgment of the Borrower, adequate.     (k)  Financial Statements.  The Borrower has furnished or caused to be furnished to the Administrative Agent and the Lenders as of the Agreement Date, audited financial statements of the Borrower and audited financial statements of the Subsidiaries of the Borrower on a consolidated basis for the fiscal year ended December 31, 1999, and unaudited financial statements of the Borrower and its Subsidiaries on a consolidated basis for the fiscal quarter ended September 30, 1999, all of which have been prepared in accordance with GAAP and present fairly in all material respects the financial position of the Borrower and its Subsidiaries on a consolidated and consolidating basis, as the case may be, on and as at such dates and the results of operations for the periods then ended. Neither the Borrower nor any of its Subsidiaries has any material liabilities, contingent or otherwise, other than as disclosed in the financial statements referred to in the preceding sentence or as set forth or referred to in this Agreement, and there are no material unrealized losses of the Borrower or any of its Subsidiaries and no material anticipated losses of the Borrower or any of its Subsidiaries other than (i) writeoffs of the Borrower's unamortized costs in connection with the Prior Loan Agreement and (ii) those which have been previously disclosed in writing to the Administrative Agent and the Lenders and identified as such.     (l)  No Material Adverse Change.  There has occurred no event since December 31, 1999 which has or which could reasonably be expected to have a Materially Adverse Effect.     (m)  ERISA.  The Borrower and each of its Subsidiaries and each of their respective Plans are in material compliance with ERISA and the Code. Neither the Borrower nor any of its ERISA Affiliates, including its Subsidiaries, has incurred any accumulated funding deficiency with respect to any Employee Pension Plan within the meaning of ERISA or the Code. Neither the Borrower nor any of its Subsidiaries has made any promises of retirement or other benefits to employees, except as set forth in the Plans, in written agreements with such employees, or in the Borrower's employee handbook and memoranda to employees. Neither the Borrower nor any of its ERISA Affiliates, including its Subsidiaries, has incurred any material liability to PBGC in connection with any such Plan; have suffered the imposition of a Lien under Section 412(m) of the Code; or have been required to provide security as a result of any amendment to any such Plan as required by Section 401(a)(29) of the Code. The assets of each such Plan which is subject to Title IV of ERISA are sufficient to provide the benefits under such Plan, the payment of which PBGC would guarantee if such Plan were terminated, and such assets are also sufficient to provide all other "benefit liabilities" (within the meaning of Section 4041 of ERISA) due under the Plan upon termination. No Reportable Event which would cause a Materially Adverse Effect has occurred and is continuing with respect to any such Plan. No such Plan or trust created thereunder, or party in interest (as defined in Section 3(14) of ERISA), or any fiduciary (as defined in Section 3(21) of ERISA), has engaged in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject such 39 -------------------------------------------------------------------------------- Plan or any other Plan of the Borrower or any of its Subsidiaries, any trust created thereunder, or any such party in interest or fiduciary, or any party dealing with any such Plan or any such trust, to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code which would cause a Materially Adverse Effect. Neither the Borrower nor any of its ERISA Affiliates, including its Subsidiaries, is or has been obligated to make any payment to a Multiemployer Plan.     (n)  Compliance with Regulations T, U and X.  Neither the Borrower nor any of its Subsidiaries is engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying, and neither the Borrower nor any of the Borrower's Subsidiaries owns or presently intends to acquire, any "margin security" or "margin stock" as defined in Regulations T, U, and X (12 C.F.R. Parts 220, 221 and 224) (the "Regulations") of the Board of Governors of the Federal Reserve System (herein called "margin stock"). None of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of the Regulations. Neither the Borrower nor any of its Subsidiaries has taken, caused or authorized to be taken, and will not take any action which might cause this Agreement or the Notes to violate any of the Regulations or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as now in effect or as the same may hereafter be in effect. If so requested by the Administrative Agent, the Borrower will furnish the Administrative Agent with (i) a statement or statements in conformity with the requirements of Federal Reserve Form U-1 or G-3 referred to in Regulation U of said Board of Governors and (ii) other documents evidencing its compliance with the margin regulations, reasonably requested by the Administrative Agent. Neither the making of the Loans nor the use of proceeds thereof will violate, or be inconsistent with, the provisions of any of the Regulations.     (o)  Investment Company Act.  Neither the Borrower nor any of its Subsidiaries is required to register under the provisions of the Investment Company Act of 1940, as amended, and neither the entering into or performance by the Borrower and its Subsidiaries of this Agreement and the Loan Documents nor the issuance of the Notes violates any provision of such Act or requires any consent, approval or authorization of, or registration with, the Securities and Exchange Commission or any other governmental or public body or authority pursuant to any provisions of such Act.     (p)  Governmental Regulation.  Neither the Borrower nor any of its Subsidiaries is required to obtain any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authority in connection with the execution and delivery of this Agreement or any other Loan Document. Neither the Borrower nor any of its Subsidiaries is required to obtain any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authority in connection with the performance, in accordance with their respective terms, of this Agreement or any other Loan Document, other than filing of appropriate UCC financing statements.     (q)  Absence of Default, Etc.  The Borrower and its Subsidiaries are in compliance in all respects with all of the provisions of their respective partnership agreements, Certificates or Articles of Incorporation and By-Laws, as the case may be, and no event has occurred or failed to occur (including, without limitation, any matter which could create a Default hereunder by cross-default) which has not been remedied or waived, the occurrence or non-occurrence of which constitutes, (i) a Default or (ii) a material default by the Borrower or any of its Subsidiaries under any indenture, agreement or other instrument relating to Indebtedness of the Borrower or any of its Subsidiaries in the amount of $1,000,000 or more in the aggregate, any License, or any judgment, decree or order to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its 40 -------------------------------------------------------------------------------- Subsidiaries or any of their respective properties may be bound or affected. The Loans are "Senior Indebtedness" as defined under the terms of the Subordinated Indebtedness.     (r)  Accuracy and Completeness of Information.  All information, reports, prospectuses and other papers and data relating to the Borrower or any of its Subsidiaries and furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or the Lenders were, at the time furnished, true, complete and correct in all material respects to the extent necessary to give the Administrative Agent and the Lenders true and accurate knowledge of the subject matter, and all projections, consisting of a statement of operating statistics, an income statement summary, a debt repayment schedule and pro forma compliance calculations (the "Projections") (i) disclose all assumptions made with respect to costs, general economic conditions, and financial and market conditions formulating the Projections; (ii) are based on reasonable estimates and assumptions; and (iii) reflect, as of the date prepared, and continue to reflect, as of the date hereof, the reasonable estimate of Borrower of the results of operations and other information projected therein for the periods covered thereby.     (s)  Agreements with Affiliates.  Except for agreements or arrangements with Affiliates wherein the Borrower or one or more of its Subsidiaries provides services to such Affiliates for fair consideration or which are set forth on Schedule 6 attached hereto, neither the Borrower nor any of its Subsidiaries has (i) any written agreements or binding arrangements of any kind with any Affiliate or (ii) any management or consulting agreements of any kind with any Affiliate.     (t)  Payment of Wages.  The Borrower and each of its Subsidiaries are in compliance with the Fair Labor Standards Act, as amended, in all material respects, and to the knowledge of the Borrower and each of its Subsidiaries, such Persons have paid all minimum and overtime wages required by law to be paid to their respective employees.     (u)  Priority.  The Security Interest is a valid and, upon filing of appropriate UCC financing statements or taking of possession, if applicable, perfected first priority security interest in the Collateral in favor of the Administrative Agent, for the benefit of itself and the Lenders, securing, in accordance with the terms of the Security Documents, the Obligations, and the Collateral is subject to no Liens other than Permitted Liens. The Liens created by the Security Documents are enforceable as security for the Obligations in accordance with their terms with respect to the Collateral subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower or any of its Subsidiaries, as the case may be).     (v)  Indebtedness.  Except as shown on the financial statements of the Borrower for the fiscal year ended December 31, 1998 and the Subordinated Indebtedness, neither the Borrower nor any of its Subsidiaries has outstanding, as of the Agreement Date, and after giving effect to the initial Advances hereunder on the Agreement Date, any Indebtedness for Money Borrowed other than the Loans.     (w)  Solvency.  As of the Agreement Date and after giving effect to the transactions contemplated by the Loan Documents (i) the property of the Borrower, at a fair valuation, will exceed its debt; (ii) the capital of the Borrower will not be unreasonably small to conduct its business; (iii) the Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and (iv) the present fair salable value of the assets of the Borrower will be materially greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. For purposes of this Section, "debt" means any liability on a claim, and "claim" means (i) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or 41 -------------------------------------------------------------------------------- unsecured, or (ii) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured.     Section 4.2  Survival of Representations and Warranties, etc.  All representations and warranties made under this Agreement and any other Loan Document shall be deemed to be made, and shall be true and correct, at and as of the Agreement Date and on the date of each Advance except to the extent previously fulfilled in accordance with the terms hereof and to the extent relating specifically to the Agreement Date. All representations and warranties made under this Agreement and the other Loan Documents shall survive, and not be waived by, the execution hereof by the Lenders and the Administrative Agent, any investigation or inquiry by any Lender or the Administrative Agent, or the making of any Advance under this Agreement. ARTICLE 5 General Covenants     So long as any of the Obligations is outstanding and unpaid or the Lenders have an obligation to fund Advances hereunder (whether or not the conditions to borrowing have been or can be fulfilled), and unless the Required Lenders, or such greater number of Lenders as may be expressly provided herein, shall otherwise consent in writing:     Section 5.1  Preservation of Existence and Similar Matters.  The Borrower will, and will cause each of its Subsidiaries to:     (a) preserve and maintain (i) its existence, and (ii) its material rights, franchises, licenses and privileges in the state of its incorporation, including, without limiting the foregoing, the Licenses and all other Necessary Authorizations; and     (b) qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization.     Section 5.2  Business; Compliance with Applicable Law.  The Borrower will, and will cause each of its Subsidiaries to, (a) engage in the business of owning, constructing, managing, operating and investing in Cellular Systems and other wireless communications and related businesses and no unrelated activities, and (b) comply in all material respects with the requirements of all Applicable Law.     Section 5.3  Maintenance of Properties.  The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in the ordinary course of business in good repair, working order and condition (reasonable wear and tear excepted) all properties used in their respective businesses (whether owned or held under lease), other than obsolete equipment or unused assets, and from time to time make or cause to be made all needed and appropriate repairs, renewals, replacements, additions, betterments and improvements thereto, except as to leased properties where the landlord is required to make such repairs, in which event Borrower shall be under no obligation to do so unless the particular lease permits the Borrower to do so in the absence of the landlord complying with its obligations.     Section 5.4  Accounting Methods and Financial Records.  The Borrower will, and will cause each of its Subsidiaries on a consolidated and consolidating basis to, maintain a system of accounting established and administered in accordance with GAAP, keep adequate records and books of account in which complete entries will be made in accordance with GAAP and reflecting all transactions required to be reflected by GAAP and keep accurate and complete records of their respective properties and assets. The Borrower and each of its Subsidiaries will maintain a fiscal year ending on December 31st. 42 --------------------------------------------------------------------------------     Section 5.5  Insurance.  The Borrower will, and will cause each of its Subsidiaries to:     (a) Maintain insurance, including, without limitation, business interruption coverage and public liability coverage insurance from responsible companies in such amounts and against such risks to the Borrower and each of its Subsidiaries as is standard for similarly situated companies engaged in the cellular telephone and wireless communications industry.     (b) Keep their respective assets insured by insurers on terms and in a manner reasonably acceptable to the Administrative Agent against loss or damage by fire, flood, theft, burglary, loss in transit, explosions and hazards insured against by extended coverage, in amounts which are prudent for the cellular telephone and wireless communications industry and reasonably satisfactory to the Administrative Agent, all premiums thereon to be paid by the Borrower and its Subsidiaries.     (c) Require that each insurance policy provide for at least thirty (30) days' prior written notice to the Administrative Agent of any termination of or proposed cancellation or nonrenewal of such policy, and name the Administrative Agent as additional named lender loss payee and, as appropriate, additional insured, to the extent of the Obligations.     Section 5.6  Payment of Taxes and Claims.  The Borrower will, and will cause each of its Subsidiaries to, pay and discharge all taxes, including, without limitation, withholding taxes, assessments and governmental charges or levies required to be paid by them or imposed upon them or their income or profits or upon any properties belonging to them, prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien or charge upon any of their properties; except that no such tax, assessment, charge, levy or claim need be paid which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on the appropriate books, but only so long as such tax, assessment, charge, levy or claim does not become a Lien or charge other than a Permitted Lien and no foreclosure, distraint, sale or similar proceedings shall have been commenced. The Borrower will, and will cause each of its Subsidiaries to, timely file all information returns required by federal, state or local tax authorities.     Section 5.7  Compliance with ERISA.       (a) The Borrower will, and will cause its Subsidiaries to, make all contributions to any Employee Pension Plan when such contributions are due and not incur any "accumulated funding deficiency" within the meaning of Section 412(a) of the Code, whether or not waived, and will otherwise comply with the requirements of the Code and ERISA with respect to the operation of all Plans, except to the extent that the failure to so comply could not have a Materially Adverse Effect.     (b) The Borrower will, and will cause its Subsidiaries to, comply in all respects with the requirements of COBRA with respect to any Plans subject to the requirements thereof, except to the extent that the failure to so comply could not have a Materially Adverse Effect.     (c) The Borrower will furnish to the Administrative Agent (i) within thirty (30) days after any officer of the Borrower obtains knowledge that a "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Plan of the Borrower or its ERISA Affiliates, including its Subsidiaries, that any Reportable Event has occurred with respect to any Employee Pension Plan or that PBGC has instituted or will institute proceedings under Title IV of ERISA to terminate any Employee Pension Plan or to appoint a trustee to administer any Employee Pension Plan, a statement setting forth the details as to such prohibited transaction, Reportable Event or termination or appointment proceedings and the action which it (or any other Employee Pension Plan sponsor if other than the Borrower) proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to PBGC if a copy of such notice is available to the Borrower, any of its Subsidiaries or any of its ERISA Affiliates, (ii) promptly after receipt thereof, a copy of any notice the Borrower, any of its Subsidiaries or any of its ERISA 43 -------------------------------------------------------------------------------- Affiliates or the sponsor of any Plan receives from PBGC, or the Internal Revenue Service or the Department of Labor which sets forth or proposes any action or determination with respect to such Plan, (iii) promptly after the filing thereof, any annual report required to be filed pursuant to ERISA in connection with each Employee Pension Plan subject to Title IV of ERISA maintained by the Borrower or any of its ERISA Affiliates, including the Subsidiaries, and (iv) promptly upon the Administrative Agent's request therefor, such additional information concerning any such Plan as may be reasonably requested by the Administrative Agent.     (d) The Borrower will promptly notify the Administrative Agent of any excise taxes which have been assessed or, other than as described in subsection (c) above, which the Borrower, any of its Subsidiaries or any of its ERISA Affiliates has reason to believe may be assessed against the Borrower, any of its Subsidiaries or any of its ERISA Affiliates by the Internal Revenue Service or the Department of Labor with respect to any Plan of the Borrower or its ERISA Affiliates, including its Subsidiaries.     (e) Within the time required for notice to the PBGC under Section 302(f)(4)(A) of ERISA or Section 412(m)(4) of the Code, as the case may be, the Borrower will notify the Administrative Agent of any lien arising under Section 302(f) of ERISA or Section 412(m) of the Code in favor of any Plan of the Borrower or its ERISA Affiliates, including its Subsidiaries.     (f)  The Borrower will not, and will not permit any of its Subsidiaries or any of its ERISA Affiliates to take any of the following actions or permit any of the following events to occur if such action or event together with all other such actions or events would subject the Borrower, any of its Subsidiaries, or any of its ERISA Affiliates to any tax, penalty, or other liabilities which could have a Materially Adverse Effect:     (1) engage in any transaction in connection with which the Borrower, any of its Subsidiaries or any ERISA Affiliate could be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code;     (2) terminate any Employee Pension Plan in a manner, or take any other action, which could result in any liability of the Borrower, any of its Subsidiaries or any ERISA Affiliate to the PBGC;     (3) fail to make full payment when due of all amounts which, under the provisions of any Employee Pension Plan, the Borrower, any of its Subsidiaries or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency within the meaning of Section 412(a) of the Code, whether or not waived, with respect to any Employee Pension Plan;     (4) permit the present value of all benefit liabilities under all Employee Pension Plans which are subject to Title IV of ERISA to exceed the present value of the assets of such Plans allocable to such benefit liabilities (within the meaning of Section 4041 of ERISA), except as may be permitted under actuarial funding standards adopted in accordance with Section 412 of the Code; or     (5) requires the provision of security in favor of any Plan maintained by the Borrower or its ERISA Affiliates, including its Subsidiaries under Section 401(a)(29) of the Code.     Section 5.8  Visits and Inspections.  The Borrower will, and will cause each of its Subsidiaries to, permit representatives of the Administrative Agent and any of the Lenders, upon reasonable notice, to (i) visit and inspect the properties of the Borrower or any of its Subsidiaries during business hours, (ii) inspect and make extracts from and copies of their respective books and records, and (iii) discuss with their respective principal officers their respective businesses, assets, liabilities, financial positions, results of operations and business prospects. The Borrower will, and will cause each of its Subsidiaries to, also permit representatives of the Administrative Agent and any of the Lenders to discuss with their 44 -------------------------------------------------------------------------------- respective accountants the Borrower's and its Subsidiaries' businesses, assets, liabilities, financial positions, results of operations and business prospects.     Section 5.9  Payment of Indebtedness; Loans.  Subject to any provisions herein or in any other Loan Document, the Borrower will, and will cause each of its Subsidiaries to, pay any and all of their respective Indebtedness when and as it becomes due or to the extent of trade payables of such Persons otherwise in accordance with ordinary business practices customary for the wireless communications industry, other than amounts diligently disputed in good faith and for which adequate reserves have been set aside in accordance with GAAP.     Section 5.10  Use of Proceeds.  The Borrower will use the aggregate proceeds of all Advances under the Loans directly or indirectly:     (a) to fund Capital Expenditures;     (b) for working capital needs and other corporate purposes of the Borrower and its Subsidiaries (including, without limitation, the fees and expenses incurred in connection with the execution and delivery of this Agreement) which do not otherwise conflict with this Section 5.10;     (c) to fund the Saco River Acquisition in an aggregate amount not to exceed $200,000,000 on substantially the terms and conditions set forth in the Saco River Agreement and the fees and expenses incurred by the Borrower in connection with the Saco River Acquisition;     (d) to fund Acquisitions as permitted under Section 7.6(e) hereof;     (e) to make Restricted Payments as permitted under Section 7.7 hereof; and     (f)  to refinance the Borrower's existing bank debt. No proceeds of Advances hereunder shall be used for the purchase or carrying or the extension of credit for the purpose of purchasing or carrying, any margin stock within the meaning of the Regulations.     Section 5.11  Real Estate.  Subject to Section 7.14 hereof, the Borrower will, and will cause its Subsidiaries to, grant a mortgage to the Administrative Agent securing the Obligations or such amount thereof as is equal to the fair market value of such real estate, in form and substance reasonably satisfactory to the Administrative Agent, covering (a) any parcel of real estate not subject to a Permitted Lien described in clause (i) of the definition thereof or covered by the Headquarter's Mortgage having a fair market value, exclusive of equipment acquired by the Borrower or any of its Subsidiaries after the Agreement Date, the value of which exceeds $5,000,000 individually, and (b) all parcels of real estate owned by the Borrower and its Subsidiaries not subject to a Permitted Lien described in clause (i) of the definition thereof or covered by the Headquarter's Mortgage at such time as the aggregate fair market value of all such real estate equals or exceeds $20,000,000. The Borrower will, and will cause its Subsidiaries to, deliver to the Administrative Agent all documentation, including, without limitation, opinions of counsel and policies of title insurance, which in the reasonable opinion of the Administrative Agent are appropriate with each such grant, including any phase I environmental audit requested by the Required Lenders. The Borrower and the Lenders hereby agree that although the Headquarter's Mortgage will not be recorded on the Agreement Date the Administrative Agent may, at the direction of the Required Lenders after the occurrence and during the continuance of an Event of Default, cause the Headquarter's Mortgage to be recorded in the appropriate jurisdiction and further agree that upon becoming aware of any change in the recording tax in the State of Minnesota such that the recording costs for the Headquarter's Mortgage do not exceed $10,000, the Administrative Agent shall promptly cause the Headquarter's Mortgage to be recorded in the appropriate jurisdiction. The Borrower agrees to take any action including, without limitation, the execution and delivery of any additional mortgage documents or amendments thereto as may be necessary to permit the actions set forth in the preceding sentence. Any recording taxes or fees paid by 45 -------------------------------------------------------------------------------- the Administrative Agent in connection with the Headquarter's Mortgage shall be expenses hereunder and shall be subject to reimbursement under Sections 9.11 and 11.2 hereof.     Section 5.12  Indemnity.  The Borrower agrees to indemnify and hold harmless each Lender, the Swing Line Lender and the Administrative Agent, and each of their respective affiliates, employees, representatives, shareholders, officers, directors, trustees and advisors (any of the foregoing shall be an "Indemnitee") from and against any and all claims, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable attorneys', experts', agents', consultants' fees and expenses (as such fees and expenses are incurred) and demands by any party, including, without limitation, the costs of investigating and defending such claims, whether or not the Borrower, any of its Subsidiaries or the Person seeking indemnification is the prevailing party (a) resulting from any breach or alleged breach by the Borrower or any of its Subsidiaries of any representation or warranty made hereunder or under any other Loan Document; or (b) otherwise arising out of (i) the Commitments, the Swing Line Commitment or otherwise under this Agreement, any Loan Document or any transaction contemplated hereby or thereby, including, without limitation, the use of the proceeds of Loans hereunder in any fashion by the Borrower or the performance of their respective obligations under the Loan Documents by the Borrower or any of its Subsidiaries, (ii) allegations of any participation by the Swing Line Lender, the Lenders or the Administrative Agent, or any of them, in the affairs of the Borrower or any of its Subsidiaries, or allegations that any of them has any joint liability with the Borrower or any of its Subsidiaries arising out of the Commitments, the Swing Line Commitment or otherwise under this Agreement or any Loan Document (or the rights of such Person arising thereunder); (iii) any claims against the Swing Line Lender, the Lenders or the Administrative Agent, or any of them, by any shareholder or other investor in or lender to the Borrower or any Subsidiary of the Borrower, by any brokers or finders or investment advisers or investment bankers retained by the Borrower or by any other third party, arising out of the Commitments, the Swing Line Commitment or otherwise under this Agreement; or (c) in connection with taxes (not including federal or state income taxes or other taxes based solely upon the revenues of such Persons), fees, and other charges payable in connection with the Loans, or the execution, delivery, and enforcement of this Agreement, the Security Documents, the other Loan Documents, any amendments thereto or waivers of any of the provisions thereof; unless the Person seeking indemnification hereunder is determined in such case to have acted with gross negligence or willful misconduct, in any case, by a final, non-appealable judicial order. The obligations of the Borrower under this Section 5.12 are in addition to, and shall not otherwise limit, any liabilities which the Borrower might otherwise have in connection with any warranties or similar obligations of the Borrower in any other Loan Document.     Section 5.13  Interest Rate Hedging.  Within ninety (90) days of the Agreement Date and forty-five (45) days after each Advance, the Borrower shall enter into (and shall at all times thereafter maintain) one or more Interest Hedge Agreements with respect to the Borrower's interest obligations on not less than fifty percent (50%) of the principal amount of the Loans outstanding from time to time. Such Interest Hedge Agreements shall provide interest rate protection in conformity with International Swap Dealers Association standards and for an average period of at least three (3) years from the date of such Interest Hedge Agreements or, if earlier, until the later of the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date or Incremental Facility Maturity Date on terms reasonably acceptable to the Administrative Agent, such terms to include consideration of the creditworthiness of the other party to the proposed Interest Hedge Agreement. All Obligations of the Borrower to either Administrative Agent or any of the Lenders (or any of their Affiliates) pursuant to any Interest Hedge Agreement and all Liens granted to secure such Obligations shall rank pari passu with all other Obligations and Liens securing such other Obligations up to the then effective amount of the Commitments; and any Interest Hedge Agreement between the Borrower and any other Person shall be unsecured. 46 --------------------------------------------------------------------------------     Section 5.14  Covenants Regarding Formation of Subsidiaries and Acquisitions; Partnership, Subsidiaries.  At the time of (i) any Acquisition permitted hereunder or (ii) the formation of any new Subsidiary of the Borrower or any of its Subsidiaries which is permitted under this Agreement, the Borrower will, and will cause its Subsidiaries, as appropriate, to (a) provide to the Administrative Agent an executed Subsidiary Security Agreement for such new Subsidiary, in substantially the form of Exhibit I attached hereto, together with appropriate UCC-1 financing statements, as well as an executed Subsidiary Guaranty for such new Subsidiary, in substantially the form of Exhibit G attached hereto, which shall constitute both Security Documents and Loan Documents for purposes of this Agreement, as well as a loan certificate for such new Subsidiary, substantially in the form of Exhibit O attached hereto, together with appropriate attachments; (b) pledge to the Administrative Agent all of the stock or partnership interests (or other instruments or securities evidencing ownership) of such Subsidiary or Person which is acquired or formed, beneficially owned by the Borrower or any of the Borrower's Subsidiaries, as the case may be, as additional Collateral for the Obligations to be held by the Administrative Agent in accordance with the terms of the Borrower's Pledge Agreement, an existing Subsidiary Pledge Agreement, or a new Subsidiary Pledge Agreement in substantially the form of Exhibit H attached hereto, and execute and deliver to the Administrative Agent all such documentation for such pledge as, in the reasonable opinion of the Administrative Agent, is appropriate; and (c) provide revised financial projections for the remainder of the fiscal year and for each subsequent year until the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable which reflect such Acquisition or formation, certified by the chief financial officer of the Borrower, together with a statement by such Person that, to the knowledge of the Borrower, no Default exists or would be caused by such Acquisition or formation, and all other documentation, including one or more opinions of counsel, reasonably satisfactory to the Administrative Agent which in its reasonable opinion is appropriate with respect to such Acquisition or the formation of such Subsidiary. Any document, agreement or instrument executed or issued pursuant to this Section 5.14 shall be a Loan Document for purposes of this Agreement.     Section 5.15  Payment of Wages.  The Borrower will, and will cause each of its Subsidiaries to, at all times comply in all material respects with the requirements of the Fair Labor Standards Act, as amended, including, without limitation, the provisions of such Act relating to the payment of minimum and overtime wages as the same may become due from time to time.     Section 5.16  Further Assurances.  The Borrower will promptly cure, or cause to be cured, defects in the creation and issuance of any of the Notes and the execution and delivery of the Loan Documents (including, without limitation, this Agreement), resulting from any acts or failure to act by the Borrower or any of the Borrower's Subsidiaries or any employee or officer thereof. The Borrower at its expense will promptly execute and deliver to the Administrative Agent and the Lenders, or cause to be executed and delivered to the Administrative Agent and the Lenders, all such other and further documents, agreements, and instruments in compliance with or accomplishment of the covenants and agreements of the Borrower in the Loan Documents, including this Agreement, or to correct any omissions in the Loan Documents, or more fully to state the obligations set out herein or in any of the Loan Documents, or to obtain any consents, all as may be necessary or appropriate in connection therewith and as may be reasonably requested. ARTICLE 6 Information Covenants     So long as any of the Obligations is outstanding and unpaid or the Lenders have an obligation to fund Advances hereunder (whether or not the conditions to borrowing have been or can be fulfilled) 47 -------------------------------------------------------------------------------- and unless the Required Lenders shall otherwise consent in writing, the Borrower will furnish or cause to be furnished to each Lender and the Administrative Agent, at their respective offices:     Section 6.1  Quarterly Financial Statements and Information.  Within forty-five (45) days after the last day of each of the first three (3) quarters of each fiscal year of the Borrower, commencing with the quarter ending March 31, 2000, the balance sheets of the Borrower on a consolidated and consolidating basis with its Subsidiaries as at the end of such quarter and as of the end of the preceding fiscal year, and the related statements of operations and the related statements of cash flows of the Borrower on a consolidated and consolidating basis with its Subsidiaries for such quarter and for the elapsed portion of the year ended with the last day of such quarter, which shall set forth in comparative form such figures as at the end of and for such quarter and appropriate prior period and shall be certified by the chief financial officer, the president or the chief operating officer of the Borrower to have been prepared in accordance with GAAP and to present fairly in all material respects the financial position of the Borrower on a consolidated and consolidating basis with its Subsidiaries as at the end of such period and the results of operations for such period, and for the elapsed portion of the year ended with the last day of such period, subject only to normal year-end and audit adjustments.     Section 6.2  Annual Financial Statements and Information.  Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related audited consolidated and unaudited consolidating statements of operations for such fiscal year and for the previous fiscal year, the related audited consolidated statements of cash flow and stockholders' equity for such fiscal year and for the previous fiscal year, which shall be accompanied by an opinion, which opinion shall be in scope and substance reasonably satisfactory to the Administrative Agent, of independent certified public accountants of recognized national standing acceptable to the Administrative Agent, together with a statement of such accountants that in connection with their audit, nothing came to their attention that caused them to believe that the Borrower was not in compliance with the terms, covenants, provisions or conditions of Articles 7 and 8 hereof insofar as they relate to accounting matters.     Section 6.3  Performance Certificates.  At the time the financial statements are furnished pursuant to Sections 6.1 and 6.2, a certificate of the president or chief financial officer of the Borrower as to its financial performance, in substantially the form attached hereto as Exhibit R:     (a) setting forth as and at the end of such quarterly period or fiscal year, as the case may be, the arithmetical calculations required to establish (i) any adjustment to the Applicable Margins, as provided for in Section 2.3(f) hereof, and (ii) whether or not the Borrower was in compliance with the requirements of Sections 7.8, 7.9, 7.10, 7.11 and 7.12 hereof;     (b) setting forth on a consolidated basis for the Borrower and its Subsidiaries for each such fiscal quarter (i) the number of subscribers at the beginning of the quarter, (ii) the number of gross new subscribers added and deactivated subscribers lost during the quarter, and (iii) the number of subscribers at the end of the quarter; and     (c) stating that, to the best of his or her knowledge, no Default has occurred as at the end of such quarterly period or year, as the case may be, or, if a Default has occurred, disclosing each such Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrower with respect to such Default.     Section 6.4  Copies of Other Reports.       (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower by the Borrower's independent public accountants regarding the Borrower, including, without limitation, any management report prepared in connection with the annual audit referred to in Section 6.2 hereof. 48 --------------------------------------------------------------------------------     (b) Promptly upon receipt thereof, copies of any material adverse notice or report regarding any License from the FCC.     (c) From time to time and promptly upon each request, such data, certificates, reports, statements, documents or further information regarding the business, assets, liabilities, financial position, projections, results of operations or business prospects of the Borrower or any of its Subsidiaries, as the Administrative Agent or any Lender may reasonably request.     (d) Annually, within ninety (90) days of the last day of each fiscal year of the Borrower, certificates of insurance indicating that the requirements of Section 5.5 hereof remain satisfied for such fiscal year, together with copies of any new or replacement insurance policies obtained during such year.     (e) Prior to January 31st of each year, the annual budget for the Borrower and the Borrower's Subsidiaries, including, without limitation, forecasts of the income statement, the balance sheet and a cash flow statement for such year, on a quarter by quarter basis.     (f)  Promptly after the sending thereof, copies of all statements, reports and other information which the Borrower or any of its Subsidiaries sends to security holders of the Borrower generally or files with the Securities and Exchange Commission or any national securities exchange.     Section 6.5  Notice of Litigation and Other Matters.  Notice specifying the nature and status of any of the following events, promptly, but in any event not later than fifteen (15) days (or, in the case of Section 6.5(d) hereof, ten (10) days) after the occurrence of any of the following events becomes known to the Borrower or any of its Subsidiaries:     (a) the commencement of all proceedings and investigations by or before any governmental body and all actions and proceedings in any court or before any arbitrator against, or to the extent known to the Borrower or any of its Subsidiaries, in any other way relating materially adversely to the Borrower or any of its Subsidiaries, or any of their respective properties, assets or businesses or any License;     (b) any material adverse change with respect to the business, assets, liabilities, financial position, results of operations or business prospects of the Borrower or any of its Subsidiaries other than changes in the ordinary course of business which have not had and would not reasonably be expected to have a Materially Adverse Effect and other changes in the industry in which either the Borrower or any of its Subsidiaries operate which would not reasonably be expected to have a Materially Adverse Effect;     (c) any material adverse amendment or change to the financial projections or annual budget provided to the Lenders by the Borrower;     (d) any Default or the occurrence or non-occurrence of any event (i) which constitutes, or which with the passage of time or giving of notice or both would constitute a default by the Borrower or any of its Subsidiaries under any material agreement other than this Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is party or by which any of their respective properties may be bound, or (ii) which could have a Materially Adverse Effect, giving in each case a detailed description thereof and specifying the action proposed to be taken with respect thereto;     (e) the occurrence of any Reportable Event or a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan of the Borrower or any of its Subsidiaries or the institution or threatened institution by PBGC of proceedings under ERISA to terminate or to partially terminate any such Plan or the commencement or threatened commencement of any litigation regarding any such Plan or naming it or the trustee of any such Plan with respect to such Plan or any action taken by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate of the Borrower to withdraw or partially withdraw from any Plan or to terminate any Plan; and 49 --------------------------------------------------------------------------------     (f)  the occurrence of any event subsequent to the Agreement Date which, if such event had occurred prior to the Agreement Date, would have constituted an exception to the representation and warranty in Section 4.1(m) hereof. ARTICLE 7 Negative Covenants     So long as any of the Obligations is outstanding and unpaid or the Lenders have an obligation to fund Advances hereunder (whether or not the conditions to borrowing have been or can be fulfilled) and unless the Required Lenders, or such greater number of Lenders as may be expressly provided herein, shall otherwise give their prior consent in writing:     Section 7.1  Indebtedness of the Borrower and its Subsidiaries.  The Borrower shall not, and shall not permit any of its Subsidiaries to, create, assume, incur or otherwise become or remain obligated in respect of, or permit to be outstanding, any Indebtedness except:     (a) the Obligations;     (b) operating accounts payable, accrued expenses and customer advance payments and accrued Plan contributions incurred in the ordinary course of business;     (c) Indebtedness secured by Permitted Liens;     (d) obligations under Interest Hedge Agreements with respect to the Loans;     (e) Indebtedness of the Borrower, or of any of its Subsidiaries to the Borrower or any other Subsidiary, so long as the corresponding debt instruments are pledged to the Administrative Agent as security for the Obligations and Indebtedness expressly permitted pursuant to Section 7.5 hereof;     (f)  the Incremental Facility;     (g) (i) secured Indebtedness of the Borrower which does not exceed $10,000,000 in the aggregate at any one time outstanding, and/or (ii) unsecured Indebtedness of the Borrower which does not exceed $25,000,000 in the aggregate at any one time outstanding; provided, however, that the sum of (1) the aggregate amount of secured Indebtedness permitted pursuant to this Section 7.1(g), plus (2) the aggregate amount of unsecured Indebtedness permitted pursuant to this Section 7.1(g) shall not exceed $25,000,000 in the aggregate at any one time outstanding, on terms and conditions reasonably satisfactory to the Administrative Agent;     (h) Subordinated Indebtedness and Preferred Stock;     (i)  Indebtedness which does not exceed $5,000,000 in the aggregate at any one time outstanding; provided, however, that such Indebtedness is (i) purchase money Indebtedness of the Borrower or any of its Subsidiaries that is incurred or assumed to finance part or all of (but not more than) the purchase price of a tangible asset in which neither the Borrower nor such Subsidiary had at any time prior to such purchase any interest other than a security interest or an interest as lessee under an operating lease, or (ii) Capitalized Lease Obligations.     Section 7.2  Limitation on Liens.  The Borrower shall not, and shall not permit any of its Subsidiaries to, create, assume, incur or permit to exist or to be created, assumed, incurred or permitted to exist, directly or indirectly, any Lien on any of its properties or assets, whether now owned or hereafter acquired, except for Permitted Liens. 50 --------------------------------------------------------------------------------     Section 7.3  Amendment and Waiver.  The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) without the consent of the Required Lenders, enter into any amendment of, or agree to or accept or consent to any waiver of any of the material provisions of, as applicable, (i) its articles or certificate of incorporation or partnership agreement, (ii) its by-laws or membership agreement, (iii) the membership agreement of Wireless Alliance, (iv) the Subordinated Notes (or the related indenture) or (v) the Preferred Stock (or the related indentures) or (b) without the consent of the Administrative Agent, the Saco River Agreement.     Section 7.4  Liquidation, Merger, or Disposition of Assets.       (a)  Disposition of Assets.  The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time sell, lease, abandon, or otherwise dispose of any assets (other than assets disposed of in the ordinary course of business) without the prior written consent of the Lenders; provided, however, that the prior written consent of the Lenders shall not be required for (i) the transfer of assets (including, without limitation, cash or cash equivalents) among the Borrower and its Subsidiaries (excluding Wireless Alliance) or for the transfer of assets (including, without limitation, cash or cash equivalents, but excluding the Licenses) between or among Subsidiaries (excluding Wireless Alliance) of the Borrower, (ii) dispositions of assets the proceeds of which are applied pursuant to Section 2.5(c) or 2.7(b)(vi) hereof (provided, however, that, with respect to such sales under Section 2.5(c) or 2.7(b)(vi), the Borrower provides to the Administrative Agent and the Lenders on the date of such sale a certificate reflecting compliance with the terms and provisions of Sections 7.8, 7.9, 7.10, 7.11 and 7.12 hereof both before and after giving effect to such sale or transfer) or (iii) the Borrower or any of its Subsidiaries may enter into sale/leaseback transactions with respect to its cellular towers so long as the documentation for any such sale/ leaseback or similar arrangement is approved as to form by the Administrative Agent (such approval not to be unreasonably withheld).     (b)  Liquidation or Merger.  The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time liquidate or dissolve itself (or suffer any liquidation or dissolution) or otherwise wind up, or enter into any merger, other than (i) a merger or consolidation among the Borrower and one or more Subsidiaries; provided, however, that the Borrower is the surviving corporation, or (ii) a merger between or among two or more Subsidiaries, or (iii) in connection with an Acquisition permitted hereunder effected by a merger in which the Borrower or, in a merger in which the Borrower is not a party, a Subsidiary of the Borrower is the surviving corporation.     Section 7.5  Limitation on Guaranties.  The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time Guaranty, assume, be obligated with respect to, or permit to be outstanding any Guaranty of, any obligation of any other Person other than (a) a guaranty by endorsement of negotiable instruments for collection in the ordinary course of business, (b) obligations under agreements of the Borrower or any of its Subsidiaries entered into in connection with leases of real property or the acquisition of services, supplies and equipment in the ordinary course of business of the Borrower or any of its Subsidiaries, (c) Guaranties of Indebtedness incurred as permitted pursuant to Section 7.1 hereof (other than Section 7.1(h) hereof), (d) as may be contained in any Loan Document, including, without limitation, the Subsidiary Guaranty or (e) in its capacity as a general partner in any of its Subsidiaries.     Section 7.6  Investments and Acquisitions.  The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make any loan or advance, or otherwise acquire for consideration evidences of Indebtedness, capital stock or other securities of any Person or other assets or property (other than assets or property in the ordinary course of business), or make any Acquisition or Investment; provided, however, that:     (a) The Borrower or any of its Subsidiaries may, directly or through a brokerage account, (i) purchase marketable, direct obligations of the United States of America, its agencies and instrumentalities maturing within three hundred sixty-five (365) days of the date of purchase, 51 -------------------------------------------------------------------------------- (ii) purchase commercial paper, money-market funds and business savings accounts issued by corporations, each of which shall have a combined net worth of at least $100,000,000 and each of which conducts a substantial part of its business in the United States of America, maturing within two hundred seventy (270) days from the date of the original issue thereof, and rated "P-2" or better by Moody's Investors Service, Inc. or "A-2" or better by Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc., and (iii) purchase repurchase agreements, bankers' acceptances, and certificates of deposit maturing within three hundred sixty-five (365) days of the date of purchase which are issued by, or time deposits maintained with, a United States national or state bank the deposits of which are insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation and having capital, surplus and undivided profits totaling more than $100,000,000 and rated "A" or better by Moody's Investors Service, Inc. or Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc.;     (b) So long as no Default then exists or would be caused thereby, and subject to compliance with Section 5.14 hereof, the Borrower or any of its Subsidiaries may complete the following Acquisitions: (i) the Saco River Acquisition to be consummated on substantially the terms and conditions set forth in the Saco River Agreement; and (ii) from the Agreement Date, Acquisitions in the aggregate not to exceed $150,000,000 (including reasonable and customary costs and expenses related to such Acquisitions) of not less than fifty and one one-hundredth percent (50.01%) of the ownership interest (after giving effect to any ownership interest acquired on or prior to the date of such Acquisition as permitted hereunder) in Cellular Systems, or the right to construct a Cellular System (including, without limitation, associated construction costs), in an RSA or an MSA or a BTA (in the case of a PCS System) which is primarily within the same geographic area as or contiguous to a Cellular System then owned by the Borrower or any of its Subsidiaries;     (c) So long as no Default then exists or would be caused thereby, the Borrower or any of its Subsidiaries may make Investments in an aggregate amount not to exceed $50,000,000, in Cellular Systems, or the right to construct a Cellular System (including without limitation, associated construction costs), in an RSA or an MSA or a BTA (in the case of a PCS System) which is primarily within the same geographic area as or contiguous to a Cellular System then owned by the Borrower or any of its Subsidiaries, Capital Expenditures and general working capital purposes without the consent of the Lenders; provided, however, that (i) prior to making such Investment, the Borrower shall deliver to the Administrative Agent and the Lenders a certificate reflecting pro forma projections and compliance with the terms and conditions of this Agreement from the date of such Acquisition through the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable after giving effect to such Investment and using reasonable assumptions in the opinion of the Required Lenders; (ii) in the case of any equity investment, any equity interests received in connection with such Investment are pledged as Collateral for the Obligations; and (iii) in the case of any loan or extension of Indebtedness, such loan is evidenced by a promissory note which is assigned as Collateral for the Obligations;     (d) So long as no Default then exists or would be caused thereby, the Borrower or any of its Subsidiaries may make Investments in Wireless Alliance in an aggregate amount not to exceed $50,000,000 (which amount shall include, without limitation, any Investment in Wireless Alliance made prior to the Agreement Date, but exclude Acquisitions made pursuant to Section 7.6(b) hereof and Investments made pursuant to Section 7.6(e) hereof); provided, however, that (i) in the case of any equity investment, any equity interests received in connection with such Investment are pledged as Collateral for the Obligations and (ii) in the case of any loan or extension of Indebtedness, such loan is evidenced by a promissory note which is assigned as Collateral for the Obligations;     (e) except so long as no Default then exists or would be caused thereby, subject to compliance with Section 5.14 hereof, the Borrower may issue equity interests in the Borrower in exchange for ownership interests in any Person operating a Cellular System; provided however to the extent that the 52 -------------------------------------------------------------------------------- Borrower has acquired less than or equal to fifty percent (50%) of the total ownership interests in such Person, no such acquired ownership interest subjects the Borrower to any obligation to fund additional capital or otherwise make any Investment (in cash or otherwise) in such Person; and     (f)  During such time as any Cooperative Lender shall be a Lender, the Borrower may purchase such non-voting equity interests in such Cooperative Lender represented by participation certificates of such Cooperative Lender as such Cooperative Lender may from time to time require in accordance with such Cooperative Lender's bylaws and "Loan-Based Capital Plan." Each Cooperative Lender shall have a statutory first Lien on the equity in such Cooperative Lender to secure all obligations of the Borrower to such Cooperative Lender, and such Lien shall be deemed to constitute a Permitted Lien hereunder. No Cooperative Lender shall be obligated to set off or otherwise apply such equities to the Borrower's obligations to the Cooperative Lender.     Section 7.7  Restricted Payments and Purchases.  The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare or make any Restricted Payment or Restricted Purchase; provided, however, that so long as no Default hereunder then exists or would be caused thereby, (a) and so long as a Subsidiary of the Borrower is not obligated on any Indebtedness to the Borrower or any of its Subsidiaries, such Subsidiary may make distributions to (i) any partner or shareholder of such Subsidiary holding a minority position with respect to such Subsidiary, so long as such Subsidiary makes a contemporaneous pro rata distribution to the Borrower or any of its Subsidiaries, and such partner or shareholder is not an Affiliate of the Borrower, (ii) the Borrower or any of its Subsidiaries, (b) the Borrower may make scheduled interest payments, when such payments are due and payable, on any Subordinated Indebtedness to the extent such Subordinated Indebtedness has scheduled payments permitted hereunder in accordance with any subordination provisions thereunder, (c) the Borrower may make scheduled dividend payments, when such payments are due and payable on any Preferred Stock to the extent such Preferred Stock has scheduled dividend payments permitted hereunder in accordance with any subordination provisions thereunder and (d) the Borrower may repay in whole or in part the Junior Preferred Stock pursuant to Section 2.7(b)(vi) hereunder.     Section 7.8  Total Leverage Ratio.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit its Total Leverage Ratio to exceed the ratios set forth below during the periods indicated: Period --------------------------------------------------------------------------------   Total Leverage Ratio -------------------------------------------------------------------------------- Agreement Date through June 30, 2000   8.50:1.00   July 1, 2000 through December 31, 2000       7.50:1.00   January 1, 2001 through June 30, 2001       7.25:1.00   July 1, 2001 through December 31, 2001       6.50:1.00   January 1, 2002 through December 31, 2002       6.00:1.00   January 1, 2003 and thereafter       5.00:1.00     Notwithstanding anything herein to the contrary, the Total Leverage Ratio on the Agreement Date shall (after giving effect to the initial Advances hereunder) be less than or equal to 8.00 to 1.00. 53 --------------------------------------------------------------------------------     Section 7.9  Senior Leverage Ratio.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) the principal amount of the Loans outstanding on such date to (ii) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be) to exceed the ratios set forth below during the periods indicated: Period --------------------------------------------------------------------------------   Senior Leverage Ratio -------------------------------------------------------------------------------- Agreement Date through June 30, 2000   7.50:1.00   July 1, 2000 through December 31, 2000       7.00:1.00   January 1, 2001 through June 30, 2001       6.25:1.00   July 1, 2001 through December 31, 2001       5.50:1.00   January 1, 2002 through December 31, 2002       5.00:1.00   January 1, 2003 and thereafter       4.50:1.00     Section 7.10  Annualized Operating Cash Flow to Pro Forma Debt Service.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be) to (ii) the sum of (A) its Pro Forma Debt Service for the four (4) calendar quarters immediately following the calculation date and (B) Interest Expense for the four (4) calendars quarters immediately preceding the calculation date, to be less than 1.20 to 1.00.     Section 7.11  Annualized Operating Cash Flow to Interest Expense.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be) to (ii) its Interest Expense for the twelve (12) calendar months immediately preceding the calculation date to be less than the ratios set forth below for the periods indicated: Period --------------------------------------------------------------------------------   Annualized Operating Cash Flow to Interest Expense -------------------------------------------------------------------------------- Agreement Date through June 30, 2000   1.25:1.00   July 1, 2000 through June 30, 2001       1.50:1.00   July 1, 2001 and thereafter       2.00:1.00                 Section 7.12  Fixed Charge Coverage Ratio  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as 54 -------------------------------------------------------------------------------- of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case maybe) to (ii) the sum of, without duplication, for the twelve (12) calendar months preceding the calculation date (A) Capital Expenditures made during such period plus (B) Debt Service for such period plus (C) Restricted Payments made during such period to be less than 1.00:1.00.     Section 7.13  Affiliate Transactions.  Except as specifically provided herein and as may be described on Schedule 6 attached hereto, the Borrower shall not, and shall not permit any of its Subsidiaries to, at any time engage in any transaction with an Affiliate, or make an assignment or other transfer of any of its properties or assets to any Affiliate, on terms less advantageous to the Borrower or such Subsidiary than would be the case if such transaction had been effected with a non-Affiliate.     Section 7.14  Real Estate.  The Borrower shall not, and shall cause each of its Subsidiaries not to, purchase real estate; provided, however, that subject to Section 5.11 hereof, the Borrower and each of its Subsidiaries may purchase real estate solely for use in the business of the Borrower and its Subsidiaries.     Section 7.15  ERISA Liabilities.  The Borrower shall not, and shall cause each of its ERISA Affiliates not to, (i) permit the assets of any of their respective Employee Pension Plans to be less than the amount necessary to provide all accrued benefits under such Plans, or (ii) enter into any Multiemployer Plan. ARTICLE 8 Default     Section 8.1  Events of Default.  Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or non-governmental body:     (a) Any representation or warranty made under this Agreement or any other Loan Document shall prove incorrect or misleading in any material respect when made or deemed to be made pursuant to Section 4.2 hereof;     (b) The Borrower shall default in the payment of: (i) any interest under any of the Notes (or Incremental Facility Notes) or fees or other amounts payable to the Lenders, the Swing Line Lender and the Administrative Agent under any of the Loan Documents, or any of them, when due, and such Default shall not be cured by payment in full within five (5) Business Days from the due date; or (ii) any principal under any of the Notes (or Incremental Facility Notes) when due;     (c) The Borrower shall default (i) in the performance or observance of any agreement or covenant contained in Sections 5.2(a), 5.10, 6.5, 7.1, 7.2 (if the event causing such default is consensual in nature), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, and 7.12 hereof; or (ii) in providing any financial statement or report under Article 6 hereof, and, with respect to this clause (ii) only, such Default shall not be cured by delivery thereof within a period of fifteen (15) days from the later of (x) occurrence of such Default and (y) the date on which such Default became known to the Borrower;     (d) The Borrower shall default in the performance or observance of any other agreement or covenant contained in this Agreement not specifically referred to elsewhere in this Section 8.1, and such default shall not be cured within a period of thirty (30) days from the later of (i) occurrence of such default and (ii) the date on which such default became known to the Borrower;     (e) There shall occur any default in the performance or observance of any agreement or covenant or breach of any representation or warranty contained in any of the Loan Documents (other than this Agreement or as otherwise provided in this Section 8.1) by the Borrower, any of its Subsidiaries, or any 55 -------------------------------------------------------------------------------- other obligor thereunder, which shall not be cured within a period of thirty (30) days from the later of (i) occurrence of such default and (ii) the date on which such default became known to the Borrower;     (f)  There shall be entered and remain unstayed a decree or order for relief in respect of the Borrower or any of its Subsidiaries under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Borrower or any of its Subsidiaries, or of any substantial part of their respective properties, or ordering the winding-up or liquidation of the affairs of the Borrower or any of its Subsidiaries; or an involuntary petition shall be filed against the Borrower or any of its Subsidiaries and a temporary stay entered, and (i) such petition and stay shall not be diligently contested, or (ii) any such petition and stay shall continue undismissed for a period of sixty (60) consecutive days;     (g) The Borrower or any of its Subsidiaries shall file a petition, answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or the Borrower or any of its Subsidiaries shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Borrower or any of its Subsidiaries or of any substantial part of their respective properties, or the Borrower or any of its Subsidiaries shall fail generally to pay their respective debts as they become due or shall be adjudicated insolvent; the Borrower shall suspend or discontinue its business; the Borrower or any of its Subsidiaries shall have concealed, removed any of its property with the intent to hinder or defraud its creditors or shall have made a fraudulent or preferential transfer under any applicable fraudulent conveyance or bankruptcy law, or the Borrower or any of its Subsidiaries shall take any action in furtherance of any such action;     (h) A judgment not covered by insurance or indemnification, where the indemnifying party has agreed to indemnify and is financially able to do so, shall be entered by any court against the Borrower or any of its Subsidiaries for the payment of money which exceeds singly or in the aggregate with other such judgments, $5,000,000, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or any of its Subsidiaries which, together with all other such property of the Borrower or any of its Subsidiaries subject to other such process, exceeds in value $5,000,000 in the aggregate, and if, within thirty (30) days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or discharged or stayed pending appeal or removed to bond, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged or removed to bond;     (i)  (i) There shall be at any time any "accumulated funding deficiency," as defined in ERISA or in Section 412 of the Code, with respect to any Plan maintained by the Borrower or any of its Subsidiaries or any ERISA Affiliate, or to which the Borrower or any of its Subsidiaries or any ERISA Affiliate has any liabilities, or any trust created thereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan; or (ii) PBGC shall institute proceedings to terminate any such Plan; or (iii) the Borrower or any of its Subsidiaries or any ERISA Affiliate shall incur any liability to PBGC in connection with the termination of any such Plan; or (iv) any Plan or trust created under any Plan of the Borrower or any of its Subsidiaries or any ERISA Affiliate shall engage in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject any such Plan, any trust created thereunder, any trustee or administrator thereof, or any party dealing with any such Plan or trust to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code which has or could be reasonably likely to have a Materially Adverse Effect and which is not cured to the reasonable satisfaction of the Required Lenders within thirty (30) days from the later of (A) the occurrence of such event or (B) the date on which such event became known to the Borrower; or (v) the Borrower or 56 -------------------------------------------------------------------------------- any of its Subsidiaries or any ERISA Affiliate shall adopt or otherwise contribute to a Multiemployer Plan.     (j)  Any event not referred to elsewhere in this Section 8.1 shall occur which has a Materially Adverse Effect and such event shall not be cured within a period of thirty (30) days from the later of (i) occurrence of such event and (ii) the date on which such event became known to the Borrower or any of its Subsidiaries;     (k) There shall occur (i) any acceleration of the maturity of any Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $5,000,000, or, as a result of a failure to comply with the terms thereof, such Indebtedness shall otherwise become due and payable; (ii) any event or condition the occurrence of which would permit such acceleration of such Indebtedness, or which, as a result of a failure to comply with the terms thereof, would make such Indebtedness otherwise due and payable, and which event or condition has not been cured within any applicable cure period or waived in writing prior to any declaration of an Event of Default or acceleration of the Loans hereunder; or (iii) any material default under any Interest Hedge Agreement which would permit the obligation of the Borrower to make payments to the counterparty thereunder to be then due and payable;     (l)  The FCC shall deliver to the Borrower or any of its Subsidiaries an order to show cause why an order of revocation should not be issued based upon any alleged attribution of alien ownership (within the meaning of 47 U.S.C. § 310(b) and any interpretation of the FCC thereunder) to the Borrower or any of its Subsidiaries and (i) such order shall not have been rescinded within thirty (30) days after such delivery or (ii) in the reasonable judgment of the Required Lenders, proceedings by or before the FCC related to such order are reasonably likely to result in one or more orders of revocation and would constitute an Event of Default under Section 8.1(m) hereof;     (m) One or more Licenses shall be terminated or revoked or substantially adversely modified such that the Borrower and its Subsidiaries are no longer able to operate the related Cellular System or Systems or portions thereof and retain the revenue received therefrom or any such License shall fail to be renewed at the stated expiration thereof such that the Borrower and its Subsidiaries are no longer able to operate the related Cellular System or Systems or portions thereof and retain the revenue received therefrom, and the overall effect of such termination, revocation or failure to renew would be to reduce Operating Cash Flow (determined as at the last day of the most recently ended fiscal year of the Borrower) by ten percent (10%) or more;     (n) Any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the voting or economic Capital Stock of the Borrower;     (o) Any Loan Document or any material provision thereof, shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by the Borrower or any of its Subsidiaries or by any governmental authority having jurisdiction over the Borrower or any of its Subsidiaries seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or the Borrower or any of its Subsidiaries shall deny that it has any liability or obligation for the payment of principal or interest purported to be created under any Loan Document; or     (p) Any Security Document shall for any reason, fail or cease (except by reason of lapse of time) to create a valid and perfected and first-priority Lien on or Security Interest in any portion of the Collateral purported to be covered thereby. 57 --------------------------------------------------------------------------------     Section 8.2  Remedies.       (a) If an Event of Default specified in Section 8.1 (other than an Event of Default under Section 8.1(f) or (g) hereof) shall have occurred and shall be continuing, the Administrative Agent, at the request of the Required Lenders subject to Section 9.8(a) hereof, shall (i) terminate the Commitments, the Swing Line Commitment and the Incremental Facility Commitment, and/or (ii) declare the principal of and interest on the Loans and the Notes and the Incremental Facility Notes, and all other amounts owed to the Lenders, the Swing Line Lender and the Administrative Agent under this Agreement, the Notes and the Incremental Facility Notes, and any other Loan Documents to be forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Agreement, the Notes and the Incremental Facility Notes, or any other Loan Document to the contrary notwithstanding, and the Commitment, the Swing Line Commitment and the Incremental Facility Commitment shall thereupon forthwith terminate.     (b) Upon the occurrence and continuance of an Event of Default specified in Section 8.1(f) or (g) hereof, all principal, interest and other amounts due hereunder and under the Notes and the Incremental Facility Notes, and all other Obligations, shall thereupon and concurrently therewith become due and payable and the Commitment and the Incremental Facility Commitment shall forthwith terminate and the principal amount of the Loans outstanding hereunder shall bear interest at the Default Rate, all without any action by the Administrative Agent, the Swing Line Lender, the Lenders, or the Required Lenders, or any of them and without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or in the other Loan Documents to the contrary notwithstanding.     (c) Upon acceleration of the Notes and, if applicable, the Incremental Facility Notes as provided in subsection (a) or (b) of this Section 8.2, above, the Administrative Agent and the Lenders shall have all of the post-default rights granted to them, or any of them, as applicable under the Loan Documents and under Applicable Law.     (d) Upon acceleration of the Notes and the Incremental Facility Notes, as provided in subsection (a) or (b) of this Section 8.2, the Administrative Agent, upon request of the Required Lenders, shall have the right to the appointment of a receiver for the properties and assets of the Borrower and its Subsidiaries, and the Borrower, for itself and on behalf of its Subsidiaries, hereby consents to such rights and such appointment and hereby waives any objection the Borrower or any of its Subsidiaries may have thereto or the right to have a bond or other security posted by the Administrative Agent on behalf of the Lenders, in connection therewith. The rights of the Administrative Agent under this Section 8.2(d) shall be subject to its prior compliance with the Communications Act and the FCC rules and policies promulgated thereunder to the extent applicable to the exercise of such rights.     (e) The rights and remedies of the Administrative Agent and the Lenders hereunder shall be cumulative, and not exclusive.     Section 8.3  Payments Subsequent to Declaration of Event of Default.  After the occurrence of and during the continuation of any Default or Event of Default, payments and prepayments under this Agreement made to any of the Administrative Agent and the Lenders or otherwise received by any of such Persons (from realization on Collateral for the Obligations or otherwise) shall be paid over to the Administrative Agent (if necessary) and distributed by the Administrative Agent as follows: first, to the reasonable costs and expenses, if any, incurred by the Lenders or the Administrative Agent in connection with the collection of such payment or prepayment, including, without limitation, any reasonable costs incurred by any of them in connection with the sale or disposition of any Collateral for the Obligations and all amounts under Section 11.2(b) and (c) hereof; second, to the Lenders and the Administrative Agent for any fees hereunder or under any of the other Loan Documents then due and payable; third, to the Lenders and the Swing Line Lender pro rata on the basis of their respective 58 -------------------------------------------------------------------------------- unpaid principal amounts (except as provided in Section 2.2(e) hereof), to the payment of any unpaid interest which may have accrued on the Obligations; fourth, to the Lenders and the Swing Line Lender pro rata until all Loans (amounts applied to the Revolving Loans hereunder shall permanently reduce the Revolving Loan Commitments in such amounts) and, if applicable, the Incremental Facility Loans, have been paid in full (and, for purposes of this clause, obligations under Interest Hedge Agreements with the Lenders or any of them shall be paid on a pro rata basis with the Loans to the extent such payments are proceeds of Collateral and, if applicable, the Incremental Facility Loans); fifth, to the Lenders and the Swing Line Lender pro rata on the basis of their respective unpaid amounts, to the payment of any other unpaid Obligations; and sixth, to the Borrower or as otherwise required by law. ARTICLE 9 The Agents     Section 9.1  Appointment and Authorization.  Each Lender hereby irrevocably appoints and authorizes, and hereby agrees that it will require any transferee of any of its interest in its portion of the Loans and in its Note irrevocably to appoint and authorize the Administrative Agent to take such actions as its agents on its behalf and to exercise such powers hereunder and under the other Loan Documents as are delegated by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Neither the Administrative Agent nor any of its directors, officers, employees or agents, shall be liable for any action taken or omitted to be taken by it hereunder or in connection herewith, except for its own gross negligence or willful misconduct as determined by a final, non-appealable judicial order of a court of competent jurisdiction.     Section 9.2  Interest Holders.  The Administrative Agent may treat each Lender, or the Person designated in the last notice filed with the Administrative Agent, as the holder of all of the interests of such Lender in its portion of the Loans and in its Note until written notice of transfer, signed by such Lender (or the Person designated in the last notice filed with the Administrative Agent) and by the Person designated in such written notice of transfer, in form and substance satisfactory to the Administrative Agent, shall have been filed with the Administrative Agent.     Section 9.3  Consultation with Counsel.  The Administrative Agent may consult with Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia, special counsel to the Administrative Agent, or with other legal counsel selected by them and shall not be liable for any action taken or suffered by them in good faith in consultation with the Required Lenders and in reasonable reliance on such consultations.     Section 9.4  Documents.  The Administrative Agent shall be under no duty to examine, inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any Note, any other Loan Document, or any instrument, document or communication furnished pursuant hereto or in connection herewith, and the Administrative Agent shall be entitled to assume that they are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be.     Section 9.5  Administrative Agent and Affiliates.  With respect to the Commitments, the Incremental Facility Commitment and the Loans, the Administrative Agent shall have the same rights and powers hereunder as any other Lender, and the Administrative Agent and Affiliates of the Administrative Agent may accept deposits from, lend money to and generally engage in any kind of business with the Borrower, any of its Subsidiaries or any Affiliates of, or Persons doing business with, the Borrower, as if they were not affiliated with the Administrative Agent and without any obligation to account therefor. The foregoing sentence shall apply with equal force to the Administrative Agent. 59 --------------------------------------------------------------------------------     Section 9.6  Responsibility of the Administrative Agent.  The duties and obligations of the Administrative Agent under this Agreement are only those expressly set forth in this Agreement. The Administrative Agent shall be entitled to assume that no Default or Event of Default has occurred and is continuing unless it has actual knowledge, or has been notified in writing by the Borrower, of such fact, or has been notified by a Lender in writing that such Lender considers that a Default or an Event of Default has occurred and is continuing, and such Lender shall specify in detail the nature thereof in writing. The Administrative Agent shall not be liable hereunder for any action taken or omitted to be taken except for its own gross negligence or willful misconduct as determined by a final, non-appealable judicial order of a court of competent jurisdiction. The Administrative Agent shall provide each Lender with copies of such documents received from the Borrower as such Lender may reasonably request.     Section 9.7  Collateral.  The Administrative Agent is hereby authorized to act on behalf of the Lenders, in its own capacity and through other agents and sub-agents appointed by it, under the Security Documents; provided, however, that the Administrative Agent shall not agree to the release of any Collateral, or any property encumbered by any mortgage, pledge or security interest, except in compliance with Section 11.12 hereof.     Section 9.8  Action by Administrative Agent.       (a) The Administrative Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, this Agreement, unless the Administrative Agent shall have been instructed by the Required Lenders to exercise or refrain from exercising such rights or to take or refrain from taking such action; provided, however, that the Administrative Agent shall not exercise any rights under Section 8.2(a) hereof without the request of the Required Lenders (or, where expressly required, all the Lenders) unless time is of the essence, in which case, such action can be taken at the request of the Administrative Agent. The Administrative Agent shall incur no liability under or in respect of this Agreement with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment or which may seem to it to be necessary or desirable in the circumstances, except for its gross negligence or willful misconduct as determined by a final, non-appealable judicial order of a court having jurisdiction over the subject matter.     (b) The Administrative Agent shall not be liable to the Lenders or to any Lender or the Borrower or any of the Borrower's Subsidiaries in acting or refraining from acting under this Agreement or any other Loan Document in accordance with the instructions of the Required Lenders (or, where expressly required, all the Lenders), and any action taken or failure to act pursuant to such instructions shall be binding on all Lenders. The Administrative Agent shall not be obligated to take any action which is contrary to law or which would in such Person's reasonable opinion subject such Person to liability.     Section 9.9  Notice of Default or Event of Default.  In the event that the Administrative Agent or any Lender shall acquire actual knowledge, or shall have been notified, of any Default or Event of Default, the Administrative Agent or such Lender shall promptly notify the Lenders and the Administrative Agent, as applicable (provided, however, that failure to give such notice shall not result in any liability on the part of such Lender or Administrative Agent), and the Administrative Agent shall take such action and assert such rights under this Agreement and the other Loan Documents as the Required Lenders shall request in writing, and the Administrative Agent shall not be subject to any liability by reason of its acting pursuant to any such request. If the Required Lenders shall fail to request the Administrative Agent to take action or to assert rights under this Agreement or any other Loan Documents in respect of any Default or Event of Default within ten (10) days after their receipt of the notice of any Default or Event of Default from the Administrative Agent or any Lender, or shall request inconsistent action with respect to such Default or Event of Default, the Administrative Agent may, but shall not be required to, take such action and assert such rights (other than rights under 60 -------------------------------------------------------------------------------- Article 8 hereof) as it deems in its discretion to be advisable for the protection of the Lenders, except that, if the Required Lenders have instructed the Administrative Agent not to take such action or assert such right, in no event shall the Administrative Agent act contrary to such instructions unless time is of the essence.     Section 9.10  Responsibility Disclaimed.  The Administrative Agent shall not be under any liability or responsibility whatsoever as Administrative Agent:     (a) To the Borrower or any other Person as a consequence of any failure or delay in performance by or any breach by, any Lender or Lenders of any of its or their obligations under this Agreement;     (b) To any Lender or Lenders, as a consequence of any failure or delay in performance by, or any breach by, (i) the Borrower of any of its obligations under this Agreement or the Notes or any other Loan Document, or (ii) any Subsidiary of the Borrower or any other obligor under any other Loan Document;     (c) To any Lender or Lenders, for any statements, representations or warranties in this Agreement, or any other document contemplated by this Agreement or any information provided pursuant to this Agreement, any other Loan Document, or any other document contemplated by this Agreement, or for the validity, effectiveness, enforceability or sufficiency of this Agreement, the Notes, any other Loan Document, or any other document contemplated by this Agreement; or     (d) To any Person for any act or omission other than that arising from gross negligence or willful misconduct of the Administrative Agent as determined by a final, non-appealable judicial order of a court of competent jurisdiction.     Section 9.11  Indemnification.  The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower) pro rata according to their respective Commitment Ratios and Incremental Facility Commitment Ratios, from and against any and all liabilities, obligations, losses (other than the loss of principal and interest hereunder in the event of a bankruptcy or out-of-court "work-out" of the Loans), damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, reasonable fees and expenses of experts, agents, consultants and counsel), or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any other Loan Document, or any other document contemplated by this Agreement or any other Loan Document or any action taken or omitted by the Administrative Agent under this Agreement, any other Loan Document, or any other document contemplated by this Agreement, except that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent as determined by a final, non-appealable judicial order of a court having jurisdiction over the subject matter.     Section 9.12  Credit Decision.  Each Lender represents and warrants to each other and to the Administrative Agent that:     (a) In making its decision to enter into this Agreement and to make its portion of the Loans it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower and that it has made an independent credit judgment, and that it has not relied upon the Administrative Agent or information provided by the Administrative Agent (other than information provided to the Administrative Agent by the Borrower and forwarded by the Administrative Agent to the Lenders); and     (b) So long as any portion of the Loans remains outstanding or such Lender has an obligation to make its portion of Advances hereunder, it will continue to make its own independent evaluation of the financial condition and affairs of the Borrower. 61 --------------------------------------------------------------------------------     Section 9.13  Successor Administrative Agent.  Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time for cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent which appointment shall, prior to an Event of Default, be subject to the consent of the Borrower, acting reasonably. If (a) no successor Administrative Agent shall have been so appointed by the Required Lenders or (b) if appointed, no successor Administrative Agent shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gave notice of resignation or the Required Lenders removed the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be any Lender or a commercial bank organized under the laws of the United States of America or any political subdivision thereof which has combined capital and reserves in excess of $250,000,000, which appointment shall, prior to an Event of Default, be subject to the consent of the Borrower, acting reasonably. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent the provisions of this Article shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent.     Section 9.14  Delegation of Duties.  The Administrative Agent may execute any of its duties under the Loan Documents by or through agents or attorneys selected by it using reasonable care, and shall be entitled to advice of counsel concerning all matters pertaining to such duties.     Section 9.15  No Responsibilities of the Agents.  The Agents (except for the Administrative Agent) shall have no responsibilities hereunder or under any of the other Loan Documents in their respective capacities. ARTICLE 10 Change in Circumstances Affecting LIBOR Advances     Section 10.1  LIBOR Basis Determination Inadequate or Unfair.  If with respect to any proposed LIBOR Advance for any Interest Period, the Administrative Agent determines after consultation with the Lenders that deposits in dollars (in the applicable amount) are not being offered to each of the Lenders in the relevant market for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such situation no longer exist, the obligations of any affected Lender to make its portion of such type of LIBOR Advances shall be suspended.     Section 10.2  Illegality.  If after the date hereof, the adoption of any Applicable Law, or any change in any Applicable Law (whether adopted before or after the Agreement Date), or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender to make, maintain or fund its portion of LIBOR Advances, such Lender shall so notify the Administrative Agent, and the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower. Before giving any notice to the Administrative Agent pursuant to this Section 10.2, such Lender shall designate a different lending office if such designation will avoid the need for giving such notice and will not, in the sole judgment 62 -------------------------------------------------------------------------------- of such Lender, be otherwise materially disadvantageous to such Lender. Upon receipt of such notice, notwithstanding anything contained in Article 2 hereof, the Borrower shall repay in full the then outstanding principal amount of such Lender's portion of each affected LIBOR Advance, together with accrued interest thereon, on either (a) the last day of the then current Interest Period applicable to such affected LIBOR Advances if such Lender may lawfully continue to maintain and fund its portion of such LIBOR Advance to such day or (b) immediately if such Lender may not lawfully continue to fund and maintain its portion of such affected LIBOR Advances to such day. Concurrently with repaying such portion of each affected LIBOR Advance, the Borrower may borrow a Base Rate Advance from such Lender, and such Lender shall make such Advance, if so requested, in an amount such that the outstanding principal amount of the affected Note held by such Lender shall equal the outstanding principal amount of such Note or Notes immediately prior to such repayment.     Section 10.3  Increased Costs.       (a) If after the date hereof, the adoption of any Applicable Law, or any change in any Applicable Law (whether adopted before or after the Agreement Date), or any interpretation or change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Lender with any directive (whether or not having the force of law) of any such authority, central bank or comparable agency:     (1) shall subject any Lender to any tax, duty or other charge with respect to its obligation to make its portion of LIBOR Advances, or its portion of existing Advances, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its portion of LIBOR Advances or in respect of any other amounts due under this Agreement, in respect of its portion of LIBOR Advances or its obligation to make its portion of LIBOR Advances (except for changes in the rate or method of calculation of tax on the overall net income of such Lender); or     (2) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System, but excluding any included in an applicable Eurodollar Reserve Percentage), special deposit, capital adequacy, assessment or other requirement or condition against assets of, deposits with or for the account of, or commitments or credit extended by, any Lender or shall impose on any Lender or the London interbank borrowing market any other condition affecting its obligation to make its portion of such LIBOR Advances or its portion of existing Advances; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining any of its portion of LIBOR Advances, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under its Note with respect thereto, then, if such Lender exercises comparable rights (if any) for borrowers situated similarly to the Borrower, within ten (10) days after demand by such Lender, the Borrower agrees to pay to such Lender such additional amount or amounts as will compensate such Lender for such increased costs. Each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 10.3 and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Lender made in good faith, be otherwise disadvantageous to such Lender.     (b) Any Lender claiming compensation under this Section 10.3 shall provide the Borrower with a written certificate setting forth the additional amount or amounts to be paid to it hereunder and calculations therefor in reasonable detail. Such certificate shall be presumptively correct absent manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. If any Lender demands compensation under this Section 10.3, the Borrower may at any time, upon at least five (5) Business Days' prior notice to such Lender, prepay in full such 63 -------------------------------------------------------------------------------- Lender's portion of the then outstanding LIBOR Advances, together with accrued interest thereon to the date of prepayment, along with any reimbursement required under Section 2.10 hereof. Concurrently with prepaying such portion of LIBOR Advances the Borrower may borrow a Base Rate Advance, or a LIBOR Advance not so affected, from such Lender, and such Lender shall, if so requested, make such Advance in an amount such that the outstanding principal amount of the affected Note or Notes held by such Lender shall equal the outstanding principal amount of such Note or Notes immediately prior to such prepayment.     Section 10.4  Effect On Other Advances.  If notice has been given pursuant to Section 10.1, 10.2 or 10.3 hereof suspending the obligation of any Lender to make its portion of any type of LIBOR Advance, or requiring such Lender's portion of LIBOR Advances to be repaid or prepaid, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such repayment no longer apply, all amounts which would otherwise be made by such Lender as its portion of LIBOR Advances shall, unless otherwise notified by the Borrower, be made instead as Base Rate Advances. Any Base Rate Advance for this purpose shall not be counted in the number of Advances permitted under Section 2.3(e) hereof. ARTICLE 11 Miscellaneous     Section 11.1  Notices.       (a) Except as otherwise expressly provided herein, all notices and other communications under this Agreement and the other Loan Documents (unless otherwise specifically stated therein) shall be in writing and shall be deemed to have been given three (3) Business Days after deposit in the mail, designated as certified mail, return receipt requested, postage-prepaid, or one (1) Business Day after being entrusted to a reputable commercial overnight delivery service for next day delivery, or when sent on a Business Day prior to 5:00 p.m. (New York, New York time) by telecopy addressed to the party to which such notice is directed at its address determined as provided in this Section 11.1. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: (1)If to the Borrower, to it at: Rural Cellular Corporation 3905 Dakota Street, S.W. Alexandria, Minnesota 56308 Attn: Wesley Schultz,      Vice President      Finance and CFO Telecopy No.: (320) 808-2102 with a copy to: Moss & Barnett 4800 Norwest Center 90 South Seventh Street Minneapolis, Minnesota 55402-4129 Attn: James A. Rubenstein, Esq. Telecopy No.: (612) 339-6686 64 -------------------------------------------------------------------------------- (2)If to the Administrative Agent, to it at: Toronto Dominion (Texas), Inc. c/o The Toronto-Dominion Bank 909 Fannin Street, Suite 900 Houston, Texas 77010 Attn: Manager, Agency Telecopy No.: (713) 951-9921 with a copy to: Powell, Goldstein, Frazer & Murphy LLP Sixteenth Floor 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Douglas S. Gosden, Esq. Telecopy No.: (404) 572-6999 (3)If to the Lenders, to them at the addresses set forth on Schedule 7 attached hereto. Copies shall be provided to Persons other than parties hereto only in the case of notices under Article 8 hereof and the failure to provide such copies shall not affect the validity of the notice given to the primary recipient.     (b) Any party hereto may change the address to which notices shall be directed under this Section 11.1 by giving ten (10) days' written notice of such change to the other parties.     Section 11.2  Expenses.  The Borrower will promptly pay, or reimburse:     (a) all reasonable out-of-pocket expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and the transactions contemplated hereunder and thereunder and the making of the initial Advance hereunder (whether or not such Advance is made), including, without limitation, the reasonable fees and disbursements of Powell, Goldstein, Frazer & Murphy LLP, special counsel for the Administrative Agent;     (b) all reasonable out-of-pocket expenses of the Administrative Agent in connection with the restructuring and "work out" of the transactions contemplated in this Agreement or the other Loan Documents, and the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Administrative Agent and the Lenders, or any of them, relating to this Agreement or the other Loan Documents, including, but not limited to, the reasonable fees and disbursements of any experts, agents or consultants and, prior to the occurrence and continuance of an Event of Default, of a single law firm acting as special counsel for the Administrative Agent and the Lenders, and during the occurrence and continuance of an Event of Default a law firm for Administrative Agent and a single law firm for the Lenders; and     (c) all out-of-pocket costs and expenses of the Administrative Agent and the Lenders in connection with the restructuring and "workout" of the transactions contemplated in this Agreement or other Loan Documents or of enforcement under this Agreement or the other Loan Documents and all out-of-pocket costs and expenses of collection if an Event of Default occurs in the payment of the Notes, which in each case shall include reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and the Lenders.     Section 11.3  Waivers.  The rights and remedies of the Administrative Agent, the Swing Line Lender and the Lenders under this Agreement and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which they would otherwise have. No failure or delay by the 65 -------------------------------------------------------------------------------- Administrative Agent, the Required Lenders, the Swing Line Lender or the Lenders, or any of them, in exercising any right, shall operate as a waiver of such right. The Administrative Agent, the Swing Line Lender and the Lenders expressly reserve the right to require strict compliance with the terms of this Agreement in connection with any future funding of a Request for Advance or Request for Swing Line Advance, as applicable. In the event the Lenders decide to fund a Request for Advance or the Swing Line Lender decides to fund a Request for Swing Line Advance at a time when the Borrower is not in strict compliance with the terms of this Agreement, such decision by the Lenders or the Swing Line Lender shall not be deemed to constitute an undertaking by the Lenders or the Swing Line Lender to fund any further Request for Advance or Request for Swing Line Advance, as applicable, or preclude the Lenders, the Swing Line Lender or the Administrative Agent from exercising any rights available under the Loan Documents or at law or equity. Any waiver or indulgence granted by the Administrative Agent, the Swing Line Lender, the Lenders, or the Required Lenders, shall not constitute a modification of this Agreement or any other Loan Document, except to the extent expressly provided in such waiver or indulgence, or constitute a course of dealing at variance with the terms of this Agreement or any other Loan Document such as to require further notice of their intent to require strict adherence to the terms of this Agreement or any other Loan Document in the future.     Section 11.4  Set-Off.  In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default and during the continuation thereof, the Administrative Agent, the Swing Line Lender and each of the Lenders are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, without limitation, Indebtedness evidenced by certificates of deposit, in each case whether matured or unmatured) and any other Indebtedness at any time held or owing by the Swing Line Lender, any Lender or the Administrative Agent to or for the credit or the account of the Borrower or any of its Subsidiaries, against and on account of the obligations and liabilities of the Borrower to the Swing Line Lender, the Lenders and the Administrative Agent, including, but not limited to, all Obligations and any other claims of any nature or description arising out of or connected with this Agreement, the Notes or any other Loan Document, irrespective of whether (a) the Swing Line Lender, any Lender or the Administrative Agent shall have made any demand hereunder or (b) the Swing Line Lender, any Lender or the Administrative Agent shall have declared the principal of and interest on the Loans and other amounts due hereunder to be due and payable as permitted by Section 8.2 hereof and although such obligations and liabilities or any of them shall be contingent or unmatured. Upon direction by the Administrative Agent with the consent of the Lenders, the Swing Lender and each Lender holding deposits of the Borrower or any of its Subsidiaries shall exercise its set-off rights as so directed; and, within one (1) Business Day following any such setoff, the Administrative Agent shall give notice thereof to the Borrower.     Section 11.5  Assignment.       (a) The Borrower may not assign or transfer any of its rights or obligations hereunder, under the Notes, the Incremental Facility Notes or under any other Loan Document without the prior written consent of each Lender.     (b) Each Lender may at any time sell assignments or participations of up to one hundred percent (100%) of its interest hereunder to (A) one (1) or more wholly-owned Affiliates of such Lender or Approved Funds (provided, however, that if such Affiliate is not a financial institution, such Lender shall be obligated to repurchase such assignment if such Affiliate is unable to honor its obligations hereunder), (B) any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank (provided, however, that no such assignment shall relieve such Lender from its obligations hereunder) or (C) any Lender. 66 --------------------------------------------------------------------------------     (c) Each Lender may at any time enter into assignment agreements or participations with one or more other banks or other Persons pursuant to which each Lender may assign or participate its interest under this Agreement and the other Loan Documents, including, its interest in any particular Advance or portion thereof; provided, however, that (i) all assignments (other than assignments described in clause (b) hereof) shall be in minimum principal amounts of the lesser of (X) (1) $5,000,000 for the Revolving Loan Commitments, the Swing Line Commitment and Term Loan A Loans, and if applicable, the Incremental Facility Commitments (in a single assignment only) and (2) $1,000,000 for the Term Loan B Loans and Term Loan C Loans, and (Y) the amount of such Lender's Commitment or Incremental Facility Commitment (in a single assignment only), and (ii) all assignments (other than assignments described in clause (b) hereof) and participations hereunder shall be subject to the following additional terms and conditions:     (1) No assignment (except assignments permitted in Section 11.5(b) hereof) shall be sold without the prior consent of the Administrative Agent and prior to the occurrence and continuation of an Event of Default, the consent of the Borrower, which consents shall not be unreasonably withheld or delayed;     (2) Any Person purchasing a participation or an assignment of any portion of the Loans from any Lender shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 4.1(m) hereof);     (3) The Borrower, the Lenders, and the Administrative Agent agree that assignments permitted hereunder (including the assignment of any Advance or portion thereof) shall be made with all voting rights, and shall be made pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit S attached hereto. An administrative fee of $3,500 shall be payable to the Administrative Agent by the assigning Lender at the time of any assignment under Section 11.5(c) hereof;     (4) No participation agreement shall confer any rights under this Agreement or any other Loan Document to any purchaser thereof, or relieve any issuing Lender from any of its obligations under this Agreement, and all actions hereunder shall be conducted as if no such participation had been granted; provided, however, that any participation agreement may confer on the participant the right to approve or disapprove decreases in the interest rate, increases in the principal amount of the Loans participated in by such participant, decreases in fees, extensions of the Revolving Loan Maturity Date, Term Loan A Maturity Date, Term Loan B Maturity Date, Term Loan C Maturity Date and Incremental Facility Maturity Date, as applicable or other principal payment date for the Loans or of the scheduled reduction of the Commitments and releases of Collateral;     (5) Each Lender agrees to provide the Administrative Agent and the Borrower with prompt written notice of any issuance of participations in or assignments of its interests hereunder;     (6) No assignment, participation or other transfer of any rights hereunder or under the Notes shall be effected that would result in any interest requiring registration under the Securities Act of 1933, as amended, or qualification under any state securities law;     (7) No such assignment may be made to (A) any bank or other financial institution (x) with respect to which a receiver or conservator (including, without limitation, the Federal Deposit Insurance Corporation, the Resolution Trust Company or the Office of Thrift Supervision) has been appointed or (y) that is not "adequately capitalized" (as such term is defined in Section 131(b)(1)(B) of the Federal Deposit Insurance Corporation Improvement Act as in effect on the Agreement Date) or (B) any fund unless such fund invests in commercial loans; and     (8) If applicable, each Lender shall, and shall cause each of its assignees to, provide to the Administrative Agent on or prior to the effective date of any assignment an appropriate Internal Revenue Service form as required by Applicable Law supporting such Lender's or assignee's 67 -------------------------------------------------------------------------------- position that no withholding by the Borrower or the Administrative Agent for U.S. income tax payable by such Lender or assignee in respect of amounts received by it hereunder is required. For purposes of this Agreement, an appropriate Internal Revenue Service form shall mean Form 1001 (Ownership Exemption or Reduced Rate Certificate of the U.S. Department of Treasury), or Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States), and/or properly executed Internal Revenue Service Form W-8 or W-9, as applicable, or any successor or related forms adopted by the relevant U.S. taxing authorities.     (d) Except as specifically set forth in Section 11.5(b) and (c) hereof, nothing in this Agreement or the Notes, expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their successors and assignees permitted hereunder and thereunder any benefit or any legal or equitable right, remedy or other claim under this Agreement or the Notes.     (e) In the case of any participation, all amounts payable by the Borrower under the Loan Documents shall be calculated and made in the manner and to the parties hereto as if no such participation had been sold.     (f)  The provisions of this Section 11.5 shall not apply to any purchase of participations among the Lenders pursuant to Section 2.11 hereof.     (g) The Administrative Agent, acting, for this purpose only, as agent of the Borrower shall maintain, at no extra charge to the Borrower, a register (the "Register") at the address to which notices to the Administrative Agent are to be sent under Section 11.1 hereof on which Register the Administrative Agent shall enter the name, address and taxpayer identification number (if provided) of the registered owner of the Loans evidenced by a Registered Note or, upon the request of the registered owner, for which a Registered Note has been requested. A Registered Note and the Loans evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and the Loans evidenced thereby on the Register. Any assignment or transfer of all or part of such Loans and the Registered Note evidencing the same shall be registered on the Register only upon compliance with the other provisions of this Section 11.5 and surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the Registered Noteholder thereof, and thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) and, if less than the aggregate principal amount of such Registered Notes is thereby transferred, the assignor or transferor. Prior to the due presentment for registration of transfer of any Registered Note, the Borrower and the Administrative Agent shall treat the Person in whose name such Loans and the Registered Note evidencing the same is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary.     (h) The Register shall be available for inspection by the Borrower and any Lender at any reasonable time during the Administrative Agent's regular business hours upon reasonable prior notice.     (i)  Notwithstanding any other provision in this Agreement, any Lender that is a fund that invests in bank loans may, without the consent of the Administrative Agent or the Borrower, pledge all or any portion of its rights under, and interest in, this Agreement and the Notes to any trustee or to any other representative of holders of obligations owed or securities issued, by such fund as security for such obligations or securities; provided, however, that any transfer to any Person upon the enforcement of such pledge or security interest may only be made subject to the assignment provisions of this Section 11.5.     Section 11.6  Accounting Principles.  All references in this Agreement to GAAP shall be to such principles as in effect from time to time. All accounting terms used herein without definition shall be 68 -------------------------------------------------------------------------------- used as defined under GAAP. The Borrower shall deliver to the Lenders at the same time as the delivery of any quarterly or annual financial statements required pursuant to Section 6.1 or 6.2 hereof, as applicable, (a) a description in reasonable detail of any material variation between the application of GAAP employed in the preparation of such statements and the application of GAAP employed in the preparation of the next preceding quarterly or annual financial statements, as applicable, and (b) reasonable estimates of the differences between such statements arising as a consequence thereof. If, within thirty (30) days after the delivery of the quarterly or annual financial statements referred to in the immediately preceding sentence, the Required Lenders shall object in writing to the Borrower's determining compliance hereunder on such basis, (1) calculations for the purposes of determining compliance hereunder shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made, or (2) if requested by the Borrower, the Required Lenders will negotiate in good faith to amend the covenants herein to give effect to the changes in GAAP in a manner consistent with this Agreement.     Section 11.7  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.     Section 11.8  Governing Law.  This Agreement and the Notes shall be construed in accordance with and governed by the internal laws of the State of New York applicable to agreements made and to be performed in the State of New York. If any action or proceeding shall be brought by the Administrative Agent or any Lender hereunder or under any other Loan Document in order to enforce any right or remedy under this Agreement or under any Note or any other Loan Document, the Borrower hereby consents and will, and the Borrower will cause each Subsidiary to, submit to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. The Borrower, for itself and on behalf of its Subsidiaries, hereby agrees that service of the summons and complaint and all other process which may be served in any such suit, action or proceeding may be effected by mailing by registered mail a copy of such process to the offices of the Borrower at the address given in Section 11.1 hereof and that personal service of process shall not be required. Nothing herein shall be construed to prohibit service of process by any other method permitted by law, or the bringing of any suit, action or proceeding in any other jurisdiction. The Borrower agrees that final judgment in such suit, action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by Applicable Law.     Section 11.9  Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.     Section 11.10  Interest.       (a) In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Administrative Agent or any Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Administrative Agent or such Lender, in writing, that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Administrative Agent and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law.     (b) Notwithstanding the use by the Lenders of the Base Rate and LIBOR as reference rates for the determination of interest on the Loans, the Lenders shall be under no obligation to obtain funds 69 -------------------------------------------------------------------------------- from any particular source in order to charge interest to the Borrower at interest rates related to such reference rates.     Section 11.11  Table of Contents and Headings.  The Table of Contents and the headings of the various subdivisions used in this Agreement are for convenience only and shall not in any way modify or amend any of the terms or provisions hereof, nor be used in connection with the interpretation of any provision hereof.     Section 11.12  Amendment and Waiver.  Neither this Agreement nor any Loan Document nor any term hereof or thereof may be amended orally, nor may any provision hereof or thereof be waived orally but only by an instrument in writing signed by or at the written direction of the Required Lenders and, in the case of an amendment, by the Borrower, except that in the event of (a) any increase in the amount of any Lender's portion of the Commitments or Commitment Ratios or any reduction or postponement of the reductions to the Revolving Loan Commitments set forth in Section 2.5(a) hereof, (b) any reduction (without a corresponding payment) or postponement of the repayments of the principal amount of the Loans provided in Section 2.5 or 2.7 (b)(i), (ii) or (iii) hereof, and, during the continuance of an Event of Default, Section 2.7(b)(v) or (vi) hereof, (c) any reduction or postponement in interest or fees due hereunder without a corresponding payment of such interest or fee amount by the Borrower, (d) any release of any material portion of the Collateral for the Loans except as otherwise provided in Section 7.4 hereof, (e) any waiver of any Default due to the failure by the Borrower to pay any sum due to any of the Lenders hereunder, (f) any release of any material Guarantor to a Guaranty from its or any portion of the Obligations, except in connection with a merger, sale or other disposition otherwise permitted hereunder (in which case, such release shall require no further approval by the Lenders), (g) any amendment to the pro rata treatment of the Lenders set forth in Section 2.11 hereof, or (h) any amendment of this Section 11.12, of the definition of Required Lenders, or of any Section herein to the extent that such Section requires action by all Lenders or (i) subordinate the Loans in full or in part to any Indebtedness, any amendment or waiver or consent may be made only by an instrument in writing signed by each of the Lenders and, in the case of an amendment, by the Borrower. Any amendment to any provision hereunder governing the rights, obligations, or liabilities of the Administrative Agent, in its capacity as such, may be made only by an instrument in writing signed by such affected Person and by each of the Lenders. For purposes hereof, "material Guarantor" shall mean any Guarantor having assets in excess of $500,000.00     Section 11.13  Entire Agreement.  Except as otherwise expressly provided herein, this Agreement and the other documents described or contemplated herein will embody the entire agreement and understanding among the parties hereto and thereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof.     Section 11.14  Other Relationships.  No relationship created hereunder or under any other Loan Document shall in any way affect the ability of the Administrative Agent and each Lender to enter into or maintain business relationships with the Borrower or any of its Affiliates beyond the relationships specifically contemplated by this Agreement and the other Loan Documents.     Section 11.15  Directly or Indirectly.  If any provision in this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, whether or not expressly specified in such provision.     Section 11.16  Reliance on and Survival of Various Provisions.  All covenants, agreements, statements, representations and warranties made herein or in any certificate delivered pursuant hereto (i) shall be deemed to have been relied upon by the Administrative Agent and each of the Lenders notwithstanding any investigation heretofore or hereafter made by them, and (ii) shall survive the execution and delivery of the Notes and shall continue in full force and effect so long as any Note is 70 -------------------------------------------------------------------------------- outstanding and unpaid. Any right to indemnification hereunder, including, without limitation, rights pursuant to Sections 2.10, 2.12, 5.12, 10.3 and 11.2 hereof, shall survive the termination of this Agreement and the payment and performance of all Obligations.     Section 11.17  Senior Debt.  The Obligations are secured by the Security Documents and is intended by the parties hereto to be in parity with the Interest Hedge Agreements and senior in right of payment to all other Indebtedness of the Borrower.     Section 11.18  Obligations Several.  The obligations of the Administrative Agent and each of the Lenders hereunder are several, not joint.     Section 11.19  Confidentiality.  All information furnished to the Administrative Agent or the Lenders concerning the Borrower and its Subsidiaries is presumed to be non-public proprietary or confidential unless otherwise identified by the Person furnishing the information. The Lenders and the Administrative Agent shall hold all non-public, proprietary or confidential information obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound lending practices; however, the Lenders may make disclosure of any such information to their examiners, Affiliates, outside auditors, counsel, consultants, appraisers, other professional advisors and any direct or indirect contractual counterparty in swap agreements or such counterparty's professional advisor in connection with this Agreement or as reasonably required by any proposed syndicate member or any proposed transferee or participant in connection with the contemplated transfer of any Note or participation therein or as required or requested by any governmental authority (including, without limitation, the National Association of Insurance Commissioners or any similar organization or regulators or quasi-regulatory authority having jurisdiction over any Lender or representative thereof or in connection with the enforcement hereof or of any Loan Document or related document or pursuant to legal process or with respect to any litigation between or among the Borrower and any of the Lenders so long as any such recipient is advised of the non-public, proprietary or confidential nature of the information and of the Lender's obligations under this Section. Unless specifically requested by the Borrower, no Lender shall be obligated or required to return any materials furnished to it by the Borrower and no Lender may be obligated to return such materials (a) unless (i) such Lender ceases to be a Lender hereunder or (ii) such material was inadvertently provided to such Lender by the Borrower or (b) at any time when there exists a Default or Event of Default. The foregoing provisions shall not apply to a Lender with respect to information that (i) is or becomes generally available to the public (other than through such Lender), or (ii) is already in the possession of such Lender on a nonconfidential basis. ARTICLE 12 Waiver of Jury Trial     Section 12.1  Waiver of Jury Trial.  THE BORROWER, FOR ITSELF AND ON BEHALF OF EACH OF ITS SUBSIDIARIES, AND THE ADMINISTRATIVE AGENT AND EACH OF THE LENDERS, HEREBY AGREE TO WAIVE AND HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE BORROWER, ANY OF THE BORROWER'S SUBSIDIARIES, ANY OF THE LENDERS, THE ADMINISTRATIVE AGENT, OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY, AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE NOTES OR THE OTHER LOAN DOCUMENTS AND THE RELATIONS AMONG THE PARTIES LISTED IN THIS SECTION 12.1. EXCEPT AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES 71 -------------------------------------------------------------------------------- OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER ANY REPRESENTATIVE, AGENT NOR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCLOSED BY AND TO THE PARTIES AND THE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 72 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused it to be executed by their duly authorized officers, all as of the day and year first above written. BORROWER: RURAL CELLULAR CORPORATION, a Minnesota corporation       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------   ADMINISTRATIVE AGENT AND LENDERS:   TORONTO DOMINION (TEXAS), INC., as Administrative Agent and as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ARCHIMEDES FUNDING II, LTD., as a Lender   By:   ING Capital Advisors LLC, as Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ARCHIMEDES FUNDING III, LTD., as a Lender   By:   ING Capital Advisors LLC, as Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 73 --------------------------------------------------------------------------------       THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P., as a Lender   By:   ING Capital Advisors LLC, as Investment Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SEQUILS-ING I (HBDGM), LTD., as a Lender   By:   ING Capital Advisors LLC, as Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SWISS LIFE US RAINBOW LIMITED, as a Lender   By:   ING Capital Advisors LLC, as Investment Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ATHENA CDO, LIMITED, as a Lender   By:   Pacific Investment Management Company, as its Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 74 --------------------------------------------------------------------------------       CAPTIVA III FINANCE LTD., as Assignee as advised by Pacific Investment Management Company       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CAPTIVA IV FINANCE LTD., as a Lender as advised by Pacific Investment Management Company       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ROYALTON COMPANY, as a Lender   By:   Pacific Investment Management Company, as its Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ABN AMRO BANK N.V., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 75 --------------------------------------------------------------------------------       ALLFIRST BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       AMARA-I FINANCE, LTD., as a Lender   By:   INVESCO Senior Secured Management, Inc., as Subadvisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       AMARA 2 FINANCE, LTD., as a Lender   By:   INVESCO Senior Secured Management, Inc., as Subadvisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       AVALON CAPITAL LTD., as a Lender   By:   INVESCO Senior Secured Management, Inc., as Portfolio Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       BANK OF AMERICA, N.A., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 76 --------------------------------------------------------------------------------       BANK OF MONTRÉAL, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       THE BANK OF NOVA SCOTIA, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       BANKERS TRUST COMPANY, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       BANQUE NATIONALE DE PARIS, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 77 --------------------------------------------------------------------------------       CARLYLE HIGH YIELD PARTNERS II, LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       THE CIT GROUP/EQUIPMENT FINANCING, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CITIZENS BANK OF MASSACHUSETTS, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CITY NATIONAL BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       COBANK, ACB, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 78 --------------------------------------------------------------------------------       COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CREDIT AGRICOLE INDOSUEZ, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CYPRESSTREE INVESTMENT PARTNERS I, LTD., as a Lender   By:   CypressTree Investment Management Company, Inc. as Portfolio Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 79 --------------------------------------------------------------------------------       CYPRESSTREE INVESTMENT PARTNERS II, LTD., as a Lender   By:   CypressTree Investment Management Company, Inc. as Portfolio Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       CYPRESSTREE SENIOR FLOATING RATE FUND, as a Lender   By:   CypressTree Investment Management Company, Inc. as Portfolio Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       NORTH AMERICAN SENIOR FLOATING RATE FUND, as a Lender   By:   CypressTree Investment Management Company, Inc. as Portfolio Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       THE DAI-ICHI KANGYO BANK, LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 80 --------------------------------------------------------------------------------       DEXIA CREDIT LOCAL DE FRANCE— NEW YORK AGENCY, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       EATON VANCE CDO III, LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       EATON VANCE INSTITUTIONAL SENIOR LOAN FUND, as a Lender   By:   Eaton Vance Management, as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       EATON VANCE SENIOR INCOME TRUST, as a Lender   By:   Eaton Vance Management, as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 81 --------------------------------------------------------------------------------       OXFORD STRATEGIC INCOME FUND, as a Lender   By:   Eaton Vance Management, as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SENIOR DEBT PORTFOLIO, as a Lender   By:   Boston Management and Research, as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       FIRST UNION NATIONAL BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       FIRSTAR BANK, N.A. (formerly known as Mercantile Bank National Association), as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       FLEET NATIONAL BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 82 --------------------------------------------------------------------------------       FLEET NATIONAL BANK       As Trust Administrator for Long Lane Master Trust IV, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       FRANKLIN FLOATING RATE TRUST, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       GALAXY CLO 1999-1, LTD., as a Lender   By:   SAI Investment Adviser, Inc.       its Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       HARCH CLO I, LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 83 --------------------------------------------------------------------------------       HIGHLAND LEGACY LIMITED, as a Lender   By:   Highland Capital Management, L.P. as Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       HOWARD BANK, N.A., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       IBM CREDIT CORPORATION, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KEMPER FLOATING RATE FUND, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KEY CORPORATE CAPITAL, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH LANGDALE LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 84 --------------------------------------------------------------------------------       KZH RIVERSIDE LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH SOLEIL LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH SOLEIL-2 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH CRESCENT-2 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH HIGHLAND-2 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH ING-1 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 85 --------------------------------------------------------------------------------       KZH ING-2 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH ING-3 LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       KZH PAMCO LLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, as a Lender   By:   Stein Roe & Farnham Incorporated, As Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 86 --------------------------------------------------------------------------------       STEIN ROE & FARNHAM INCORPORATED, as a Lender as agent for Keyport Life Insurance Company       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       MERITA BANK PLC, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       MERRILL LYNCH GLOBAL INVESTMENT SERIES: BANK LOAN INCOME PORTFOLIO, as a Lender   By:   Merrill Lynch Asset Management, L.P., as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       MERRILL LYNCH PRIME RATE PORTFOLIO, as a Lender   By:   Merrill Lynch Asset Management, L.P., as Investment Advisor       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 87 --------------------------------------------------------------------------------       MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SENIOR HIGH INCOME PORTFOLIO, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       DEBT STRATEGIES FUND, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       DEBT STRATEGIES FUND II, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       DEBT STRATEGIES FUND III, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 88 --------------------------------------------------------------------------------       METROPOLITAN LIFE INSURANCE COMPANY, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       NATIONAL CITY BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       OCTAGON INVESTMENT PARTNERS II, LLC, as a Lender   By:   Octagon Credit Investors, LLC as sub-investment manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       OLYMPIC FUNDING TRUST, SERIES 1999-1, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 89 --------------------------------------------------------------------------------       PPM SPYGLASS FUNDING TRUST, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SRF TRADING, INC., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PILGRIM PRIME RATE TRUST, as a Lender   By:   Pilgrim Investments, Inc. as its investment manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ML CLO XV PILGRIM AMERICA (CAYMAN) LTD., as a Lender   By:   Pilgrim Investments, Inc. as its investment manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PNC BANK, NATIONAL ASSOCIATION, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 90 --------------------------------------------------------------------------------       PUTNAM DIVERSIFIED INCOME TRUST, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PUTNAM FUNDS TRUST—PUTNAM HIGH YIELD TRUST II, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PUTNAM HIGH YIELD ADVANTAGE FUND, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PUTNAM HIGH YIELD TRUST, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       PUTNAM VARIABLE TRUST—PVT HIGH YIELD FUND, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 91 --------------------------------------------------------------------------------       SANKATY HIGH YIELD PARTNERS II, L.P., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       GREAT POINT CLO 1999-1 LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SEQUILS IV, LTD., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       STANFIELD CLO, LTD., as a Lender   By:   Stanfield Capital Partners LLC as its Collateral Manager       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SUMMIT BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       SUNTRUST BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 92 --------------------------------------------------------------------------------       THE TRAVELERS INSURANCE COMPANY, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       TRAVELERS CORPORATE LOAN FUND INC., as a Lender   By:   Travelers Asset Management International Company LLC       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       COLUMBUS LOAN FUNDING LTD., as a Lender   By:   Travelers Asset Management International Company LLC       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       UNION BANK OF CALIFORNIA, N.A., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       U.S. BANK NATIONAL ASSOCIATION, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 93 --------------------------------------------------------------------------------       VAN KAMPEN PRIME RATE INCOME TRUST, as a Lender   By:   Van Kampen Investment Advisory Corp.       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       VAN KAMPEN SENIOR FLOATING RATE FUND, as a Lender   By:   Van Kampen Investment Advisory Corp.       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       WEBSTER BANK, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       WELLS FARGO BANK N.A., as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   --------------------------------------------------------------------------------       ELC (CAYMAN) LTD. 2000-1, as a Lender       By:                               --------------------------------------------------------------------------------       Name:                   --------------------------------------------------------------------------------       Its:                   -------------------------------------------------------------------------------- 94 -------------------------------------------------------------------------------- EXHIBIT T FORM OF REQUEST FOR SWING LINE ADVANCE                 , the duly elected and qualified            of RURAL CELLULAR CORPORATION, a Minnesota corporation (the "Borrower"), in connection with that certain Third Amended and Restated Loan Agreement dated as of June 29, 2000 (as heretofore amended, modified, restated, and supplemented from time to time, the "Loan Agreement") by and among the Borrower, the various financial institutions party thereto (the "Lenders"), the Swing Line Lender (as defined in the Loan Agreement) and Toronto Dominion (Texas), Inc. as administrative agent (the "Administrative Agent"), hereby certifies that:     1.  The Borrower hereby requests a Swing Line Advance in the amount of $            to be made on              ,       , under the Swing Line Commitment. Such Swing Line Advance shall be [a Base Rate Advance] [an Advance at an agreed upon rate]. The proceeds of the Swing Line Advance should be wired as set forth on Schedule 1 attached hereto. The foregoing instructions shall be irrevocable.     2.  All of the representations and warranties of the Borrower made under the Loan Agreement (including, without limitation, all representations and warranties with respect to the Borrower's Subsidiaries) and the other Loan Documents which, pursuant to Section 4.2 of the Loan Agreement are made at and as of the date of such Swing Line Advance, and will be as of the date of such Swing Line Advance, true and correct in all material respects both before and after giving effect to the application of the proceeds of the Swing Line Advance of the Swing Line Loans in connection with which this Request for Swing Line Advance is given, and after giving effect to any updates to information provided to the Swing Line Lender in accordance with the terms of the Loan Agreement.     3.  To the best knowledge of the undersigned after due inquiry, there does not exist, as of this date, and there will not exist after giving effect to the Swing Line Advance requested in this Request for Swing Line Advance, any Default or Event of Default under the Loan Agreement.     4.  All Necessary Authorizations have been obtained or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation.     5.  There has occurred no event having a Material Adverse Effect since              ,      .     6.  On the date of such Swing Line Advance, after giving effect to the Swing Line Advance requested hereby, the Borrower shall be in compliance on a pro forma basis with the covenants set forth in Sections 7.8, 7.9, 7.10, 7.11 and 7.12 of the Loan Agreement, and Schedule 2 attached hereto sets forth calculations demonstrating such compliance.     7.  [Use the following for initial Swing Line Advance:] All other conditions precedent to the Swing Line Advance requested hereby set forth in Section 3.1 of the Loan Agreement have been satisfied.     [Use the following for Swing Line Advances subsequent to the initial Swing Line Advance:] All other conditions precedent to the Swing Line Advance requested hereby set forth in Section 3.2 of the Loan Agreement have been satisfied.     Capitalized terms used in this Request for Swing Line Advance and not otherwise defined herein are used as defined in the Loan Agreement. --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Borrower, acting through an Authorized Signatory, has signed this Request for Swing Line Advance, as of the  day of            ,       .     RURAL CELLULAR CORPORATION, a Minnesota corporation           By:                 -------------------------------------------------------------------------------- Name: Title: Schedules:     Schedule 1—Wiring Instructions     Schedule 2—Compliance Calculations 2 -------------------------------------------------------------------------------- EXHIBIT U FORM OF SWING LINE NOTE $10,000,000.00   As of            , 2000     FOR VALUE RECEIVED, the undersigned, RURAL CELLULAR CORPORATION, a Minnesota corporation (the "Borrower"), promises to pay to the order of            (hereinafter, together with its successors and assigns, called the "Swing Line Lender") in immediately available funds, at the office of Toronto Dominion (Texas), Inc. in Houston, Texas or such other place as the Swing Line Lender may designate in writing to the Borrower, the principal sum of TEN MILLION AND 00/100s DOLLARS ($10,000,000.00) in United States funds, or, if less, so much thereof as may from time to time be advanced by the Swing Line Lender to the Borrower hereunder, plus interest as hereinafter provided. Such Swing Line Advances and repayments thereof may be endorsed from time to time on the grid attached hereto, but the failure to make such notations shall not affect the validity of the Borrower's obligation to repay unpaid principal and interest hereunder.     All capitalized terms used herein shall have the meanings ascribed to them in that certain Third Amended and Restated Loan Agreement dated as of June 29, 2000 (as amended, modified, restated, and supplemented from time to time, the "Loan Agreement") by and among the Borrower, the financial institutions parties thereto (together with their successors and assigns, the "Lenders"), the Swing Line Lender and Toronto Dominion (Texas), Inc. as administrative agent (the "Administrative Agent"), except to the extent such capitalized terms are otherwise defined or limited herein.     All principal amounts and other amounts then outstanding hereunder shall be due and payable as set forth in the Loan Agreement with a final payment of all principal amounts and other Obligations then outstanding hereunder shall be due and payable in full on the Revolving Loan Maturity Date.     The Borrower shall be entitled to borrow, re-pay and re-borrow amounts due hereunder pursuant to the Swing Line Commitment and subject to the terms and conditions of the Loan Agreement. Prepayment of the principal amount hereof may be made only as provided in the Loan Agreement. The principal amount of each Swing Line Advance shall be repaid as set forth in the Loan Agreement.     The Borrower hereby promises to pay interest on the unpaid principal amount of the Swing Line Loans outstanding hereunder as provided in Article 2 of the Loan Agreement. Interest under this Swing Line Note shall also be due and payable when this Swing Line Note shall become due (whether at maturity, by reason of acceleration or otherwise). Overdue principal and, to the extent permitted by Applicable Law, overdue interest under this Swing Line Note, shall bear interest at the Default Rate as provided in the Loan Agreement.     In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Swing Line Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Swing Line Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent of the parties hereto that the Borrower not pay and the Swing Line Lender not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law.     All parties now or hereafter liable with respect to this Swing Line Note, whether the Borrower, any guarantor, endorser, or any other Person, hereby waive to the extent permitted by Applicable Law presentment for payment, demand, notice of non-payment or dishonor, protest and notice of protest.     No delay or omission on the part of the Swing Line Lender or any holder hereof in exercising its rights under this Swing Line Note, or delay or omission on the part of the Swing Line Lender, the Administrative Agent, the Required Lenders or the Lenders, collectively, or any of them, in exercising its or their rights under the Loan Agreement or under any other Loan Document, or course of conduct relating thereto, shall operate as a waiver of such rights or any other right of the Lender or any holder -------------------------------------------------------------------------------- hereof, nor shall any waiver by the Swing Line Lender, the Administrative Agent, the Required Lenders or the Lenders collectively, or any of them, or any holder hereof, of any such right or rights on any one occasion be deemed a bar to, or waiver of, the same right or rights on any future occasion.     The Borrower promises to pay all reasonable costs of collection, including, without limitation, reasonable attorneys' fees, should this Swing Line Note be collected by or through an attorney-at-law or under advice therefrom.     Time is of the essence of this Swing Line Note.     This Swing Line Note evidences the Swing Line Lender's Swing Line Loans under, and is entitled to the benefits and subject to the terms of, the Loan Agreement, which contains provisions with respect to the acceleration of the maturity of this Swing Line Note upon the happening of certain stated events, and provisions for prepayment. This Swing Line Note is secured by and is also entitled to the benefits of the Security Documents and any other agreement or instrument providing collateral for the Swing Line Loans Loans, whether now or hereafter in existence, and any filings, instruments, agreements, and documents related thereto and providing collateral for the Swing Line Loans.     THIS SWING LINE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the duly authorized signatory of the Borrower, as Authorized Signatory, has executed this Swing Line Note as of the day and year first above written.     RURAL CELLULAR CORPORATION, a Minnesota corporation           By:                 -------------------------------------------------------------------------------- Name: Title: 3 -------------------------------------------------------------------------------- ADVANCES Date --------------------------------------------------------------------------------   Amount of Advance --------------------------------------------------------------------------------   Type of Advance --------------------------------------------------------------------------------   Amount of Principal Paid or Prepaid --------------------------------------------------------------------------------   Notation Made By --------------------------------------------------------------------------------                                     4 -------------------------------------------------------------------------------- QUICKLINKS ARTICLE 1 Definitions ARTICLE 2 Loans ARTICLE 3 Conditions Precedent ARTICLE 4 Representations and Warranties ARTICLE 5 General Covenants ARTICLE 6 Information Covenants ARTICLE 7 Negative Covenants ARTICLE 8 Default ARTICLE 9 The Agents ARTICLE 10 Change in Circumstances Affecting LIBOR Advances ARTICLE 11 Miscellaneous ARTICLE 12 Waiver of Jury Trial EXHIBIT T FORM OF REQUEST FOR SWING LINE ADVANCE EXHIBIT U FORM OF SWING LINE NOTE ADVANCES

AMENDMENT TO THE COHERENT COMMUNICATIONS SYSTEMS CORPORATION AMENDED AND RESTATED 1993 EQUITY COMPENSATION PLAN   WHEREAS, Coherent Communications Systems Corporation Coherent has heretofore established the Coherent Communications Systems Corporation Amended and Restated 1993 Equity Compensation Plan (the "Plan") for the benefit of employees, non-employee directors, and eligible independent contractors of Coherent Communications Systems Corporation and its subsidiaries; WHEREAS, Coherent was acquired by Tellabs, Inc. ("Tellabs") in a merger on August 3, 1998, and Coherent subsequently merged into Tellabs Operations, Inc. (the "Corporation"); WHEREAS, the Board of Directors of Tellabs deems it desirable to make certain amendments to the Plan relating to the vesting of options and stock appreciation rights ("SARs") and/or the post-employment exercise period in the event of the death, disability, or retirement of an option or SAR holder, or a change in control of Tellabs; WHEREAS, the Board of Directors has considered the recommendations; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows: I. Under Section 2 of the Plan, the following definition of "Change in Control" shall be added: (f) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, Tellabs, Inc. ("Tellabs") or any subsidiary of Tellabs, or any employee benefit plan of Tellabs or any subsidiary of Tellabs, or any person or entity organized, appointed or established by Tellabs for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of Tellabs, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Tellabs representing 20% or more of the combined voting power of Tellabs's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by Tellabs; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of Tellabs and any new director (except for a director designated by a person who has entered into an agreement with Tellabs to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by Tellabs' stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Tellabs (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of Tellabs immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns Tellabs or all or substantially all of Tellabs' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of Tellabs; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of Tellabs or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the stockholders of Tellabs of a complete liquidation or dissolution of Tellabs. II. Under Section 2 of the Plan, the following definition of "Disability" shall be added: (i) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Section 10 shall be amended in its entirety to read as follows: SECTION 10. Termination of Employment. Except as set forth in Section 10A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Stock Option Agreement, the following rules shall apply upon termination of the Optionee's employment with the Corporation and all Subsidiaries: (a) Except as set forth in subsections (b), (c), (d) and (e) below, in the event of termination (voluntary or involuntary) for any reason of the holder's employment by the Corporation, any unexercised Option shall be exercisable by the Optionee at any time within 30 days after the date of such termination but only to the extent such Option was exercisable on the date of such termination. In no event shall such unexercised Option be exercisable after the expiration of its term. (b) In the event of termination of employment due to the death the Optionee, each Option held by the Optionee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Optionee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Optionee, each Option held by the Optionee may, to the extent exercisable at the time of termination of employment, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Optionee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Optionee on or after attaining age 55, all or a portion of each Option held by the Optionee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Optionee's attained age and one point for each year of continuous service with the Corporation or its Subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or a Subsidiary of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points          75% of each unvested option shall vest At least 90 points                                  100% of each unvested option shall vest and all Options held by the Optionee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Optionee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any ISO which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a NQSO. IV. Section 5(h) shall be amended in its entirety to read as follows: (h) Termination of Employment. Except as set forth in Section 5(k) with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Agreement evidencing an Option or Stock Appreciation Right the following rules shall apply upon termination of the Participant's employment with the Company and all Subsidiaries: (i) Except as set forth in subsections (ii), (iii), (iv), and (v) below, unless otherwise determined by the Committee at or after grant, in the event of a Participant's termination of employment (voluntary or involuntary) for any reason other than as provided below, any Stock Option or Stock Appreciation Right held by such Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the time of such termination or on such accelerated basis as the Committee may determine at or after grant, for a period of three months (or shorter period as the Committee may specify at grant) from the date of such termination of employment or until the expiration of the stated term of such Grant, whichever period is shorter. (ii) Unless otherwise determined by the Committee at or after grant, if any Participant ceases to be employed by the Company on account of a Termination for Cause by the Company, any Stock Option held by such Participant shall terminate as of the date the Participant ceases to be employed by the Company, and the Participant shall automatically forfeit all Stock underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Participant for such Stock. (iii) In the event of termination of employment due to the death the Participant, each Option and Stock Appreciation Right held by the Participant shall become exercisable in full and may be exercised at any time prior to the expiration date of the Grant or within one year after the date of the Participant's death, whichever period is shorter, and in the event of death within three months after the date on which the Participant ceases to be employed by the Company on account of termination of employment specified in Section 5(h)(i) above, the Grant may be exercised prior to the expiration date or within one year after the date of termination, whichever is shorter. (iv) In the event of termination of employment due to the Disability of the Participant, each Option or Stock Appreciation Right held by the Participant may, to the extent exercisable at the time of termination of employment, be exercised at any time prior to the expiration date of the Grant or within three years after the date of the Participant's termination of employment, whichever period is shorter. (v) In the event of termination of employment due to the retirement of the Participant on or after attaining age 55, all or a portion of each Option and Stock Appreciation Right held by the Participant, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Participant's attained age and one point for each year of continuous service with the Company or its Subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Company or a Subsidiary of the Company, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested Grant shall vest At least 80 but less than 90 points          75% of each unvested Grant shall vest At least 90 points                                  100% of each unvested Grant shall vest and all Options and Stock Appreciation Rights held by the Participant to the extent then exercisable may be exercised at any time prior to the expiration date of the Grant or within three years after the date of the Participant's retirement, whichever period is shorter. (vi) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a Non-Qualified Stock Option. V. The Plan shall hereby be amended by adding a new Section 5(k) to read: (k) Change in Control. (i) Upon the occurrence of a Change in Control, any and all Options and Stock Appreciation Rights granted hereunder shall become immediately exercisable and remain exercisable until such Options and Stock Appreciation Rights expire or terminate under the provisions of this Plan. (ii) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options and Stock Appreciation Rights granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. IN WITNESS WHEREOF, the foregoing amendments to the Coherent Communications Systems Corporation Amended and Restated 1993 Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000. TELLABS OPERATIONS, INC.   By: /s Brian J. Jackman Name: Brian J. Jackman Its: President

Exhibit 10(n) Contract No. 117117   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 25, 2000 UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS   1. SHIPPER is: NORTH SHORE GAS COMPANY, a LDC. 2. (a) MDQ totals: 7,000 MMBTU per day. (b) Service option selected (check any or all): [ ] LN [ ] SW [ ]NB 3. TERM: April 1, 2000 through April 30, 2005. 4. Service will be ON BEHALF OF: [X] Shipper or [ ]Other: 5. The ULTIMATE END USERS are customers within any state in the continental U.S.; or (specify state)________________________________________________. 6. [ ] This Agreement supersedes and cancels a _____________ Agreement dated ___________. [X] Service and reservation charges commence the latter of: (a) April 1, 2000, and (b) the date capacity to provide the service hereunder is available on Natural's System. [ ] Other:_____________________________________________ 7. SHIPPER'S ADDRESSES   NATURAL'S ADDRESSES   General Correspondence : NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA RAULIE DE LARA   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P. O. BOX 283 77001-0283     HOUSTON, TEXAS         Statements/Invoices/Accounting Related Materials : NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA 130 E. RANDOLPH DR.   ATTENTION: ACCOUNT SERVICES CHICAGO, IL 60601-6207   ONE ALLEN CENTER, SUITE 1000     500 DALLAS ST., 77002     P.O. BOX 283 77001-0283     HOUSTON, TEXAS         Payments :     NATURAL GAS PIPELINE COMPANY OF AMERICA     P.O. BOX 70605     CHICAGO, ILLINOIS 60673-0605           FOR WIRE TRANSFER OR ACH:     DEPOSITORY INSTITUTION: THE CHASE     MANHATTAN BANK, NEW YORK, NY     WIRE ROUTING #: 021000021     ACCOUNT #: 323-206042     8. The above stated Rate Schedule, as revised from time to time, controls this Agreement and is incorporated herein. The attached Exhibits A, B, and C are part of this Agreement. NATURAL AND SHIPPER ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the entire agreement between the parties and no waiver, representation, or agreement shall affect this Agreement unless it is in writing. Shipper shall provide the actual end user purchasers names(s) to Natural if Natural must provide them to the FERC. AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   NORTH SHORE GAS COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President     Contract No. 117117     EXHIBIT A DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117117   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. NGPL/TPC GAGE GAGE NE 902900 07 7,000 INTERCONNECT WITH           TRAILBLAZER PIPELINE IN SEC. 15-           T4N-R6E, GAGE COUNTY,           NEBRASKA.             SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117117   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL TONNE RD COOK COOK IL 7866 09 7,000 INTERCONNECT WITH NORTH           SHORE GAS COMPANY ON           TRANSPORTER'S HOWARD STREET           LINE IN SEC. 27-T41N-R11E, COOK           COUNTY, ILLINOIS.             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such       EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117117   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117117   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 12   0   F   0 13   12   F   7,000 14   13   F   7,000 30   14   F   7,000

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10 (f) Amendment to the PACCAR Inc 1991 Long-Term Incentive Plan. Article 17.4 of the Plan is amended as follows: (a)"Change of Control" shall mean the happening of any of the following events: i)  The acquisition by any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding COMMON STOCK (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the COMPANY entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a CHANGE OF CONTROL: (a) any acquisition directly from the COMPANY, (b) any acquisition by the COMPANY, (c) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the COMPANY or any corporation controlled by the Company, (d) any acquisition by the natural children and grandchildren of Paul Pigott and Theiline McCone Pigott (the "Immediate Pigott Family"), any trust or foundation to which any of the foregoing has transferred or may transfer securities of the COMPANY, the trusts at Bank America Corporation or its successor, holding outstanding COMMON STOCK for descendants of Paul Pigott and Theiline McCone Pigott, any trust established for the primary benefit of any member of the Immediate Pigott Family or any of their respective heirs or legatees, any trust of which any member of the Immediate Pigott Family serves as a trustee (or any affiliate or associate (within the meaning of Rule 12b-2 promulgated under the Exchange Act) of any of the foregoing) (the "Exempted Interests"), or (e) any acquisition by any corporation pursuant to a transaction described in clauses (A), (B) and (C) of subsection (iii) below; (ii)  Individuals who, as of the date hereof, constitute the BOARD (the "Incumbent Board") cease for any reason to constitute at least a majority of the BOARD; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the COMPANY'S stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the BOARD; 1 -------------------------------------------------------------------------------- EXHIBIT 10 (f) (iii)  Approval by the stockholders of the COMPANY of a reorganization, merger, share exchange, or consolidation (a "Business Combination"), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding COMPANY COMMON STOCK and outstanding COMPANY voting securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 85% of, respectively, the then outstanding COMMON STOCK and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the COMPANY through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding COMPANY common stock and outstanding company voting securities, as the case may be, (B) no Person (excluding (1) any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination or (2) the Exempted Interests) beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the BOARD, providing for such Business Combination; or (iv)  Approval by the COMPANY'S stockholders of the (A)a complete liquidation or dissolution of the COMPANY or (B) the sale or other disposition of all or substantially all of the COMPANY'S assets, other than to a corporation with respect to which, following such sale or other disposition, (1) more than 85% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding COMPANY COMMON STOCK and outstanding COMPANY voting securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding COMPANY COMMON STOCK and Outstanding COMPANY Voting Securities, as the case may be, (2) less than 15% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding (I) any employee benefit plan (or related trust) of the COMPANY or such corporation or (II) the Exempted Interests), except to the extent that such Person owned 15% or more of the Outstanding COMPANY COMMON STOCK or Outstanding COMPANY Voting Securities prior to the sale or disposition, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the BOARD, providing for such sale or other disposition of assets of the COMPANY or were elected, appointed or nominated by the BOARD. 2 -------------------------------------------------------------------------------- QUICKLINKS Amendment to the PACCAR Inc 1991 Long-Term Incentive Plan.

EXHIBIT 10.1 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment dated as of August 1, 2000, is by and between Temptronic Corporation, a Delaware corporation, with its principal place of business in Newton, Massachusetts (the "Company"), and William M. Stone of 12 Samuel Drive, North Grafton, Massachusetts 01536 (the "Employee"). RECITALS The Company and the Employee entered into an Employment Agreement dated March 9, 2000 (the "Employment Agreement"). The Company and the Employee desire to amend the Employment Agreement as set forth in this Amendment to Employment Agreement. NOW, THEREFORE, the Company and the Employee, intending to be legally bound, hereby agree to amend the Employment Agreement as follows: 1. Definitions . All capitalized terms used and not defined herein shall have the meanings given to them in the Employment Agreement unless otherwise indicated by the context. 2. Amendments . (I) Section 4(b) of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "(b) Percent of Profit Bonus. For each full calendar year during the term of this Agreement, the Employee shall receive a bonus equal to 1% of the pre-tax profit of the Company during such fiscal year. Pre-tax profit shall be determined by the Company's independent auditors in accordance with generally accepted accounting principles, except that such computation shall not take into account the bonus payable pursuant to this Section 4(b) but pre-tax profit will be computed after deduction for the bonus amount paid during such fiscal year pursuant to Section 4(e). The bonus payable pursuant to this Section 4(b) shall be prorated for any portion of a calendar year included within the term of this Agreement." (II) A new Section 4(e) of the Employment Agreement is hereby added reading in its entirety as follows: "(e) Fixed Bonus. (i) In addition to the bonus payable pursuant to Section 4(b), the Employee shall receive additional fixed bonus amounts as follows: Payable Date   Amount 8/1/00 8/1/01 8/1/02 8/1/03 8/1/04   $80,000 $80,000 $80,000 $80,000 $80,000   The fixed bonus amounts payable pursuant to this Section 4(e), are conditioned upon the Employee's continued employment with the Company on the respective Payable Date; provided, however, that upon the occurrence of any of the following events, the remaining bonus amounts will be accelerated and become payable within thirty days thereafter: (A) a Change in Control (as defined below) of the Company's parent, inTEST Corporation ("inTEST"); (B) the Employee's death or disability; or (C) the termination of the Employee's employment by Temptronic without cause as provided in this Agreement.     (ii) "Change of Control" shall be deemed to have occurred upon the earliest to occur of the following events: (A) The date the stockholders of inTEST (or the Board of Directors, if stockholder action is not required) approve a plan or other arrangement pursuant to which inTEST will be dissolved or liquidated; (B) The date the stockholders of inTEST (or the Board of Directors, if stockholder action is not required) approve a definitive agreement to sell or otherwise dispose of all or substantially all of the assets of inTEST; (C) The date the stockholders of inTEST (or the Board of Directors, if stockholder action is not required) and the stockholders of the other constituent corporation (or its board of directors if stockholder action is not required) have approved a definitive agreement to merge or consolidate inTEST with or into such other corporation, other than, in either case, a merger or consolidation of inTEST in which holders of shares of the Common Stock of inTEST immediately prior to the merger or consolidation will hold at least a majority of the ownership of common stock of the surviving corporation (and, if one class of common stock is not the only class of voting securities entitled to vote on the election of directors of the surviving corporation, a majority of the voting power of the surviving corporation's voting securities) immediately after the merger or consolidation, which common stock (and, if applicable, voting securities) is to be held in substantially the same proportion as such holders' ownership of the Common Stock of inTEST immediately before the merger or consolidation; or (D) the date any entity, person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act")), other than (x) inTEST or any of its Affiliates (as defined below) or any employee benefit plan (or related trust) sponsored or maintained by inTEST or any of its Affiliates or (y) any entity, person or group (other than a group in which an entity described in (x) is a member) who, on the date of this Amendment shall have been the beneficial owner of at least twenty percent (20%) of the outstanding Common Stock of inTEST shall have become the beneficial owner of, or shall have obtained voting control over, more than fifty percent (50%) of the outstanding shares of the Common Stock of inTEST. The term "Affiliates" shall mean any corporation or other business organization in which inTEST owns, directly or indirectly, 50% or more of the voting stock or capital at the date of this Amendment." (III) The last sentence of Section 5(b) of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "In addition, the Employee or others so entitled shall be paid (i) any bonus to which the Employee may be entitled pursuant to Section 4(b) that may have accrued through the effective date of termination, as soon as practicable after the determination of such amount, and (ii) the remaining fixed bonus amounts, if any, as provided in Section 4(e)(i)." 3. Reaffirmation . Except as modified hereby, all of the terms, covenants and conditions of the Employment Agreement are hereby in all respects ratified, reaffirmed and confirmed and shall continue in full force and effect. 4. Counterparts . This Amendment of Employment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF , this Amendment of Employment Agreement has been executed by the Company, by its duly authorized officer, and by the Employee, as of the date first above written.         TEMPTRONIC CORPORATION   /s/ William M. Stone William M. Stone   By:   /s/ Hugh T. Regan, Jr. Hugh T. Regan, Jr. Secretary and Treasurer

AMENDMENT TO THE SALIX TECHNOLOGIES, INC. OMNIBUS STOCK PLAN   WHEREAS, Salix Technologies, Inc. has heretofore established the Salix Technologies, Inc. Omnibus Stock Plan (the "Plan") for the benefit of eligible executives and key personnel of Salix Technologies, Inc. and its subsidiaries; WHEREAS, Salix Technologies, Inc. was acquired by Oriole Merger Corp., a wholly-owned subsidiary of Tellabs, Inc. ("Sub"), and Sub was merged with and into Salix Technologies, Inc. (Tellabs, Inc. shall be known as the " Company"; provided, however, that prior to the effective time of the merger, "Company" means Salix Technologies, Inc.); WHEREAS, the Board of Directors of the Company deems it desirable to make certain amendments to the Plan relating to the vesting of options and stock appreciation rights ("SARs") and/or the post-employment exercise period in the event of the death, disability, or retirement of an option or SAR holder, or a change in control of the Company; and WHEREAS, the Board of Directors of the Company has considered the recommendations and has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Section 2 of the Plan, the following definition of "Change in Control" shall be added: (n) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, Tellabs, Inc. ("Tellabs") or any subsidiary of Tellabs, or any employee benefit plan of Tellabs or any subsidiary of Tellabs, or any person or entity organized, appointed or established by Tellabs for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of Tellabs, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Tellabs representing 20% or more of the combined voting power of Tellabs's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by Tellabs; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of Tellabs and any new director (except for a director designated by a person who has entered into an agreement with Tellabs to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by Tellabs' stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Tellabs (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of Tellabs immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns Tellabs or all or substantially all of Tellabs' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of Tellabs; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of Tellabs or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of Tellabs of a complete liquidation or dissolution of Tellabs. II. Under Section 2 of the Plan, the following definition of "Disability" shall be added: (p) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Section 8 shall be amended in its entirety to read as follows: 8. TERMINATION OF EMPLOYMENT. Except as set forth in Section 8A with respect to the effect of a Change in Control or except as the Administrator may otherwise expressly provide in the Grant Agreement evidencing an Award, the following rules shall apply upon termination of the Grantee's employment with the Company and all Subsidiaries: (a) Except as set forth in subsections (b), (c), and (d) below, in the event that a Grantee who is an employee as of the date of grant of Awards hereunder shall cease to be employed by the Company or its subsidiaries for any reason other than a termination for Cause, all vested Awards held by him pursuant to the Plan and not previously exercised at the date of such termination may be exercised for a period of ninety (90) days after the date of termination of the Grantee's employment, subject to the terms of Paragraph 5(b) and the condition that no Award shall be exercisable after the expiration of ten (10) years from the date it is granted. If the termination of employment is a termination by the Company for Cause, then all Awards held by him pursuant to the Plan and not previously exercised at the date of such termination shall terminate immediately and become void and of no effect. Authorized leaves of absence or absence for military service shall not constitute termination of employment for the purpose of the Plan. (b) In the event of termination of employment due to the death the Grantee, each Option and SAR held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of such Award or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option and SAR held by the Grantee may, to the extent exercisable at the time of termination of employment, be exercised at any time prior to the expiration date of such Award or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option and SAR held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Company or its affiliates as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Company or an affiliate of the Company, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested Award shall vest At least 80 but less than 90 points          75% of each unvested Award shall vest At least 90 points                                  100% of each unvested Award shall vest and all Options and SARs held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of such Award or within three years after the date of the Grantee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any incentive stock option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a nonqualified stock option. IV. The Plan shall hereby be amended by adding a new Section 8A to read: 8A. CHANGE IN CONTROL. (a) Effect of Change in Control. Upon the occurrence of a Change in Control, any and all Options and SARs granted hereunder shall become immediately exercisable and remain exercisable until such Options and SARs expire or terminate under the provisions of this Plan. (b) Change in Control Not Approved by Incumbent Board. Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control.   IN WITNESS WHEREOF, the foregoing amendments to the Salix Technologies, Inc. Omnibus Stock Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   SALIX TECHNOLOGIES, INC.   By: /s Brian J. Jackman Name: Brian J. Jackman Its: President

QuickLinks -- Click here to rapidly navigate through this document MLA No. Z269 MASTER LOAN AGREEMENT     THIS MASTER LOAN AGREEMENT is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank", successor by merger to the St. Paul Bank for Cooperatives) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"). BACKGROUND     On March 5, 1999, the St. Paul Bank for Cooperatives ("SPB") entered into a Seasonal Loan Agreement (the "Seasonal Loan Agreement") and a Term Loan Agreement (the "Term Loan Agreement") (collectively, the "Existing Loan Agreements") with the Company. Under the Seasonal Loan Agreement, SPB made various seasonal loans to the Company, each of which was evidenced by a promissory note. Under the Term Loan Agreement, SPB made various term loans, each of which was also evidenced by a promissory note. Subsequently, SPB merged with and into CoBank. CoBank and the Company now desire to amend and restate the Existing Loan Agreements and consolidate the Existing Loan Agreements into this Master Loan Agreement. CoBank and the Company also desire to amend and restate the promissory notes evidencing the seasonal loans and term loans made pursuant to the Existing Loan Agreements by entering into various Supplements in place of the promissory notes. Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan. Each loan will be governed by the terms and conditions contained in this Master Loan Agreement and in the Supplement relating to the loan. Collateral securing loans made pursuant to the Existing Loan Agreements shall continue to secure those same loans, all as now evidenced by various Supplements, to the same extent as provided for in the Existing Loan Agreements and any security agreements (including, without limitation, mortgages and deeds of trust) entered into in connection therewith.     SECTION 1.  Supplements.  In addition to those Supplements entered into to amend and restate the promissory notes executed in connection with the Existing Loan Agreements, the parties may enter into other Supplements in order to evidence new loans that CoBank may make to the Company. Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan. Each loan will be governed by the terms and conditions contained in this Master Loan Agreement and in the Supplement relating to the loan.     SECTION 2.  Availability.  Loans will be made available on any day on which CoBank and the Federal Reserve Banks are open for business upon the telephonic or written request of the Company. Requests for loans must be received no later than 12:00 noon Company's local time on the date the loan is desired. Loans will be made available by wire transfer of immediately available funds to such account or accounts as may be authorized by the Company. The Company shall furnish to CoBank a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form, and CoBank shall be entitled to rely on (and shall incur no liability to the Company in acting on) any request or direction furnished in accordance with the terms thereof.     SECTION 3.  Repayment.  The Company's obligation to repay each loan shall be evidenced by the promissory note set forth in the Supplement relating to that loan or by such replacement note as CoBank shall require. CoBank shall maintain a record of all loans, the interest accrued thereon, and all payments made with respect thereto, and such record shall, absent proof of manifest error, be conclusive evidence of the outstanding principal and interest on the loans. All payments shall be made by wire transfer of immediately available funds or by check. Wire transfers shall be made to ABA No. 307088754 for advice to and credit of CoBANK (or to such other account as CoBank may direct by notice). The Company shall 1 -------------------------------------------------------------------------------- give CoBank telephonic notice no later than 12:00 noon Company's local time of its intent to pay by wire and funds received after 3:00 p.m. Company's local time shall be credited on the next business day. Checks shall be mailed to CoBank, Department 167, Denver, Colorado, 80291-0167 (or to such other place as CoBank may direct by notice). Credit for payment by check will not be given until the latter of: (a) the day on which CoBank receives immediately available funds; or (b) the next business day after receipt of the check.     SECTION 4.  Capitalization.  The Company agrees to purchase such equity in CoBank as CoBank may from time to time require in accordance with its Bylaws. However, the maximum amount of equity which the Company shall be obligated to purchase in connection with any loan may not exceed the maximum amount permitted by the Bylaws at the time the Supplement relating to that loan is entered into or such loan is renewed or refinanced by CoBank.     SECTION 5.  Security.  The Company's obligations under this agreement, all Supplements (whenever executed), and all instruments and documents contemplated hereby or thereby, shall be secured by a statutory first lien on all equity which the Company may now own or hereafter acquire in CoBank. This security shall be in addition to any other security that may otherwise be required or provided.     SECTION 6.  Conditions Precedent.       (A) Conditions to Initial Supplement.  CoBank's obligation to extend credit under the initial Supplement hereto is subject to the conditions precedent that CoBank receive, in form and substance satisfactory to CoBank, each of the following:      (i) This Agreement, Etc.  A duly executed copy of this agreement and all instruments and documents contemplated hereby.     (ii) Opinion of Counsel.  A favorable opinion from the Company's counsel addressed to CoBank covering each matter as CoBank may reasonably require.    (iii) Evidence of Authority.  Such certified board resolutions, evidence of incumbency, and other evidence that CoBank may require that the Supplement, all instruments and documents executed in connection therewith, and, in the case of initial Supplement hereto, this agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed.     (B) Conditions to Each Supplement.  CoBank's obligation to extend credit under each Supplement, including the initial Supplement, is subject to the conditions precedent that CoBank receive, in form and content satisfactory to CoBank, each of the following:      (i) Supplement.  A duly executed copy of the Supplement and all instruments and documents contemplated thereby.     (ii) Fees and Other Charges.  All fees and other charges specifically permitted by this Master Loan Agreement or the Supplements, as well as reasonable expenses for outside counsel.    (iii) Evidence of Perfection, Etc.  Such evidence as CoBank may require that CoBank has a duly perfected first priority lien on all security for the Company's obligations, and that the Company is in compliance with Section 8(D) hereof.     (C) Conditions to Each Loan.  CoBank's obligation under each Supplement to make any loan to the Company thereunder is subject to the condition that no "Event of Default" (as defined in Section 11 hereof) or event which with the giving of notice and/or the passage of time would become an Event of Default hereunder (a "Potential Default"), shall have occurred and be continuing. 2 --------------------------------------------------------------------------------     SECTION 7.  Representations and Warranties.       (A) This Agreement.  The Company represents and warrants to CoBank that as of the date of this Agreement:      (i) Compliance.  The Company is in compliance with all of the terms of this agreement, and no Event of Default or Potential Default exists hereunder.     (B) Each Supplement.  The execution by the Company of each Supplement hereto shall constitute a representation and warranty to CoBank that:      (i) Applications.  Each representation and warranty and all information set forth in any application or other documents submitted in connection with, or to induce CoBank to enter into, such Supplement, is correct in all material respects as of the date of the Supplement.     (ii) Conflicting Agreements, Etc.  This agreement, the Supplements, and all security and other instruments and documents relating hereto and thereto (collectively, at any time, the "Loan Documents"), do not conflict with, or require the consent of any party to, any other agreement to which the Company is a party or by which it or its property may be bound or affected, and do not conflict with any provision of the Company's bylaws, articles of incorporation, or other organizational documents.    (iii) Compliance.  The Company is in compliance with all of the terms of the Loan Documents (including, without limitation, Section 8(A) of this agreement on eligibility to borrow from CoBank).     (iv) Binding Agreement.  The Loan Documents create legal, valid, and binding obligations of the Company which are enforceable in accordance with their terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors' rights generally.     SECTION 8.  Affirmative Covenants.  Unless otherwise agreed to in writing by CoBank, while this agreement is in effect, the Company agrees to:     (A) Eligibility.  Maintain its status as an entity eligible to borrow from CoBank.     (B) Corporate Existence, Licenses. Etc.  (i) Preserve and keep in full force and effect its existence and good standing in the jurisdiction of its incorporation or formation; (ii) qualify and remain qualified to transact business in all jurisdictions where such qualification is required; and (iii) obtain and maintain all licenses, certificates, permits, authorizations, approvals, and the like which are material to the conduct of its business or required by law, rule, regulation, ordinance, code, order, and the like (collectively, "Laws").     (C) Compliance with Laws.  Comply in all material respects with all applicable Laws, including, without limitation, all Laws relating to environmental protection and any patron or member investment program that it may have. In addition, the Company agrees to cause all persons occupying or present on any of its properties to comply in all material respects with all environmental protection Laws.     (D) Insurance.  Maintain insurance with insurance companies or associations acceptable to CoBank in such amounts and covering such risks as are usually carried by companies engaged in the same or similar business and similarly situated, and make such increases in the type or amount of coverage as CoBank may request. All such policies insuring any collateral for the Company's obligations to CoBank shall have mortgagee or lender loss payable clauses or endorsements in form and content acceptable to CoBank. At CoBank's request, all policies (or such other proof of compliance with this Subsection as may be satisfactory to CoBank) shall be delivered to CoBank.     (E) Property Maintenance.  Maintain all of its property that is necessary to or useful in the proper conduct of its business in good working condition, ordinary wear and tear excepted.     (F) Books and Records.  Keep adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles ("GAAP") consistently applied. 3 --------------------------------------------------------------------------------     (G) Inspection.  Permit CoBank or its agents, upon reasonable notice and during normal business hours or at such other times as the parties may agree, to examine its properties, books, and records, and to discuss its affairs, finances, and accounts, with its respective officers, directors, employees, and independent certified public accountants.     (H) Reports and Notices.  Furnish to CoBank:      (i) Annual Financial Statements.  As soon as available, but in no event more than 120 days after the end of each fiscal year of the Company occurring during the term hereof, annual financial statements of the Company prepared in accordance with GAAP consistently applied. Such financial statements shall: (a) be audited by independent certified public accountants selected by the Company and acceptable to CoBank; (b) be accompanied by a report of such accountants containing an opinion thereon acceptable to CoBank; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.     (ii) Interim Financial Statements.  As soon as available, but in no event more than 5 days after the filing with the Securities Exchange Commission, after the end of each quarter, a balance sheet of the Company as of the end of such fiscal quarter, a statement of income for the Company for such period and for the period year to date, and such other interim statements as CoBank may specifically request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied.    (iii) Annual Budgets.  As soon as available, but in no event more than 60 days after the end of any fiscal year of the Company occurring during the term hereof, copies of the Company's annual budgets and forecasts of operations.     (iv) Capital Expenditures Budget:  The Company will furnish an annual capital expenditure budget, within 60 days after the end of each fiscal year. The Company will also furnish a revised budget if increases over the original capital expenditure budget are approved by the board of directors.     (v) Notice of Default.  Promptly after becoming aware thereof, notice of the occurrence of an Event of Default or a Potential Default.     (vi) Notice of Non-Environmental Litigation.  Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting the Company which, if determined adversely to the Company, could have a material adverse effect on the financial condition, properties, profits, or operations of the Company.    (vii) Notice of Environmental Litigation, Etc.  Promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Company to undertake or to contribute to a cleanup or other response under environmental Laws, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions.   (viii) Bylaws and Articles.  Promptly after any change in the Company's bylaws or articles of incorporation (or like documents), copies of all such changes, certified by the Company's Secretary.     (ix) Other Information.  Such other information regarding the condition or operations, financial or otherwise, of the Company as CoBank may from time to time reasonably request, including but not limited to copies of all pleadings, notices, and communications referred to in Subsections 8(H)(vi) and (vii) above. 4 --------------------------------------------------------------------------------     (x) Officer Certificate.  A quarterly officers certificate within 45 days of each fiscal quarter end, in a form acceptable to CoBank, certified by an officer of the Company, that measures compliance with Minimum Net Working Capital; Long Term Debt Coverage and Long Term Debt to Capitalization. (Section 10 (A) & (B) & (C)).     (I) Grower Agreements.  The Company shall abide by the terms and conditions of its member grower agreements; make no material amendments or changes to the agreements without the written consent of the Bank; and extend the agreements for an additional five years when the current contracts expire.     (J) Crystech, L.L.C. ("Crystech").  Cause to be furnished to CoBank:      (i) Annual Financial Statements.  As soon as available, but in no event more than 120 days after the end of each fiscal year of Crystech occurring during the term hereof, annual financial statements of Crystech prepared in accordance with GAAP consistently applied. Such financial statements shall: (a) be audited by independent certified public accountants selected by Crystech and acceptable to CoBank; (b) be accompanied by a report of such accountants containing an opinion thereon acceptable to CoBank; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.     (ii) Interim Financial Statements.  As soon as available, but in no event more than 60 days after the end of each quarter, a balance sheet of Crystech as of the end of such fiscal quarter, a statement of income for Crystech for such period and for the period year to date, and such other interim statements as CoBank may specifically request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied.    (iii) Examinations.  Such examination of Crystech's books and records as CoBank may reasonably request.     (K) Annual Paydown.  The Company will paydown all short term loans to $80,000,000 or less for a period of 30 consecutive days during the calendar year. Total short term loans includes the seasonal loans, Commodity Credit Corporation loans, commercial paper, overdraft loans with original maturity dates of one year or less. Total short term loans excludes current maturities of long term debt.     SECTION 9.  Negative Covenants.  Unless otherwise agreed to in writing by CoBank, while this agreement is in effect the Company will not:     (A) Borrowings.  Create, incur, assume, or allow to exist, directly or indirectly, any indebtedness or liability for borrowed money (including trade or bankers' acceptances), letters of credit, or the deferred purchase price of property or services (including capitalized leases), except for: (i) debt to CoBank; (ii) accounts payable to trade creditors incurred in the ordinary course of business; (iii) current operating liabilities (other than for borrowed money) incurred in the ordinary course of business; and (iv) permitted borrowings identified on Attachment A.     (B) Liens.  Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest, or other encumbrance of any kind upon any of its property, real or personal (collectively, "Liens"). The foregoing restrictions shall not apply to: (i) Liens in favor of CoBank; (ii) Liens for taxes, assessments, or governmental charges that are not past due; (iii) Liens and deposits under workers' compensation, unemployment insurance, and social security Laws; (iv) Liens and deposits to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), and like obligations arising in the ordinary course of business as conducted on the date hereof; (v) Liens imposed by Law in favor of mechanics, materialmen, warehousemen, and like persons that secure obligations that are not past due or that are being contested in good faith by the Company; and (vi) easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment of the property or assets 5 -------------------------------------------------------------------------------- encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto except for the permitted liens identified on Attachment B, without the prior written consent of the Bank. In addition, the Company agrees that it will not agree to a negative pledge with any other lender or third party.     (C) Mergers, Acquisitions, Etc.  Merge or consolidate with any other entity or acquire all or a material part of the assets of any person or entity, or form or create any new subsidiary or affiliate, or commence operations under any other name, organization, or entity, including any joint venture.     (D) Transfer of Assets.  Sell, transfer, lease, or otherwise dispose of any of its assets, except in the ordinary course of business.     (E) Loans.  Lend or advance money, credit, or property to any person or entity, except for trade credit extended in the ordinary course of business and certain inter-company loans made pursuant to Intercompany Loan/Security Agreement dated August 31, 1997 and successor agreements.     (F) Contingent Liabilities.  Assume, guarantee, become liable as a surety, endorse, contingently agree to purchase, or otherwise be or become liable, directly or indirectly (including, but not limited to, by means of a maintenance agreement, an asset or stock purchase agreement, or any other agreement designed to ensure any creditor against loss), for or on account of the obligation of any person or entity, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of the Company's business and except for any liability on account of a guaranty of indebtedness of Midwest Agri Commodities.     (G) Change in Business.  Engage in any business activities or operations substantially different from or unrelated to the Company's present business activities or operations.     SECTION 10.  Financial Covenants.  Unless otherwise agreed to in writing, while this agreement is in effect:     (A) Minimum Net Working Capital. The Company shall maintain minimum at all times and measured as of the end of each Fiscal Quarter a ratio of Current Assets less Current Liabilities of not less than $35,000,000.     (B) Long Term Debt to Capitalization.  The Company shall maintain at all times and measured as of the end of each Fiscal Quarter a ratio of Long Term Debt divided by the sum of Long Term Debt plus Equity of no greater than fifty-five percent (55%).     (C) Long Term Debt Coverage.  The Company shall maintain at all times and measured as of the end of each Fiscal Quarter a ratio of Long Term Debt to Average Net Funds Generated during the most recent three Fiscal Years of not greater than six (6) times.     (D) Definitions.  For purposes of this Section 10 and this Master Loan Agreement, the following terms shall be defined as follows:      (i) Average Net Funds Generated.  Average Net Funds Generated is the sum of the following for the most recent three fiscal years divided by three (3).     Add:  Unit Retains; Depreciation and amortization; Net income from non-member business and member business tax timing differences; Decrease in investments in other cooperatives (excluding subsidiaries); and Net revenue from sale of stock.     Minus:  Increase in investments in other cooperatives (excluding subsidiaries); Net loss from non-member business and member business tax timing differences; Provision for income tax; and Members' investment retirements. 6 --------------------------------------------------------------------------------     (ii) Borrowing Base.  A maximum dollar amount available to the Borrower under the terms of the Commitment (as set forth in a Supplement) as determined on the basis of the most recent Borrowing Base Certificate.    (iii) Borrowing Base Certificate.  A certification of the value of specified assets of the Borrower used in computing the Borrowing Base.     (iv) Capitalization.  The sum of long term debt plus equity as determined in accordance with GAAP.     (v) Current Assets.  The current assets of the Borrower as measured in accordance with GAAP.     (vi) Current Liability.  The current liabilities of the Borrower as measured in accordance with GAAP.    (vii) Depreciation.  Total depreciation of the Borrower as measured in accordance with GAAP.   (viii) Debt.  Debt means as to any Person: (a) indebtedness or liability of such Person for borrowed money, or for the deferred purchase price of property or services; (b) obligations of such Person as lessee under capital leases; (c) obligations of such Person arising under bankers' or trade acceptance facilities; (d) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations of such Person to purchase any of the items included in this definition, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor of another Person against loss; (e) all obligations secured by a lien on property owned by such Person, whether or not the obligations have been assumed; and (f) all obligations of such Person under any agreement providing for an interest rate swap, cap, cap and floor, contingent participation or other hedging mechanisms with respect to interest payable on any of the items described in this definition.     (ix) Equity.  Total equity of the Borrower as measured in accordance with GAAP.     (x) Fiscal Quarter.  Each three (3) month period beginning on the first day of each of the following months: September, December, March and June.     (xi) Fiscal Year.  A year commencing on September 1 and ending on August 31.    (xii) GAAP.  Generally accepted accounting principles in effect from time to time.   (xiii) Interest Expense.  Current cost of borrowing funds that is shown as a financial expense in the income statement and as measured in accordance with GAAP.    (xiv) Long Term Debt.  The long term debt (excluding current maturities) as determined in accordance with GAAP.    (xv) Net Realizable Value.  The expected selling price of an inventory item less expected costs to complete and dispose, as determined in accordance with GAAP.    (xvi) Net Working Capital.  Shall mean the Total Current Assets minus the Total Current Liabilities of the Borrower as determined in accordance with GAAP accounting principles, consistently applied.   (xvii) Person.  Person shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, cooperative association, institution, entity, party or government (whether national, federal, state, provincial, country, city, municipal or otherwise, including without limitation, and instrumentality, division, agency, body or department thereof).   (xviii) Subsidiary.  Subsidiary shall mean with respect to any Person: (a) any corporation in which such Person, directly or indirectly, (i) owns more than fifty percent (50%) of the outstanding stock 7 -------------------------------------------------------------------------------- thereof, or (ii) has the power under ordinary circumstances to elect at least a majority of the directors thereof, or (b) any partnership, association, joint venture, limited liability company, or other unincorporated organization or entity with respect to which such Person, directly or indirectly, owns an equity interest in an amount sufficient to control the management thereof.     SECTION 11.  Events of Default.  Each of the following shall constitute an "Event of Default" under this agreement:     (A) Payment Default.  The Company should fail to make any payment to, or to purchase any equity in, CoBank when due. Any payment received by CoBank after its due date shall not be subject to an increase in the interest rate, as provided for in Section 12 below, if the Company is not responsible for the payment delay.     (B) Representations and Warranties.  Any representation or warranty made or deemed made by the Company herein or in any Supplement, application, agreement, certificate, or other document related to or furnished in connection with this agreement or any Supplement, shall prove to have been false or misleading in any material respect on or as of the date made or deemed made.     (C) Certain Affirmative Covenants.  The Company should fail to perform or comply with Sections 8(A) through 8(H)(ii), 8(H)(viii), or any reporting covenant set forth in any Supplement hereto, and such failure continues for 15 days after written notice thereof shall have been delivered by CoBank to the Company.     (D) Other Covenants and Agreements.  The Company should fail to perform or comply with any other covenant or agreement contained herein or in any other Loan Document or shall use the proceeds of any loan for an unauthorized purpose.     (E) Cross-Default.  The Company should, after any applicable grace period, breach or be in default under the terms of any other agreement between the Company and CoBank.     (F) Other Indebtedness.  The Company should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of property (including any capitalized lease), or any other event occurs which, under any agreement or instrument relating to such indebtedness or obligation, has the effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether or not such indebtedness or obligation is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise.     (G) Judgments.  A judgment, decree, or order for the payment of money shall be rendered against the Company in an amount which, if enforced, would have a material adverse effect on the financial condition, profits or operations of the Compay, or a Lien prohibited under Section 9(B) hereof shall have been obtained and shall continue in effect for a period of 20 consecutive days without being discharged, satisfied, or stayed pending appeal.     (H) Insolvency, Etc.  The Company shall: (i) become insolvent or shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they come due; or (ii) suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (iii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of its property or, in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is so appointed; or (iv) commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation Law of any jurisdiction.     (I) Material Adverse Change.  Any material adverse change occurs, as reasonably determined by CoBank, in the Company's financial condition, results of operation, or ability to perform its obligations hereunder or under any instrument or document contemplated hereby. 8 --------------------------------------------------------------------------------     (J) Guaranties.  The Company's agreement to guaranty, assume, or provide surety of other entities' financial obligations shall not exceed an aggregate amount greater than 10% of the Company's net worth, without the Bank's prior written consent.     SECTION 12.  Remedies.  Upon the occurrence and during the continuance of an Event of Default or any Potential Default, CoBank shall have no obligation to continue to extend credit to the Company and may discontinue doing so at any time without prior notice. CoBank shall promptly notify the Company subsequent to any action to discontinue extending credit to the Company. In addition, upon the occurrence and during the continuance of any Event of Default, CoBank may, upon notice to the Company, terminate any commitment and declare the entire unpaid principal balance of the loans, all accrued interest thereon, and all other amounts payable under this agreement, all Supplements, and the other Loan Documents to be immediately due and payable. Upon such a declaration, the unpaid principal balance of the loans and all such other amounts shall become immediately due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by the Company. In addition, upon such an acceleration:     (A) Enforcement.  CoBank may proceed to protect, exercise, and enforce such rights and remedies as may be provided by this agreement, any other Loan Document or under Law. Each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of CoBank to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any other or future exercise thereof, or the exercise of any other right. Without limiting the foregoing, CoBank may hold and/or set off and apply against the Company's obligations to CoBank the proceeds of any equity in CoBank, any cash collateral held by CoBank, or any balances held by CoBank for the Company's account (whether or not such balances are then due).     (B) Application of Funds.  CoBank may apply all payments received by it to the Company's obligations to CoBank in such order and manner as CoBank may elect in its sole discretion.     In addition to the rights and remedies set forth above: (i) if the Company fails to purchase any equity in CoBank when required or fails to make any payment to CoBank when due, then at CoBank's option in each instance, such payment shall bear interest from the date due to the date paid at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan; and (ii) after the maturity of any loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such loan (including without limitation, principal, interest, fees and expenses) shall automatically bear interest at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan. All interest provided for herein shall be payable on demand and shall be calculated on the basis of a year consisting of 360 days.     SECTION 13.  Broken Funding Surcharge.  Notwithstanding any provision contained in any Supplement giving the Company the right to repay any loan prior to the date it would otherwise be due and payable, the Company agrees that in the event it repays any fixed rate balance prior to its scheduled due date or prior to the last day of the fixed rate period applicable thereto (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Company will pay to CoBank a surcharge in an amount which would result in CoBank being made whole (on a present value basis) for the actual or imputed funding losses incurred by CoBank as a result thereof. Notwithstanding the foregoing, in the event any fixed rate balance is repaid as a result of the Company refinancing the loan with another lender or by other means, then in lieu of the foregoing, the Company shall pay to CoBank a surcharge in an amount sufficient (on a present value basis) to enable CoBank to maintain the yield it would have earned during the fixed rate period on the amount repaid. Such surcharges will be calculated in accordance with methodology established by CoBank (a copy of which will be made available to the Company upon request). 9 --------------------------------------------------------------------------------     SECTION 14.  Complete Agreement, Amendments.  This agreement, all Supplements, and all other instruments and documents contemplated hereby and thereby, are intended by the parties to be a complete and final expression of their agreement. No amendment, modification, or waiver of any provision hereof or thereof, and no consent to any departure by the Company herefrom or therefrom, shall be effective unless approved by CoBank and contained in a writing signed by or on behalf of CoBank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event this agreement is amended or restated, each such amendment or restatement shall be applicable to all Supplements hereto.     SECTION 15.  Other Types of Credit.  From time to time, CoBank may issue letters of credit or extend other types of credit to or for the account of the Company. In the event the parties desire to do so under the terms of this agreement, such extensions of credit may be set forth in any Supplement hereto and this agreement shall be applicable thereto.     SECTION 16.  Applicable Law.  Except to the extent governed by applicable federal law, this agreement and each Supplement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine.     SECTION 17.  Notices.  All notices hereunder shall be in writing and shall be deemed to be duly given upon delivery if personally delivered or sent by telegram or facsimile transmission, or 3 days after mailing if sent by express, certified or registered mail, to the parties at the following addresses (or such other address for a party as shall be specified by like notice): If to CoBank, as follows:   If to the Company, as follows: CoBank, ACB Corporate Finance P.O. Box 5110 Denver, Colorado 80217 Fax # (303) 694-5830   American Crystal Sugar Company ATTN: Treasurer 101 North 3rd Street, Moorhead, Minnesota 56560 FAX#: (218) 236-4702     SECTION 18.  Taxes and Expenses.  To the extent allowed by law, the Company agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained by CoBank) incurred by CoBank in connection with the origination, administration, collection, and enforcement of this agreement and the other Loan Documents, including, without limitation, all costs and expenses incurred in perfecting, maintaining, determining the priority of, and releasing any security for the Company's obligations to CoBank, and any stamp, intangible, transfer, or like tax payable in connection with this agreement or any other Loan Document.     SECTION 19.  Effectiveness and Severability.  This agreement shall continue in effect until: (i) all indebtedness and obligations of the Company under this agreement, all Supplements, and all other Loan Documents shall have been paid or satisfied; (ii) CoBank has no commitment to extend credit to or for the account of the Company under any Supplement; and (iii) either party sends written notice to the other terminating this agreement. Any provision of this agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof.     SECTION 20.  Successors and Assigns.  This agreement, each Supplement, and the other Loan Documents shall be binding upon and inure to the benefit of the Company and CoBank and their respective successors and assigns, except that the Company may not assign or transfer its rights or obligations under this agreement, any Supplement or any other Loan Document without the prior written consent of CoBank.     SECTION 21.  Participations.  From time to time, CoBank may sell to one or more banks or other financial institutions a participation in one or more of the loans or other extensions of credit made 10 -------------------------------------------------------------------------------- pursuant to this agreement. However, no such participation shall relieve CoBank of any commitment made to the Company under any Supplement hereto. In connection with the foregoing, CoBank may disclose information concerning the Company to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential.     IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 11 -------------------------------------------------------------------------------- Loan No. Z269S01A STATUSED REVOLVING CREDIT SUPPLEMENT     THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of April 21, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269S01.     SECTION 1.  The Revolving Credit Facility.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, the lesser of the "Borrowing Base" (as calculated pursuant to the Borrowing Base Certificate, the form of which is attached hereto as Exhibit A) or $210,000,000.00 (the "Commitment"). Within the limits of the Commitment, but subject to the Borrowing Base, the Company may borrow, repay and reborrow.     SECTION 2.  Purpose and Transfer.  The purpose of the Commitment is to finance the Company's general corporate purposes, fund working capital requirements, back the Company's commercial paper program, issue short-term commercial and standby letters of credit, and to renew, extend, and refinance the Company's obligations to CoBank under the Company's existing seasonal loan pursuant to Note No. 29590 (the "Existing Seasonal Loan") and the existing letter of credit commitment pursuant to Note No. 30812 (the Existing LC Commitment") (collectively, the "Notes"), both executed pursuant to the Seasonal Loan Agreement dated March 5, 1999 (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent to CoBank's obligation to extend credit hereunder have been satisfied: (a) the principal balance outstanding under the Existing Seasonal Loan shall be transferred to and charged against the Commitment; (b) all accrued obligations of the Company under the Existing Seasonal Loan and the Existing LC Commitment for the payment of interest or other charges shall be transferred to and become part of the Company's obligations under this Supplement as if fully set forth herein; and, (c) the Notes and the Existing Agreement shall be deemed replaced and superseded.     SECTION 3.  Term.  The term of the Commitment shall be from the date hereof, up to but not including March 30, 2001, or such later date as CoBank may, in its sole discretion, authorize in writing.     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:     (A) Base Rate Option.  At a rate per annum at all times equal to the Base Rate. For the purposes hereof, Base Rate means that rate in effect from day to day defined as the "prime" rate as published from time to time in the Eastern Edition of The Wall Street Journal as the average prime lending rate for seventy-five percent (75%) of the United States; thirty (30) largest commercial banks, or if The Wall Street Journal shall cease publication or cease publishing the "prime rate" on a regular basis, such other regularly published average prime rate applicable to such commercial banks as is acceptable to the Lender in its reasonable discretion. Loans for which the Base Rate option is selected are referred to herein as "Base Rate Loans". Base Rate Loans shall be: (a) in minimum amounts of $5,000,000 and incremental multiples of $1,000,000; and (b) made available on any Banking Day. Interest on Base Rate Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears on the twentieth Banking Day of the following month.     (B) Quoted Rate Option.  At a fixed rate per annum at all times equal to the Quoted Rate. For the purposes hereof, Quoted Rate means a fixed rate of interest to apply to a loan (referred to herein as a "Quoted Rate Loan") for a specified period of time not to exceed thirty (30) days quoted by CoBank in its sole discretion. 1 -------------------------------------------------------------------------------- Quoted Rate Loans shall be (i) in minimum amounts of $1,000,000 and incremental multiples of $1,000,000; and (ii) made available on any Banking Day. The Quoted Rate may not necessarily be the lowest rate at which CoBank funds at that time. Interest on Quoted Rate Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears on the twentieth Banking Day of the following month.     (C) LIBOR Option.  At a fixed rate equal to LIBOR plus the Applicable Margin (as defined below). For the purposes hereof, LIBOR means the rate for deposits in U.S. Dollars, with maturities comparable to the selected LIBOR Interest Period, that appears on the display designed as page "3750" of the Telerate Service (or such other page as may replace the 3750 page of that service of if the Telerate Service shall cease displaying such rates, such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London Interbank Offered Rates for U.S. Dollar deposits), determined as of 11:00 a.m. London time two Banking Days prior to the commencement of such LIBOR Interest Period. "LIBOR Interest Period" means a period of one, two, three or six months. LIBOR pricing will be adjusted for Regulation D reserve requirements. The Applicable Margin is 70 basis points. Loans for which the LIBOR option is selected are referred to herein as "LIBOR Loans". LIBOR Loans shall be: (a) in a minimum amount of $5,000,000 and incremental multiples of $1,000,000; (b) made available on three Banking Days prior notice; and (c) be for periods of one, two, three, or six months. Interest on LIBOR Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable in arrears upon maturity of the applicable LIBOR Interest Period, but no less frequently than quarterly. The LIBOR option shall be subject to the following limitations: (1)Notwithstanding anything herein to the contrary, if, on or prior to the determination of the LIBOR rate for any LIBOR Interest Period, CoBank determines (which determination shall be conclusive) that quotations of interest rates in accordance with the definition of LIBOR rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for LIBOR rate advances as provided in this Supplement, then CoBank shall give the Company prompt notice thereof, and so long as such condition remains in effect, CoBank shall be under no obligation to make LIBOR rate loans, convert Base Rate loans into LIBOR rate loans, or continue LIBOR rate loans, and the Company shall, on the last day(s) of the then current applicable LIBOR Interest Period(s) for the outstanding LIBOR rate loans, either prepay such LIBOR rate loans or such LIBOR rate loans shall automatically be converted into a Base Rate loan in accordance with this Section 4. (2)If any law, treaty, rule, regulation or determination of a court or governmental authority or any change therein or in the interpretation or application thereof subsequent to the date hereof (each, a "Change in Law") shall make it unlawful for CoBank to (a) advance any LIBOR rate loan or (b) maintain all or any portion of a LIBOR rate loan, then CoBank shall promptly notify the Company thereof. In the former event, any obligation of CoBank to make available any future LIBOR rate loan shall immediately be canceled (and, in lieu thereof shall be made as a Base Rate loan or Quoted Rate loan at the option of the Company), and in the latter event, any such unlawful LIBOR rate loan or portions thereof then outstanding shall be converted, at the option of the Company, to either a Base Rate loan or a Quoted Rate loan; provided, however, that if any such Change in Law shall permit the LIBOR rate to remain in effect until the expiration of the LIBOR rate period applicable to any such unlawful LIBOR rate loan, then such LIBOR rate loan shall continue in effect until the expiration of such LIBOR rate period. Upon the occurrence of any of the foregoing events on account of any Change in Law, the Company shall pay to CoBank immediately upon demand such amounts as may be necessary to compensate 2 -------------------------------------------------------------------------------- CoBank for any fees, charges, or other costs incurred or payable by CoBank as a result thereof and which are attributable to any LIBOR rate loans made available to the Company hereunder. (3)If CoBank shall determine that, after the date hereof, the adoption of any applicable Law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of CoBank as a consequence of CoBank's obligations hereunder to a level below that which CoBank could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy existing on the date of this Supplement) by an amount deemed by CoBank to be material, then from time to time, within fifteen (15) days after demand by CoBank, the Company shall pay to CoBank such additional amount or amounts as will compensate CoBank for such reduction. If CoBank is to require the Company to make payments under this Section then CoBank must make a demand on the Company to make such payment within ninety (90) days of the later of (1) the date on which such capital costs are actually incurred by CoBank, or (2) the date on which CoBank knows, or should have known, that such capital costs have been incurred by CoBank. The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the Base Rate unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loan. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. As used in this Section 4, "Banking Day" means a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England     SECTION 5.  Promissory Note.  The Company promises to repay the unpaid principal balance of the loans on the first CoBank business day following the last day of the term of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.     SECTION 6.  Borrowing Base Certificate, Etc.  The Company agrees to furnish a Borrowing Base Certificate to CoBank at such times or intervals as CoBank may from time to time request. Until receipt of such a request, the Company agrees to furnish a Borrowing Base Certificate to CoBank within 30 days after each month end calculating the Borrowing Base as of the last day of the month for which the Certificate is being furnished. However, if no balance is outstanding hereunder on the last day of such period, no Report need be furnished. Regardless of the frequency of the reporting, if at any time the amount outstanding under the Commitment exceeds the Borrowing Base, the Company shall immediately notify CoBank and repay so much of the loans as is necessary to reduce the amount outstanding under the Commitment to the limits of the Borrowing Base.     SECTION 7.  Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 12.5 3 -------------------------------------------------------------------------------- basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter. The unused amount of the 364-Day facility will be the difference between the 364-Day Commitment and the sum of the outstanding 364-Day Facility Loans and the undrawn face amount of all outstanding Letters of Credit.     SECTION 8.  Letters of Credit.  In addition to loans, and if agreeable to CoBank in its sole discretion in each instance, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). This Commitment shall expire on December 31, 2001. The fee for issuing each letter of credit shall be 70 basis points of the face amount of each letter of credit, along with an issuance fee to CoBank, for its own account, equal to the greater of (a) 1/8% of the face amount of the letter of credit, or (b) $2,000. The Company promises to repay the outstanding balance on the Commitment in full on demand, or if no demand is made, then any time on or before the commitment expiration date of December 31, 2001.     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- [Form of Borrowing Base] American Crystal Sugar Company Monthly Borrowing Base For the month ended                   Trade Accounts Receivables   $   @ 80%   $   (a)     --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       Trade Accounts Receivables are defined as those of the Borrower and all Guarantors which: (1) arise from the sale and delivery of inventory on ordinary trade terms; (2) are evidenced by an invoice; (3) are net of any credit, trade or other allowance given to the account debtor; (4) are not owing by an account debtor who has become insolvent or is the subject of any bankruptcy, reorganization, liquidation or like proceeding; (5) are not subject to any offset or deduction; (6) are not owing by an affiliate of Borrower; (7) are not owing by an obligor located outside of the U.S. unless the receivable is supported by a letter of credit issued by a bank acceptable to the Lender; and (8) are not government receivables. The above provisions notwithstanding, Trade Receivables shall also exclude (i) any accounts that are past due more than 90 days, and (ii) any contra account regardless of the date;   Inventory       $       (b)                     --------------------------------------------------------------------------------               Inventory as determined on the basis of Net Realizable Value, defined as the expected selling price of an inventory item less expected costs to complete and dispose, as determined in accordance with GAAP.   Crop Payments due Non-members and members       $       (c)                     --------------------------------------------------------------------------------               Net Inventory Value (b-c)       $       @ 75%       $       (d)     --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       Borrowing Base (a+d)                       $                     --------------------------------------------------------------------------------       Commercial Paper                       $       (e)             --------------------------------------------------------------------------------       Seasonal Loan                               (f)             --------------------------------------------------------------------------------       CCC                               (g)             --------------------------------------------------------------------------------       Total Short-term Loans (e+f+g)                       $                     --------------------------------------------------------------------------------     1 -------------------------------------------------------------------------------- Exhibit A LETTER OF CREDIT REIMBURSEMENT AGREEMENT     In consideration of CoBank issuing one or more letters of credit (each a "Credit") for the Company's account under the Supplement to which this agreement is attached (the "Supplement"), the Company agrees as follows:     1.  The Company will pay to CoBank in United States currency and in immediately available funds the amount of each draft drawn or instrument paid under a Credit. In addition, the Company agrees to pay to CoBank such fee for issuing each Credit as CoBank shall prescribe, as well as all customary charges associated with the issuance of a Credit. If a Credit is payable in a foreign currency, the Company will pay to CoBank an amount in United States currency equivalent to CoBank's selling rate of exchange for that currency. In addition to the amounts set forth above, the Company shall pay to CoBank such amounts as CoBank shall determine are necessary to compensate CoBank for any cost attributable to CoBank issuing or having outstanding any Credit resulting from the application of any law or regulation concerning any reserve, assessment, capital adequacy or similar requirement relating to letters of credit, reimbursement agreements with respect thereto, or to similar liabilities or assets of banks, whether existing at the time of the issuance of a Credit or adopted thereafter. Each payment hereunder shall be payable on demand at the place and manner set forth in the Master Loan Agreement between the parties (the "MLA") and with interest from the date of demand to the date paid at CoBank's National Variable Rate. The Company hereby authorizes CoBank to create a loan under the Supplement bearing interest at the variable rate set forth therein for any sums owing hereunder.     2.  Neither CoBank nor any of its correspondents shall in any way be responsible for the performance by any beneficiary of its obligations to the Company nor for the form, sufficiency, correctness, genuineness, authority of the person signing, falsification or legal effect of any documents called for under a Credit if such documents on their face appear to be in order. In addition, CoBank and its correspondents may receive and accept or pay as complying with the terms of a Credit any drafts, documents, or certificates, otherwise in order, signed by any person purporting to be an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under a Credit to draw or issue such instruments or other documents.     3.  In the event the Credit is a commercial Credit, then, in addition to the other provisions hereof, the Company: (i) agrees to obtain or cause to be in existence insurance on any merchandise described in the Credit against fire and other usual risks and against any additional risks which CoBank may request; and (ii) authorizes and empowers CoBank to collect the amount due under any such insurance and apply the same against any of the Company's obligations to CoBank arising under the Credit or otherwise. In addition, whether the Credit is a commercial or a standby Credit, the Company represents and warrants that any required import, export or foreign exchange licenses or other governmental approvals relevant to the Credit and the merchandise described therein have been obtained and that the transactions contemplated thereby are not prohibited under any law, rule, regulation, order or the like, including the Foreign Assets Control Regulations of the U.S. Department of Treasury.     4.  All directions and correspondence relating to a Credit are to be sent at the Company's risk and CoBank does not assume any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph, cable or other electronic means, or for any inaccuracy of translation.     5.  CoBank shall not be responsible for any act, error, neglect, default, omission, insolvency or failure in business of any of its correspondents, and any action taken or omitted by CoBank or its correspondents under or in connection with a Credit shall, if taken or omitted with honesty in fact, be binding on the Company and shall not put CoBank or its correspondents under any resulting liability to the Company. In no event shall CoBank be liable for special, consequential or punitive damages. 1 --------------------------------------------------------------------------------     6.  The Company will indemnify CoBank against and hold it harmless from all loss, damage, cost and expense (including attorneys' fees and expenses) arising out of (i) its issuance of or any other action taken by CoBank in connection with a Credit, other than loss or damage resulting from its gross negligence or willful misconduct, and (ii) claims or legal proceedings incident to the collection of amounts owed by the Company hereunder, or the enforcement of CoBank's rights or the rights of others under a Credit, including, without limitation, legal proceedings relating to any court order, injunction or other process or decree restraining or seeking to restrain CoBank from paying any amount under a Credit.     7.  In the event: (i) the Company fails to make any payment owing hereunder when the same shall become due and payable; (ii) any covenant or representation or warranty set forth herein is breached; (iii) the "Commitment" (as defined in the Supplement) expires prior to the expiration date of any Credit; or (iv) an "Event of Default" (as defined in the MLA) occurs under the MLA, then, in any such event, the amount of each Credit, together with any amounts payable by us in connection therewith, shall, at CoBank's option, become immediately due and payable. To the extent that any amount paid by the Company pursuant to this Section 7 shall not then be due under the terms of a Credit, such payment shall serve as security for the Company's obligation to indemnify CoBank for any amounts subsequently disbursed by CoBank pursuant to a Credit. Furthermore, upon the institution of any legal proceeding described in Section 6(ii) hereof, the Company will, on demand, assign and deliver to CoBank, as security for the Company's obligation to indemnify CoBank, cash collateral in an amount satisfactory to CoBank.     8.  CoBank shall be fully protected in, and shall incur no liability to the Company for acting upon, any oral, telephonic, facsimile, cable or other electronic instructions which CoBank in good faith believes to have been given by any authorized person. CoBank may, at its option, use any means of verifying any instructions received by it and may also, at its option, refuse to act on any oral, telephonic, facsimile, cable or other electronic instructions or any part thereof, without incurring any responsibility for any loss, liability or expenses arising out of such refusal.     9.  The Uniform Customs and Practice as most recently published by the International Chamber of Commerce (hereafter called the "UCP") shall in all respects be deemed a part hereof as fully as if incorporated herein, and shall apply to the Credits. To the extent the UCP is inconsistent with the governing law set forth in the MLA, the UCP shall control. 2 -------------------------------------------------------------------------------- Loan No. Z269T01 REVOLVING TERM LOAN SUPPLEMENT     THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company").     SECTION 1.  The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $88,698,180.00 at any one time outstanding (the "Commitment"). Within the limits of the Commitment, the Company may borrow, repay and reborrow.     SECTION 2.  Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company and to renew, extend, and refinance the Company's obligations to CoBank under the Company's existing reinstatable term loan (the "Existing Reinstatable Term Loan") as currently evidenced by Note No. 31143 (the "Note") entered into pursuant to the Term Loan Agreement dated March 5, 1999 (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent to CoBank's obligation to extend credit hereunder have been satisfied: (a) the principal balance outstanding under the Existing Reinstatable Term Loan shall be transferred to and charged against the Commitment; (b) all accrued obligations of the Company under the Existing Reinstatable Term Loan for the payment of interest or other charges shall be transferred to and become part of the Company's obligations under this Supplement as if fully set forth herein; and, (c) the Note and the Existing Agreement (to the extent applicable to the Note) shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA.     SECTION 3.  Term.  The term of the Commitment shall be from March 31, 2000, up to but not including March 31, 2001, or such later date as CoBank may, in its sole discretion, authorize in writing.     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:     (A) Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.     (B) Quoted Rate Option.  At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.     (C) LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below). Under this option: (a) rates may be fixed for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6 months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days' prior notice. For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the 1 -------------------------------------------------------------------------------- Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that: (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS Rate Product --------------------------------------------------------------------------------   Index --------------------------------------------------------------------------------   Spread Over Index in Basis Points -------------------------------------------------------------------------------- One Month   LIBOR   90 bps Two Months   LIBOR   90 bps Three Months   LIBOR   90 bps Six Months   LIBOR   90 bps     (D) Treasury Option.  At a fixed rate equal to Applicable "Treasury" Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined). Under this option, balances of $2,000,000.00 or more may be fixed on or before for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed. If, however, no instrument is indicated for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations TREASURY MARGINS One Year   U.S.$ Constant Maturity Treasury ("US$CMT")   125 bps Two Years   US$CMT   125 bps Three Years   US$CMT   125 bps Four Years   US$CMT   125 bps Five Years   US$CMT   125 bps Seven Years   US$CMT   140 bps Ten Years   US$CMT   140 bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank's cost of funds (as reasonably determined by CoBank in its sole discretion)   105 bps 2 --------------------------------------------------------------------------------     The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts based on the Borrower's previous fiscal quarter's leverage ratio, as follows: Leverage Ratio (as defined below) --------------------------------------------------------------------------------   Increase / Decrease to Spread --------------------------------------------------------------------------------   Change to Libor and Treasury Margins (In Basis Points) -------------------------------------------------------------------------------- A.   Equal to or greater than 1.35:1.00   Increase   20 B.   Equal to or greater than 1.20:1.00, but less than 1.35:1.00   None   0 C.   Less than 1.20:1.00, but greater than or equal to 1.00:1.00   Decrease   10 D.   Less than 1.00:1.00   Decrease   20     Leverage Ratio:  The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002. Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains.     The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter.     The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.     SECTION 5.  Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $9,396,579.17 each due on or before December 31st of each year through December 31, 2008, and a final principal payment due on or before December 31, 2009. All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof.     The Company shall be permitted to make special payments, in a minimum amount of $388,500.00, on the variable rate portion of this loan, when all short term financing, including the Company's seasonal loans, Commodity Credit Corporation loans and other short term loans have been zeroed out. These special payments may be readvanced through the expiration date of the Commitment. Reinstatement may be denied and canceled at any time at the option of CoBank. The reinstatable commitments arising from such special payments shall be subject to the Commitment Fee as described in Section 8 below.     SECTION 6.  Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day's prior written notice. During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify. After the expiration of the term of the 3 -------------------------------------------------------------------------------- Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.     SECTION 7.  Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 12.5 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter. Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.     SECTION 8.  Commitments Arising From Special Payments.  Commitments arising as a result of special payments described in Section 5 above shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment. Any such fees incurred shall be payable on the last day of the calendar quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which such reinstatable commitments were outstanding.     SECTION 9.  Security.  In addition to any other security that may otherwise be required or provided, the Company's obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- Loan No. Z269T01NP REVOLVING TERM LOAN SUPPLEMENT     THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company").     SECTION 1.  The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $71,771,820.00 at any one time outstanding (the "Commitment"). Within the limits of the Commitment, the Company may borrow, repay and reborrow.     SECTION 2.  Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company and to renew, extend, and refinance the Company's obligations to CoBank under the Company's existing reinstatable term loan (the "Existing Reinstatable Term Loan") as currently evidenced by Note No. 31143NP (the "Note") entered into pursuant to the Term Loan Agreement dated March 5, 1999 (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent to CoBank's obligation to extend credit hereunder have been satisfied: (a) the principal balance outstanding under the Existing Reinstatable Term Loan shall be transferred to and charged against the Commitment; (b) all accrued obligations of the Company under the Existing Reinstatable Term Loan for the payment of interest or other charges shall be transferred to and become part of the Company's obligations under this Supplement as if fully set forth herein; and, (c) the Note and the Existing Agreement (to the extent applicable to the Note) shall be deemed replaced and superseded, but the indebtedness evidenced by such Notes shall not be deemed to have been paid off, by this Supplement and the MLA.     SECTION 3.  Term.  The term of the Commitment shall be from March 31, 2000, up to but not including March 31, 2001, or such later date as CoBank may, in its sole discretion, authorize in writing.     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:     (A) Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.     (B) Quoted Rate Option.  At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.     (C) LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below). Under this option: (a) rates may be fixed for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6 months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days' prior notice. For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the 1 -------------------------------------------------------------------------------- Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that: (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS Rate Product --------------------------------------------------------------------------------   Index --------------------------------------------------------------------------------   Spread Over Index in Basis Points -------------------------------------------------------------------------------- One Month   LIBOR   90 bps Two Months   LIBOR   90 bps Three Months   LIBOR   90 bps Six Months   LIBOR   90 bps     (D) Treasury Option.  At a fixed rate equal to the Applicable Treasury Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined). Under this option, balances of $2,000,000.00 or more may be fixed on or before for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed. If, however, no instrument is indicated for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations TREASURY MARGINS One Year   U.S.$ Constant Maturity Treasury ("US$CMT")   125 bps Two Years   US$CMT   125 bps Three Years   US$CMT   125 bps Four Years   US$CMT   125 bps Five Years   US$CMT   125 bps Seven Years   US$CMT   140 bps Ten Years   US$CMT   140 bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank's cost of funds (as reasonably determined by CoBank in its sole discretion)   105 bps 2 --------------------------------------------------------------------------------     The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts based on the Borrower's previous fiscal quarter's leverage ratio, as follows: Leverage Ratio (as defined below) --------------------------------------------------------------------------------   Increase / Decrease to Spread --------------------------------------------------------------------------------   Change to Libor and Treasury Margins (in Basis Points) -------------------------------------------------------------------------------- A.   Equal to or greater than 1.35:1.00   Increase   20 B.   Equal to or greater than 1.20:1.00, but less than 1.35:1.00   None   0 C.   Less than 1.20:1.00, but greater than or equal to 1.00:1.00   Decrease   10 D.   Less than 1.00:1.00   Decrease   20     Leverage Ratio:  The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002. Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains.     The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter.     The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.     SECTION 5.  Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $7,603,420.83 each due on or before December 31st of each year through December 31, 2008, and a final principal payment due on or before December 31, 2009. All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof.     The Company shall be permitted to make special payments, in a minimum amount of $111,500.00, on the variable rate portion of this loan, when all short term financing, including the Company's seasonal loans, Commodity Credit Corporation loans and other short term loans have been zeroed out. These special payments may be readvanced through the expiration date of the Commitment. Reinstatement may be denied and canceled at any time at the option of CoBank. The reinstatable commitments arising from such special payments shall be subject to the Commitment Fee as described in Section 8 below.     SECTION 6.  Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day's prior written notice. During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify. After the expiration of the term of the 3 -------------------------------------------------------------------------------- Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.     SECTION 7.  Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 12.5 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter. Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.     SECTION 8.  Commitments Arising From Special Payments.  Commitments arising as a result of special payments described in Section 5 above shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment. Any such fees incurred shall be payable on the last day of the calendar quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which such reinstatable commitments were outstanding.     SECTION 9.  Security.  In addition to any other security that may otherwise be required or provided, the Company's obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- Loan No. Z269T02NP REVOLVING TERM LOAN SUPPLEMENT     THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company").     SECTION 1.  The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $20,000,000.00 at any one time outstanding (the "Commitment"). Within the limits of the Commitment, the Company may borrow, repay and reborrow, provided, however, no advances shall be made on this Term Loan, until Term Loan No. Z269T01, has been fully advanced.     SECTION 2.  Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company and to renew, extend, and refinance the Company's obligations to CoBank under the Company's existing reinstatable term loan (the "Existing Reinstatable Term Loan") as currently evidenced by Note No. 31144NP (the "Note") entered into pursuant to the Term Loan Agreement dated March 5, 1999 (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent to CoBank's obligation to extend credit hereunder have been satisfied: (a) the principal balance outstanding under the Existing Reinstatable Term Loan shall be transferred to and charged against the Commitment; (b) all accrued obligations of the Company under the Existing Reinstatable Term Loan for the payment of interest or other charges shall be transferred to and become part of the Company's obligations under this Supplement as if fully set forth herein; and, (c) the Note and the Existing Agreement (to the extent applicable to the Note) shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA.     SECTION 3.  Term.  The term of the Commitment shall be from March 31, 2000, up to but not including March 31, 2001, or such later date as CoBank may, in its sole discretion, authorize in writing.     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:     (A) Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.     (B) Quoted Rate Option.  At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.     (C) LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below). Under this option: (a) rates may be fixed for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6 months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days' prior notice. For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open 1 -------------------------------------------------------------------------------- for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that: (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS Rate Product --------------------------------------------------------------------------------   Index --------------------------------------------------------------------------------   Spread over Index in Basis Points -------------------------------------------------------------------------------- One Month   LIBOR   90 bps Two Months   LIBOR   90 bps Three Months   LIBOR   90 bps Six Months   LIBOR   90 bps     (D) Treasury Option.  At a fixed rate equal to Applicable "Treasury" Margin per annum (as described in terms of basis points ("bps") in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined). Under this option, balances of $2,000,000.00 or more may be fixed on or before for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed. If, however, no instrument is indicated for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations TREASURY MARGINS One Year   U.S.$ Constant Maturity Treasury ("US$CMT")   125 bps Two Years   US$CMT   125 bps Three Years   US$CMT   125 bps Four Years   US$CMT   125 bps Five Years   US$CMT   125 bps Seven Years   US$CMT   140 bps Ten Years   US$CMT   140 bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank's cost of funds (as reasonably determined by CoBank in its sole discretion)   105 bps 2 --------------------------------------------------------------------------------     The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts based on the Borrower's previous fiscal quarter's leverage ratio, as follows: Leverage Ratio (as defined below) --------------------------------------------------------------------------------   Increase/Decrease to Spread --------------------------------------------------------------------------------   Change to Libor and Treasury Margins (in Basis Points) -------------------------------------------------------------------------------- A.   Equal to or greater than 1.35:1.00   Increase   20 B.   Equal to or greater than 1.20:1.00, but less than 1.35:1.00   None   0 C.   Less than 1.20:1.00, but greater than or equal to 1.00:1.00   Decrease   10 D.   Less than 1.00:1.00   Decrease   20     Leverage Ratio:  The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002. Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains.     The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter.     The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.     SECTION 5.  Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $2,000,000.00 each due on or before December 31st of each year commencing in 2001. All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof.     SECTION 6.  Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day's prior written notice. During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify. After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.     SECTION 7.  Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of 12.5 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day 3 -------------------------------------------------------------------------------- following each calendar quarter. Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.     SECTION 8.  Letters of Credit.  In addition to loans, and if agreeable to CoBank in its sole discretion in each instance, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). The fee for issuing each letter of credit shall be determined at the time of application.     SECTION 9.  Security.  In addition to any other security that may otherwise be required or provided, the Company's obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- Loan No. Z269T03A NP SINGLE ADVANCE TERM LOAN SUPPLEMENT     THIS SUPPLEMENT to the Master Loan Agreement dated as of March 31, 2000 (the "MLA"), is entered into as of April 21, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269T03NP.     SECTION 1.  The Term Loan.  This Supplement is to evidence a term loan to the Company in the original principal commitment amount of $12,000,000.00 (the "Loan"). The Loan is currently evidenced by Note No. 30800NP (the "Note") and is subject to the terms of that certain Note Agreement dated December 5, 1994 by and among the Company, CoBank's predecessor (the St. Paul Bank for Cooperatives), and Bank of North Dakota (the "Note Agreement"). The outstanding principal balance of the Loan as of the date hereof is $7,200,000.00.     SECTION 2.  Purpose and Transfer.  The purpose of this Supplement is to replace the Note and transfer the indebtedness evidenced thereby to this Supplement. As of the date of this Supplement, the Note shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA. The Note Agreement shall remain in full force and effect except that any reference to the "Loan" shall be deemed to mean the indebtedness evidenced by this Supplement, and any reference to "Loan Agreement" shall be deemed a reference to the MLA. To the extent that the Note Agreement may be inconsistent with the terms of this Supplement or the MLA, the terms of the Note Agreement shall control. All security given to secure the Note shall secure this Supplement.     SECTION 3.  Availability.  The date for permitting advances under the Note has expired. There is no further availability.     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid balance of the Loan at such rate or rates as determined in accordance with the terms of the Note Agreement. As of the date hereof the interest rate is fixed at 6.34% per annum and shall remain fixed at such rate for the period as provided for in the Note Agreement. All other matters regarding the calculation and payment of interest shall be in accordance with the terms of the Note Agreement (including, without limitation, the terms applicable to prepayment of fixed rate loans prior to pricing maturity dates).     SECTION 5.  Promissory Note.  The Company promises to repay the Loan in accordance with the repayment terms of the Note Agreement. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the terms of the Note Agreement. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.     SECTION 6.  Prepayment.  Subject to the terms of the Note Agreement, the Loan may be prepaid in whole or in part on one CoBank business day's prior written notice.     SECTION 7.  Security.  In addition to any other security that may otherwise be required or provided, the Company's obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent. 1 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- Loan No. Z269T04 LETTER OF CREDIT COMMITMENT SUPPLEMENT.     THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company").     SECTION 1.  The Letter of Credit.  On the terms and conditions set forth in the MLA, CoBank agrees to establish a loan commitment to the Company in an amount not to exceed $31,000,000.00 (the "Commitment"). The Commitment shall expire at 12:00 noon (Company's local time) on April 30, 2013 or on such later date as CoBank may, in its sole discretion, authorize in writing.     SECTION 2.  Purpose.  The purpose of the Commitment is to reimburse CoBank in the event of draws on letters of credit issued by CoBank (or its predecessor) for the benefit of the Company, and to renew, extend and refinance the Company's obligations to CoBank under the Company's existing Letter of Credit Commitment ("Existing Letter of Credit Commitment") as currently evidenced by Note No. 30343 (the "Note") and the Loan Agreement dated March 5, 1999. (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent to CoBank's obligation to extend credit hereunder have been satisfied: (a) the principal balance outstanding (or any obligations outstanding as a result of any letters of credit currently in effect) under the Existing Letter of Credit Commitment shall be transferred to and charged against this Commitment; (b) all accrued obligations of the Company under the Existing Letter of Credit Commitment for the payment of interest or other charges shall be transferred to and become part of the Company's obligations under this Supplement as if fully set forth herein; and, (c) the Note and the Existing Agreement (to the extent applicable to the Note) shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA.     SECTION 3.  Promissory Note.  The Company promises to repay all outstanding balances for advances made in support of outstanding letters of credit, upon demand     SECTION 4.  Interest.  The Company agrees to pay interest on the unpaid principal balance of each loan, from the date of draw to actual repayment on a daily basis for the actual number of days any portion of the principal is outstanding. The unpaid principal balance shall bear interest at a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month.     SECTION 5.  Issuance of Letters of Credit.  Each letter of credit issued shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). The fee for issuing each letter of credit shall be determined CoBank at the time of issuance. The Company promises to repay the outstanding balance on the Commitment in full on demand, or if no demand is made, then any time on or before the Commitment expiration date.     SECTION 6.  Security.  In addition to any other security that may otherwise be required or provided, the Company's obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent. 1 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB   AMERICAN CRYSTAL SUGAR COMPANY   By:       /s/ CASEY GARTEN    --------------------------------------------------------------------------------       By:       /s/ SAMUEL WAI    --------------------------------------------------------------------------------   Title:       Vice President --------------------------------------------------------------------------------       Title:       Treasurer -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- (to be placed on Company letterhead) AMERICAN CRYSTAL SUGAR COMPANY COMPLIANCE CERTIFICATE     To induce CoBank to make and continue making advances to the Company and to comply with and demonstrate compliance with the terms, covenants, and conditions of the Loan Agreement and all Supplements thereto, this financial statement is furnished to the Bank. The undersigned certifies that, (i) this statement was prepared from the books and records of the Association, is in agreement with them, and is correct to the best of the undersigned's knowledge and belief, and (ii) no event has occurred which, with notice or lapse of time, or both, might become an Event of Default under the Loan Agreement. AMERICAN CRYSTAL SUGAR       -------------------------------------------------------------------------------- Date       -------------------------------------------------------------------------------- (Name/Title) 1 -------------------------------------------------------------------------------- [Form of Compliance Certificate] American Crystal Sugar Company Quarterly Compliance Certificate Term and Seasonal Loans Net Working Capital:   a) Current Assets as measured in accordance with GAAP   $     --------------------------------------------------------------------------------   b) Current Liabilities as measured in accordance with GAAP   $     --------------------------------------------------------------------------------   Net Working Capital (a-b)       $     -------------------------------------------------------------------------------- Long-Term Debt Coverage: Net Funds --------------------------------------------------------------------------------   Year 1 --------------------------------------------------------------------------------   Year 2 --------------------------------------------------------------------------------   Year 3 --------------------------------------------------------------------------------       a)       Unit retains       ÷                             b)       Depreciation and amortization       +                             c)       Net income from non-member business and member business tax timing differences       +                             d)       Decrease in investments in other cooperatives (excluding subsidiaries)       +                             e)       Net revenue from the sale of stock       +                             f)       Increase in investments in other cooperatives (excluding subsidiaries)       (        )   (        )       (        )     g)       Net loss from non-member business and member business tax timing differences       (        )   (        )       (        )     h)       Provision for income tax       (        )   (        )       (        )     i)       Members' investment retirements       (        )   (        )       (        )             Sum (a through i)                                                   --------------------------------------------------------------------------------                       Average Net Funds       $   j                                       --------------------------------------------------------------------------------                       Long-term Debt       $   k                                       --------------------------------------------------------------------------------                       Ratio (k / j)           :1                                       --------------------------------------------------------------------------------                                                 1 -------------------------------------------------------------------------------- Long-Term Debt to Capitalization: )   a)   Long-term debt (excluding current maturities) as determined in accordance with GAAP   $         --------------------------------------------------------------------------------     b)       Total equity as measured in accordance with GAAP       $                   --------------------------------------------------------------------------------     c)       Capitalization (a ÷ b)       $                   --------------------------------------------------------------------------------     Long-Term Debt to Capitalization (a / c)       :1.0                   --------------------------------------------------------------------------------                     Leverage Ratio (Term Pricing Only) )   a)   Long-term Debt   $         --------------------------------------------------------------------------------     b)       Actual Less Minimum Net Working Capital       $                   --------------------------------------------------------------------------------     c)       Adjusted Long-term Debt (a - b)       $                   --------------------------------------------------------------------------------     d)       Total Member Investment       $                   --------------------------------------------------------------------------------     e)       Estimated Unit Retains       $                   --------------------------------------------------------------------------------     f)       Adjusted Members Investment (d + e)       $                   --------------------------------------------------------------------------------     g)       Adjusted Leverage Ratio (c / f)       :1.0                   --------------------------------------------------------------------------------                     Pricing Grid (Term Only) A. › 1.35:1       B. 1.20:1       C. ‹ 1.20:1       D. ‹ 1.0:1         --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- QUICKLINKS MASTER LOAN AGREEMENT BACKGROUND STATUSED REVOLVING CREDIT SUPPLEMENT REVOLVING TERM LOAN SUPPLEMENT REVOLVING TERM LOAN SUPPLEMENT LIBOR MARGINS TREASURY MARGINS REVOLVING TERM LOAN SUPPLEMENT LIBOR MARGINS TREASURY MARGINS SINGLE ADVANCE TERM LOAN SUPPLEMENT LETTER OF CREDIT COMMITMENT SUPPLEMENT. AMERICAN CRYSTAL SUGAR COMPANY COMPLIANCE CERTIFICATE

  -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     $58,000,000 CREDIT AGREEMENT DATED AS OF SEPTEMBER 8, 2000 AMONG SUNRISE MEDICAL, INC., as Borrower, THE LENDERS LISTED HEREIN, as Lenders, and BANKERS TRUST COMPANY, as Agent     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     TABLE OF CONTENTS Section 1. DEFINITITONS 1.1 Certain Defined Term 1.2  Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement 1.3  Other Definitional Provisions     Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1  Commitments; Making of Loans; the Register; Notes 2.2  Interest on the Loans 2.3  Fees 2.4  Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments; Application of Proceeds of Collateral and Payments Under Subsidiary Guaranty 2.5  Use of Proceeds 2.6  Special Provisions Governing Eurodollar Rate Loans 2.7  Increased Costs; Taxes; Capital Adequacy 2.8  Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate 2.9  Replacement of a Lender 2.10  Collection, Deposit and Transfer of Payments in Respect of Accounts     Section 3.  LETTERS OF CREDIT 3.1  Issuance of Letters of Credit and Lenders' Purchase of Participations Therein 3.2  Letter of Credit Fees 3.3  Drawings and Reimbursement of Amounts Drawn Under Letters of Credit 3.4  Obligations Absolute 3.5  Indemnification; Nature of Issuing Lenders' Duties     Section 4.  CONDITIONS TO LOANS AND LETTERS OF CREDIT 4.1  Conditions to Initial Revolving Loans 4.2  Conditions to All Loans 4.3  Conditions to Letters of Credit     Section 5.  COMPANY'S REPRESENTATIONS AND WARRANTIES 5.1  Organization, Powers, Qualification, Good Standing, Business and Subsidiaries 5.2  Authorization of Borrowing, etc. 5.3  Financial Condition 5.4  No Material Adverse Change; No Restricted Junior Payments 5.5  Title to Properties; Liens; Real Property 5.6  Litigation; Adverse Facts 5.7  Payment of Taxes 5.8  Performance of Agreements; Materially Adverse Agreements; Material Contracts 5.9  Governmental Regulation 5.10  Securities Activities 5.11  Employee Benefit Plans 5.12  Certain Fees 5.13  Environmental Protection 5.14  Employee Matters 5.15  Solvency 5.16  Matters Relating to Collateral 5.17  Disclosure     Section 6.  COMPANY'S AFFIRMATIVE COVENANTS 6.1  Financial Statements and Other Reports 6.2  Existence, etc. 6.3  Payment of Taxes and Claims; Tax 6.4  Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation Proceeds 6.5  Inspection; Lender Meeting 6.6  Compliance with Laws, etc. 6.7  Company's Remedial Action Regarding Hazardous Materials 6.8  Execution of Subsidiary Guaranty and Personal Property Collateral Documents After the Closing Date     Section 7.  COMPANY'S NEGATIVE COVENANTS 7.1  Indebtedness 7.2  Liens and Related Matters 7.3  Investments; Acquisitions 7.4  Contingent Obligations 7.5  Restricted Junior Payments 7.6  Minimum Consolidated Adjusted EBITDA 7.7  Restriction on Fundamental Changes; Asset Sales 7.8  Maximum Consolidated Adjusted Capital Expenditures 7.9  Deposit Accounts 7.10  Sales and Lease-Backs 7.11  Sale or Discount of Receivables 7.12  Transactions with Shareholders and Affiliates 7.13  Disposal of Subsidiary Stock 7.14  Conduct of Business 7.15  Amendments of Documents Relating to Certain Indebtedness 7.16  Fiscal Year     Section 8.  EVENTS OF DEFAULT 8.1  Failure to Make Payments When Due 8.2  Default in Other Agreements 8.3  Breach of Certain Covenants 8.4  Breach of Warranty 8.5  Other Defaults Under Loan Documents 8.6  Involuntary Bankruptcy; Appointment of Receiver, etc. 8.7  Voluntary Bankruptcy; Appointment of Receiver, etc. 8.8  Judgments and Attachments 8.9  Dissolution 8.10  Employee Benefit Plans 8.11  Change in Control 8.12  Invalidity of Subsidiary Guaranty 8.13  Failure of Security     Section 9.  AGENT 9.1  Appointment 9.2  Powers and Duties; General Immunity 9.3  Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness 9.4  Right to Indemnity 9.5  Successor Agent 9.6  Collateral Documents and Guaranties 9.7  Agent May File Proofs of Claim     Section 10.  MISCELLANEOUS 10.1  Successors and Assigns; Assignments and Participations in Loans and Letters of Credit 10.2  Expenses 10.3  Indemnity 10.4  Set-Off; Security Interest in Deposit Accounts 10.5  Ratable Sharing 10.6  Amendments and Waivers 10.7  Independence of Covenants 10.8  Notices 10.9  Survival of Representations, Warranties and Agreements 10.10  Failure or Indulgence Not Waiver; Remedies Cumulative 10.11  Marshalling; Payments Set Aside 10.12  Severability 10.13  Obligations Several; Independent Nature of Lenders' Rights 10.14  Headings 10.15  Applicable Law 10.16  Construction of Agreement 10.17  Consent to Jurisdiction and Service of Process 10.18  Waiver of Jury Trial 10.19  Confidentiality 10.20  Counterparts; Effectiveness   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   > EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT IV  FORM OF REVOLVING NOTE V  FORM OF SUBSIDIARY GUARANTY VI  FORM OF COMPLIANCE CERTIFICATE VII  FORM OF SUBORDINATION PROVISIONS VIII  FORM OF BORROWING BASE CERTIFICATE IX  FORM OF OPINION OF LATHAM & WATKINS X  FORM OF OPINION OF O'MELVENY & MYERS XI  FORM OF ASSIGNMENT AGREEMENT XII FORM OF BLOCKED ACCOUNT AGREEMENT XIII FORM OF COLLATERAL ACCESS AGREEMENT XIV FORM OF LOCK BOX AGREEMENT XV FORM OF SECURITY AGREEMENT > SCHEDULES 1.1  RESTRUCTURING CHARGES AND RESTRUCTURING CAPITAL EXPENDITURES 2.1  LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1C  CORPORATE, CAPITAL AND OWNERSHIP STRUCTURE 5.1  SUBSIDIARIES OF COMPANY 5.5  REAL PROPERTY ASSETS 5.6  LITIGATION 5.11  CERTAIN EMPLOYEE BENEFIT PLANS 5.13  ENVIRONMENTAL MATTERS 7.1  CERTAIN EXISTING INDEBTEDNESS 7.2  CERTAIN EXISTING LIENS 7.3  CERTAIN EXISTING INVESTMENTS 7.4  CERTAIN CONTINGENT OBLIGATIONS > > > >   > > > > > > > >   > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > >   > > > > > > > >     CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of September 8, 2000 and entered into by and among SUNRISE MEDICAL, INC., a Delaware corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and collectively as "Lenders"), and BANKERS TRUST COMPANY ("BTCo"), as agent for Lenders (in such capacity, "Agent"). R E C I T A L S WHEREAS , Company desires that Lenders extend certain credit facilities to Company to provide financing for (i) refinancing certain of Company's and its Subsidiaries' existing indebtedness in the approximate aggregate principal amount of $41,000,000, and (ii) possible refinancing of certain other indebtedness and working capital and other general corporate purposes of Company and its Subsidiaries; WHEREAS , Company has agreed to secure its Obligations hereunder and under the other Loan Documents by granting to Agent for the benefit of Lenders a first priority Lien on substantially all of its Domestic Accounts and Domestic Inventory; and WHEREAS , the Domestic Subsidiaries of Company have agreed to guarantee the Obligations hereunder and under the other Loan Documents and to secure their guaranties by granting to Agent for the benefit of Lenders a first priority Lien on substantially all of their Accounts and Inventory. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agent agree as follows: Section 1. DEFINITIONS 1.1 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings: "Account" means, with respect to any Person, all present and future rights of such Person to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance. "Acquisition Subordinated Debt" has the meaning assigned that term in the definition of "Subordinated Indebtedness." "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the offered quotation (rounded upward to the nearest 1/16 of one percent) to first class banks in the interbank Eurodollar market by BTCo for U.S. dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of BTCo for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such Interest Period as of approximately 12:00 Noon (New York City time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "Adjusted Pro Rata Share" means, with respect to any Lender, the percentage obtained by dividing (i) the Revolving Loan Exposure of that Lender by (ii) the aggregate Revolving Loan Exposure of all Lenders other than Daily Funding Lender. "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affected Loans" has the meaning assigned to that term in subsection 2.6C. "Affiliate" , as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Affiliated Fund" means, with respect to any Lender, a fund that invests in commercial loans and is managed by the same investment advisor as such Lender, an Affiliate of such Lender or by an Affiliate of the same investment advisor as such Lender. "Agent" has the meaning assigned to that term in the introduction to this Agreement, and, with respect to the issuance of any Letter of Credit and so long as BTCo serves as Agent hereunder, includes any Affiliates of BTCo (including, without limitation, Deutsche Bank AG) acting as an Issuing Lender, and also means and includes any successor Agent appointed pursuant to subsection 9.5. "Agreement" means this Credit Agreement dated as of September 8, 2000, as it may be amended, supplemented or otherwise modified from time to time. "Asset Sale" means the sale by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of (i) any of the stock of any of Company's Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (other than (a) inventory sold in the ordinary course of business and (b) any such other assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions is equal to $100,000 or less). "Assignment Agreement" means an Assignment Agreement in substantially the form of Exhibit XI annexed hereto. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. "Base Rate Margin" means the margin over the Base Rate used in determining the rate of interest of Base Rate Loans pursuant to subsection 2.2A. "Blocked Account Agreement" means the Blocked Account Agreement executed and delivered by a Concentration Bank, Agent and the applicable Loan Party, substantially in the form of Exhibit XII annexed hereto, as such Blocked Account Agreement may be amended, supplemented or otherwise modified from time to time, and "Blocked Account Agreements" means all such Blocked Account Agreements, collectively. "Borrowing Base" means, as at any date of determination, an aggregate amount equal to: > > (i) seventy-five percent (75%) of Eligible Accounts Receivable plus > > > > (ii) fifty percent (50%) of Eligible Inventory up to a maximum amount for > > all such Eligible Inventory equal to thirty percent (30%) of the Total > > Utilization of Revolving Loan Commitments plus > > > > (iii) one hundred percent (100%) of the face amount of any certificate of > > deposit constituting a Cash Equivalent investment which certificate of > > deposit is pledged to Agent for the benefit of Lenders under the Security > > Agreement minus > > > > (iv) the aggregate amount of reserves, if any, established by Agent in the > > exercise of its Permitted Discretion against Eligible Accounts Receivable > > and Eligible Inventory; provided that Agent, in the exercise of its Permitted Discretion, may (a) increase or decrease reserves against Eligible Accounts Receivable and Eligible Inventory and (b) reduce the advance rates provided in this definition, or restore such advance rates to any level equal to or below the advance rates in effect as of the Closing Date. "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit VIII annexed hereto delivered to Lenders by Company pursuant to subsection 4.1 or subsection 6.1(xviii). "BTCo" has the meaning assigned to that term in the introduction to this Agreement. "BTCo Account" means an account maintained by Agent at BTCo into which the applicable Concentration Banks are instructed to transfer funds on deposit in the applicable Concentration Accounts pursuant to the terms of the applicable Blocked Account Agreement, if any. "BT Concentration Account" means an account under the exclusive dominion and control of Agent that is maintained by any Loan Party with BTCo into which the applicable Lock Box Banks are instructed to transfer funds on deposit in the Lock Box Accounts pursuant to the terms of the Lock Box Agreements. "Business Day" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York or California or is a day on which banking institutions located in either such state are authorized or required by law or other governmental action to close; provided that, with respect to any Letter of Credit, "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the state where the Issuing Lender is domiciled or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close. "Capital Lease" , as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means, as at any date of determination, (a) marketable securities (1) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (2) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (c) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (d) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (1) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (2) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (e) shares of any money market mutual fund that (1) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) and (b) above, (2) has net assets of not less than $500,000,000, and (3) has the highest rating obtainable from either S&P or Moody's; (f) investment grade securities maturing within one year after such date; and (g) overnight repurchase agreements maturing within one year after such date. "Cash Management Triggering Event" means that either (x) an Event of Default has occurred or (y) Excess Availability as reflected on Company's latest Borrowing Base Certificate delivered pursuant to subsection 6.1(xviii) exceeds the Total Utilization of Revolving Loan Commitments by less than $3,000,000. "Closing Date" means the date on or before September 15, 2000 on which the initial Loans are made. "Collateral" means, collectively, all of the personal property in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations. "Collateral Access Agreement" means any landlord waiver, mortgagee waiver, bailee letter or any similar acknowledgement agreement of any landlord or mortgagee in respect of any Real Property Asset where any Inventory is located or any warehouseman or processor in possession of Inventory, substantially in the form of Exhibit XIII annexed hereto, with such changes thereto as may be agreed to by Agent. "Collateral Account" has the meaning assigned to that term in the Security Agreement. "Collateral Documents" means the Security Agreement, the Blocked Account Agreements, the Collateral Access Agreements, the Lock Box Agreements and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Agent, on behalf of Lenders, a Lien on any personal property of that Loan Party as security for the Obligations. "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Company or any of its Subsidiaries in the ordinary course of business of Company or such Subsidiary. "Commitments" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "Company" has the meaning assigned to that term in the introduction to this Agreement. "Compliance Certificate" means a certificate substantially in the form of Exhibit VI annexed hereto delivered to Agent and Lenders by Company pursuant to subsection 6.1(iv). "Concentration Accounts" means, collectively, the BT Concentration Accounts and the Other Bank Concentration Accounts. "Concentration Bank" means BTCo or any commercial bank satisfactory to Agent at which any Loan Party maintains a Concentration Account. "Consolidated Adjusted Capital Expenditures" means, for any period, Consolidated Capital Expenditures minus Restructuring Capital Expenditures; provided, however that the Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures in any Fiscal Year shall not exceed (i) for the Fiscal Year ending on or about June 30, 2001, $5,400,000, (ii) for the Fiscal Year ending on or about June 30, 2002, (a) $16,600,000 minus (b) the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for the Fiscal Year ending on or about June 30, 2001; (iii) for the Fiscal Year ending on or about June 30, 2003, (a) $17,400,000 minus (b) the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for the Fiscal Years ending on or about June 30, 2001 and June 30, 2002; and (iv) for the Fiscal Year ending on or about June 30, 2004, (a) $17,400,000 minus (b) the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for the Fiscal Years ending on or about June 30, 2001, June 30, 2002 and June 30, 2003. "Consolidated Adjusted EBITDA" means, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated EBITDA, (ii) income attributable to interest earned on Cash and Cash Equivalents held by Company and its Subsidiaries, (iii) to the extent deducted in determining Consolidated Net Income for such period, rental expense attributable to the sale and leaseback after the Closing Date of any Facility of Company or any of its Subsidiaries, which sale and leaseback is permitted under subsection 7.10, (iv) to the extent deducted in determining Consolidated Net Income for such period but not in excess of an aggregate $1,500,000 for all periods, expenses attributable to any unconsummated sale, merger, or transfer of Project Alpha and Project Beta, as those terms are defined in a letter to Agent dated as of the date hereof, (v) to the extent deducted in determining Consolidated Net Income for such period, any fees, expenses and charges related to acquisitions and mergers of Company and its Subsidiaries incurred not later than one year after the Closing Date, whether consummated or unconsummated, and (vi) to the extent deducted in determining Consolidated Net Income for such period, any Restructuring Charges; provided however that the Restructuring Charges of Company and its Subsidiaries included in Consolidated Adjusted EBITDA in any Fiscal Year pursuant to this clause (vi) shall not exceed (i) for the Fiscal Year ending on or about June 30, 2001, $27,000,000, (ii) for the Fiscal Year ending on or about June 30, 2002, (a) $44,000,000 minus (b) the amount of Restructuring Charges included in Consolidated Adjusted EBITDA for the Fiscal Year ending on or about June 30, 2001; (iii) for the Fiscal Year ending on or about June 30, 2003, (a) $57,700,000 minus (b) the amount of Restructuring Charges included in Consolidated Adjusted EBITDA for the Fiscal Years ending on or about June 30, 2001 and June 30, 2002; and (iv) for Fiscal Year ending on or about June 30, 2004, (a) $57,700,000 minus (b) the amount of Restructuring Charges included in Consolidated Adjusted EBITDA for all prior Fiscal Years ending on or about June 30, 2001 and thereafter. "Consolidated Capital Expenditures" means, for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items, net of immaterial disposals, as reflected in the consolidated statement of cash flows of Company and its Subsidiaries. "Consolidated EBITDA" means, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense, and (vi) other non-cash items deducted in the calculation of Consolidated Net Income (other than any such non-cash item to the extent that it represents an accrual of or reserve for cash expenditures in any future period) less other non-cash items added in the calculation of Consolidated Net Income (other than any such non-cash item to the extent that it will result in the receipt of cash payments in any future period), all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in subsection 2.3 payable to Agent and Lenders on or before the Closing Date. "Consolidated Leverage Ratio" means, as at any date, the ratio of (a) Consolidated Total Debt as at such date to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of the most recently ended Fiscal Quarter. "Consolidated Net Income" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net non-cash extraordinary losses. "Consolidated Total Debt" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Contingent Obligation" , as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. "Contractual Obligation" , as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Currency Agreement" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. "Daily Funding Lender" means Agent, in its individual capacity as a Lender hereunder. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Domestic Account" means an Account arising in a sale made in and to an account debtor located in the United States of America. "Domestic Inventory" means Inventory held in the United States of America. "Domestic Subsidiary" means a direct or indirect Subsidiary of Company that is incorporated or organized under the laws of a state of the United States of America. "Dominant Domestic Subsidiary" means, with respect to any Person, a Domestic Subsidiary of such Person and such Person owns not less than 80% of the voting stock of such Domestic Subsidiary. "Eligible Accounts Receivable" means, with respect to Company and Company's Domestic Subsidiaries which are Loan Parties, Domestic Accounts of such Loan Party deemed by Agent in the exercise of its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. In determining the amount to be so included, the face amount of such Accounts shall be reduced by the amount of all credit memo reserves, promissory notes, chargebacks, returns, discounts (except for secondary cash discounts), deductions, sales taxes, claims, credits, charges, or other allowances. Unless otherwise approved in writing by Agent, an Account shall not be an Eligible Account Receivable if: > > (a) it arises out of a sale made by such Loan Party to an Affiliate, > > including without limitation intra/intercompany receivables and > > employee/sales person receivables; or > > > > (b) its payment terms are longer than 120 days from date of invoice; or > > > > (c) it is unpaid (i) more than 60 days after the original payment due date > > on payment terms of 90 days or less from date of invoice, or (ii) more than > > 30 days after the original payment due date on payment terms of 120 days > > from date of invoice; or > > > > (d) it is from the same account debtor or its Affiliate and fifty percent > > (50%) or more of all Accounts from that account debtor (and its Affiliates) > > are ineligible under (c) above; or > > > > (e) the account debtor for such Account is a creditor of such Loan Party, > > has or has asserted a right of setoff against such Loan Party, or has > > disputed its liability or otherwise has made any claim with respect to such > > Account or any other Account which has not been resolved, in each case to > > the extent of the amount owed by such Loan Party to such account debtor, the > > amount of such actual or asserted right of setoff, or the amount of such > > dispute or claim, as the case may be; or > > > > (f) the account debtor is (or its assets are) the subject of an Insolvency > > Event; or > > > > (g) such Account is not payable in Dollars or the account debtor for such > > Account is located outside the United States unless such Account is > > supported by an irrevocable letter of credit satisfactory to Agent (as to > > form, substance and issuer) and assigned to and directly drawable by Agent; > > or > > > > (h) the sale to the account debtor is on a bill-and-hold, guarantied sale, > > sale-and-return, sale on approval or consignment basis or made pursuant to > > any other written agreement providing for repurchase or return; or > > > > (i) Agent determines pursuant to its Permitted Discretion by its own credit > > analysis that collection of such Account is uncertain or that such Account > > may not be paid; or > > > > (j) the Account consists of a right to payment of Medicare or Medicaid > > claims; or the account debtor is the United States of America, or any > > department, agency or instrumentality thereof unless the applicable Loan > > Party duly assigns its rights to payment of such Account to Agent pursuant > > to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sections 3727 > > et seq.); or > > > > (k) the goods giving rise to such Account have not been shipped and > > delivered to and accepted by the account debtor, the services giving rise to > > such Account have not been performed and accepted, or such Account otherwise > > does not represent a final sale; or > > > > (l) such Account does not comply with all Requirements of Law, including > > without limitation the Federal Consumer Credit Protection Act, the Federal > > Truth in Lending Act and Regulation Z of the Board of Governors of the > > Federal Reserve System; or > > > > (m) such Account is subject to any adverse security deposit, progress > > payment or other similar advance made by or for the benefit of the > > applicable account debtor; or > > > > (n) it is not subject to a valid and perfected first priority Lien in favor > > of Agent or does not otherwise conform to the representations and warranties > > contained in the Loan Documents; or > > > > (o) when aggregated with all other accounts of an account debtor, such > > Account exceeds 10% in face value of all Accounts of the Loan Parties, taken > > as a whole, then outstanding, but only to the extent of such excess, unless > > such excess is supported by an irrevocable letter of credit satisfactory to > > Agent (as to form, substance and issuer) and assigned to and directly > > drawable by Agent; or provided that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or eliminate the same) to the standards of eligibility set forth in this definition; and provided further that unless otherwise approved by Agent, Company and its Subsidiaries will continue to extend payment terms on Accounts in accordance with their usual and customary practices as in effect on the date of this Agreement. "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, in each case (under clauses (i) through (iv) above) that is reasonably acceptable to Company and Agent; and (B) any Lender, any Affiliate of any Lender and any Affiliated Fund of any Lender; provided that neither Company nor any Affiliate of Company shall be an Eligible Assignee. "Eligible Inventory" means, with respect to Company and Company's Domestic Subsidiaries which are Loan Parties, the aggregate amount of Domestic Inventory of such Loan Party deemed by Agent in the exercise of its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. In determining the amount to be so included, Inventory shall be valued at the lower of cost or market on a basis consistent with such Loan Party's current and historical accounting practice and shall be net of all freight, duty and brokerage charges and all reserves related thereto, including without limitation reserves for obsolete inventory, inventory shrinkage, samples, inter-company profits, revaluations, small components, LIFO reserves, favorable PPV reserves and other miscellaneous reserves. Unless otherwise approved in writing by Agent, an item of Inventory shall not be included in Eligible Inventory if: > > (a) it is not owned solely by such Loan Party or such Loan Party does not > > have good, valid and marketable title thereto; or > > > > (b) it is not located in the United States (but "Eligible Inventory" shall > > include "in transit" inventory inside the United States); or > > > > (c) it consists of goods on consignment; it is not located on, or in transit > > in the United States to, property owned or leased by such Loan Party or in a > > contract warehouse (but not including any such goods being held by any > > customs authorities), in each case subject to a Collateral Access Agreement > > executed by any applicable mortgagee, lessor or contract warehouseman, as > > the case may be, and segregated or otherwise separately identifiable from > > goods of others, if any, stored on the premises; or > > > > (d) it is not subject to a valid and perfected first priority Lien in favor > > of Agent except, with respect to Inventory stored at sites described in > > clause (c) above, for Liens for unpaid rent or normal and customary > > warehousing charges; or > > > > (e) it consists of goods returned or rejected by such Loan Party's customers > > or goods in transit to third parties (other than goods in transit in the > > United States to warehouse sites covered by a Collateral Access Agreement, > > but not including any such goods being held by any customs authorities); or > > > > (f) it is not first-quality goods, is obsolete or slow moving, or does not > > otherwise conform to the representations and warranties contained in the > > Loan Documents; or > > > > (g) it consists of unreconciled items between the stock status report and > > the general ledger or it consists of reconciled differences between the > > general ledger and perpetual; or > > > > (h) it consists of sample inventory or promotional materials and literature; provided that Agent, in the exercise of its Permitted Discretion, may impose additional restrictions (or eliminate the same) to the standards of eligibility set forth in this definition. "Employee Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates. "Environmental Claim" means any investigation, written notice, written notice of violation, claim, action, suit, proceeding, written demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of Government Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA Affiliate" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of a Person or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of such Person or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Person or such Subsidiary and with respect to liabilities arising after such period for which such Person or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (ix) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "Eurodollar Rate Margin" means the margin over the Adjusted Eurodollar Rate used in determining the rate of interest of Eurodollar Rate Loans pursuant to subsection 2.2A. "Event of Default" means each of the events set forth in Section 8. "Excess Availability" means, as at any date of determination, an aggregate amount equal to: > > > (i) seventy-five percent (75%) of Eligible Accounts Receivable plus > > > > > > (ii) fifty percent (50%) of Eligible Inventory; provided that if Agent, in the exercise of its Permitted Discretion, changes the advance rates provided for above pursuant to the definition of "Borrowing Base", the advance rates provided for above will be correspondingly amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Facilities" means all real property (including, without limitation, all buildings, fixtures or other improvements located thereon) and related facilities now, hereafter or heretofore owned, leased, operated or used by Company or any of its Subsidiaries. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent. "Financial Plan" has the meaning assigned to that term in subsection 6.1(xii). "First Priority" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien has priority over any other Lien on such Collateral and (ii) such Lien is the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to subsection 7.2) to which such Collateral is subject. "Fiscal Month" means a fiscal month of any Fiscal Year. "Fiscal Quarter" means a fiscal quarter of any Fiscal Year. "Fiscal Year" means the 52 or 53 week period of Company and its Subsidiaries ending on the Friday closest to June 30 of each calendar year. "Funding and Payment Office" means (i) the office of Agent located at 130 Liberty Street, New York, New York 10006, or (ii) such other office of Agent as may from time to time hereafter be designated as such in a written notice delivered by Agent to Company and each Lender. "Funding Date" means the date of the funding of a Loan. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "Governing Body" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company. "Government Authority" means any political subdivision or department thereof, any other governmental or regulatory body, commission, central bank, board, bureau, organ or instrumentality or any court, in each case whether federal, state, local or foreign. "Governmental Authorization" means any permit, license, registration, authorization, plan, directive, consent order or consent decree of or from, or notice to, any Government Authority. "Guaranties" means the Subsidiary Guaranty. "Guarantor" means, at any time, any of Company's Domestic Subsidiaries that is then a party to the Subsidiary Guaranty. "Hazardous Materials" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", acutely hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste", "infectious waste", "toxic substances", or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Government Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Hedge Agreement" means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively. "Hedge Exposure" means the amount of the credit exposure under a Hedge Agreement with any Lender as determined by Agent in accordance with its usual and customary practices for evaluating such credit risk. "Inactive Subsidiary" means any Subsidiary of Company that does not engage in any significant business activity or own any asset or assets (including capital stock of another Person) with an aggregate fair market value in excess of $25,000 or generate revenues in excess of $25,000 annually and does not have any Subsidiary other than an Inactive Subsidiary; provided that neither the aggregate assets owned nor the aggregate revenues generated by all Inactive Subsidiaries shall exceed $50,000. "Indebtedness" , as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money (other than trade or other accounts payable incurred in the ordinary course of business in accordance with customary terms and historical practices), (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA, and other than trade or other accounts payable incurred in the ordinary course of business in accordance with customary terms and historical practices), and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person but only to the extent such indebtedness is included as a liability on the balance sheet of such Person in accordance with GAAP. Obligations under Interest Rate Agreements and Currency Agreements constitute (X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and in neither case constitute Indebtedness. "Indemnitee" has the meaning assigned to that term in subsection 10.3. "Insolvency Event" means, with respect to any Person, the occurrence of any of the events described in subsection 8.6 or 8.7; provided that, solely for purposes of this definition, any references to Company or any of its Subsidiaries in subsection 8.6 or 8.7 shall be deemed to be a reference to such Person. "Insolvency Laws" means the Bankruptcy Code or any other applicable bankruptcy, insolvency or similar law now or hereafter in effect in the United States of America or any state thereof. "Intellectual Property" means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. "Interest Payment Date" means (i) with respect to any Base Rate Loan, the first Business Day of each calendar month, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of six months "Interest Payment Date" shall also include the date that is three months after the commencement of such Interest Period. "Interest Period" has the meaning assigned to that term in subsection 2.2B. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. "Interest Rate Determination Date" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "Inventory " means, with respect to any Person, all goods, merchandise and other personal property which are held by such Person for sale or lease, work in process and all raw materials to be used or consumed in the production or manufacture of all such goods, merchandise and other property held for sale or lease by such Person, excluding sample items and those held for display or demonstration and literature and promotional materials. "Investment" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of Company), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person other than Company or any of its Subsidiaries, of any equity Securities of such Subsidiary (other than a redemption, retirement, purchase or other acquisition that is made pro rata among (x) Company and its Subsidiaries and (y) the other owners of such Subsidiary), (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person (other than a wholly-owned Subsidiary of Company that is a party to the Subsidiary Guaranty), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business, or (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Issuing Lender" means, with respect to any Letter of Credit, the Lender that agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii); provided that any Issuing Lender may be an Affiliate of BTCo (including, without limitation, Deutsche Bank AG) so long as (i) BTCo is a Lender under this Agreement and (ii) such Affiliate shall have executed a counterpart of this Agreement on or prior to the date of any issuance of any Letter of Credit by such Affiliate. "Joint Venture" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "Lender" and "Lenders" means the persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include BTCo as an Issuing Lender unless the context otherwise requires; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Company pursuant to subsection 3.1. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed out of the proceeds of Revolving Loans pursuant to subsection 3.3B or otherwise reimbursed by Company. "Lien" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest other than any agreement not otherwise prohibited by this Agreement not intended to create a lien but including language permitting recharacterization as such if such intention is disregarded) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "Loan" or "Loans" means one or more of the Revolving Loans. "Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of an Issuing Lender relating to, the Letters of Credit), the Guaranties and the Collateral Documents. "Loan Parties" means any of Company or any Subsidiary of Company executing a Loan Document. "Lock Box" means a lockbox maintained by any Loan Party pursuant to arrangements satisfactory to Agent. "Lock Box Account" means a Deposit Account under the exclusive dominion and control of Agent that is maintained by any Loan Party with a Lock Box Bank pursuant to a Lock Box Agreement. "Lock Box Agreement" means a Lock Box Agreement executed and delivered by a Lock Box Bank, Agent and the applicable Loan Party, substantially in the form of Exhibit XIV annexed hereto, as such Lock Box Agreement may be amended, supplemented or otherwise modified from time to time, and "Lock Box Agreements" means all such Lock Box Agreements, collectively. "Lock Box Bank" means any commercial bank satisfactory to Agent at which any Loan Party maintains a Lock Box Account. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries, taken as a whole, (ii) the material impairment of the ability of Company or any of its Significant Subsidiaries to perform, or of Agent or Lenders to enforce, the Obligations, or (iii) a material adverse effect on the value of the Collateral or the amount which Agent or Lenders would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of the Collateral. "Material Contract" means any contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could have a Material Adverse Effect. "Multiemployer Plan" means any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA. "Net Insurance/Condemnation Proceeds" means any Cash payments or proceeds received by Company or any of its Subsidiaries (i) under any business interruption or casualty insurance policy in respect of a covered loss thereunder or (ii) as a result of the taking of any assets of Company or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, in each case net of any actual and reasonable documented costs incurred by Company or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof. "Non-US Lender" has the meaning assigned to that term in subsection 2.7B(iii)(a). "Notes" means one or more of the Revolving Notes. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto delivered by Company to Agent pursuant to subsection 2.1B with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit II annexed hereto delivered by Company to Agent pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "Obligations" means all obligations of every nature of each Loan Party from time to time owed to Agent, Lenders or any of them under the Loan Documents, whether for principal, interest (including interest accruing on or after the occurrence of an Insolvency Event), reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. "Officer" means the president, chief executive officer, a vice president, chief financial officer, general counsel, treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the organizational documents of a corporation, partnership, trust or limited liability company to serve in a similar capacity as the foregoing. "Officer's Certificate" means, as applied to any Person that is a corporation, partnership, trust or limited liability company, a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company. "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "Organizational Documents" means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation, partnership, trust or limited liability company is organized. "Other Bank Concentration Account" means an account under the exclusive dominion and control of Agent that is maintained by any Loan Party with a Bank (other than BTCo) that is satisfactory to Agent pursuant to a Blocked Account Agreement into which the applicable Lock Box Banks are instructed to transfer funds on deposit in the Lock Box Accounts pursuant to the terms of the Lock Box Agreements. "Overadvance Deposit Account" has the meaning assigned to that term in the Security Agreement. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor thereto). "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Permitted Discretion" means Agent's good faith judgment as to the value of any item of Collateral based upon any factor which it believes in good faith: (i) will or could reasonably be expected to adversely affect the value of any Collateral, the enforceability or priority of Agent's Liens thereon or the amount which Agent and Lenders would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral; (ii) suggests that any collateral report or financial information delivered to Agent by any Person on behalf of any Loan Party is incomplete, inaccurate or misleading in any material respect; (iii) materially increases the likelihood of a bankruptcy, reorganization or other insolvency proceeding involving Company or any of the Subsidiary Guarantors or any of the Collateral; or (iv) creates or reasonably could be expected to create a Potential Event of Default or Event of Default. In exercising such judgment, Agent may consider such factors already included in or tested by the definition of Eligible Accounts Receivable or Eligible Inventory, as well as any of the following: (i) the financial and business climate of any Loan Party's industry and general macroeconomic conditions, (ii) changes in collection history and dilution with respect to Loan Parties' Accounts, (iii) changes in demand for, and pricing of, Loan Parties' Inventory, (iv) changes in any concentration of risk with respect to such Accounts or Inventory, and (v) any other factors that change the credit risk of lending to Company on the security of such Accounts or Inventory. The burden of establishing lack of good faith shall be on Company. "Permitted Encumbrances" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Collateral Documents): > > (i) Liens for taxes, assessments or governmental charges or claims the > > payment of which is not, at the time, required by subsection 6.3; > > > > (ii) statutory Liens of landlords, statutory Liens and rights of set-off of > > banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, > > workmen and materialmen, and other Liens imposed by law, in each case > > incurred in the ordinary course of business (a) for amounts not yet overdue > > or (b) for amounts that are overdue and that (in the case of any such > > amounts overdue for a period in excess of 30 days) are being contested in > > good faith by appropriate proceedings, so long as (1) such reserves or other > > appropriate provisions, if any, as shall be required by GAAP shall have been > > made for any such contested amounts, and (2) in the case of a Lien with > > respect to any portion of the Collateral, such contest proceedings > > conclusively operate to stay the sale of any portion of the Collateral on > > account of such Lien; > > > > (iii) Liens incurred or deposits made in the ordinary course of business in > > connection with workers' compensation, unemployment insurance and other > > types of social security, or to secure the performance of tenders, statutory > > obligations, surety and appeal bonds, bids, leases, government contracts, > > trade contracts, utilities, deposits made under Hedge Agreements permitted > > by this Agreement, performance and return-of-money bonds and other similar > > obligations (exclusive of obligations for the payment of borrowed money), so > > long as no foreclosure, sale or similar proceedings have been commenced with > > respect to any portion of the Collateral on account thereof; > > > > (iv) any attachment or judgment Lien not constituting an Event of Default > > under subsection 8.8; > > > > (v) leases or subleases granted to third parties and not interfering in any > > material respect with the ordinary conduct of the business of Company or any > > of its Subsidiaries or resulting in a material diminution in the value of > > any Collateral as security for the Obligations; > > > > (vi) easements, rights-of-way, restrictions, encroachments, and other minor > > defects or irregularities in title, in each case which do not and will not > > interfere in any material respect with the ordinary conduct of the business > > of Company or any of its Subsidiaries; > > > > (vii) any (a) interest or title of a lessor or sublessor under any lease not > > prohibited by this Agreement, (b) restriction or encumbrance that the > > interest or title of such lessor or sublessor may be subject to, or > > (c) subordination of the interest of the lessee or sublessee under such > > lease to any restriction or encumbrance referred to in the preceding clause > > (b), so long as the holder of such restriction or encumbrance agrees to > > recognize the rights of such lessee or sublessee under such lease; > > > > (viii) Liens arising from filing UCC financing statements relating solely to > > leases not prohibited by this Agreement; > > > > (ix) Liens in favor of customs and revenue authorities arising as a matter > > of law to secure payment of customs duties in connection with the > > importation of goods; > > > > (x) any zoning or similar law or right reserved to or vested in any > > governmental office or agency to control or regulate the use of any real > > property; > > > > (xi) Liens securing obligations (other than obligations representing > > Indebtedness for borrowed money) under operating, reciprocal easement or > > similar agreements entered into in the ordinary course of business of > > Company and its Subsidiaries; and > > > > (xii) licenses of patents, trademarks and other intellectual property rights > > granted by Company or any of its Subsidiaries in the ordinary course of > > business and not interfering in any material respect with the ordinary > > conduct of the business of Company or such Subsidiary. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. "Pledged Collateral" means collectively, the "Pledged Collateral" as defined in the Security Agreement. "Potential Event of Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "Pricing Certificate" means an Officer's Certificate of Company certifying the Consolidated Leverage Ratio as of the last day of any Fiscal Quarter and setting forth the calculation of such Consolidated Leverage Ratio in reasonable detail, which Officer's Certificate may be delivered to Agent at any time on or after the date of delivery by Company of the Compliance Certificate with respect to the period ending on the last day of such Fiscal Quarter pursuant to subsection 6.1(iv). "Prime Rate" means the rate that BTCo announces from time to time as its prime lending rate in the United States for Dollar denominated loans, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. BTCo or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Proceedings" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration. "Pro Rata Share" means with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein purchased by any Lender, the percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1 or required pursuant to subsection 10.5. The initial Pro Rata Share of each Lender for purposes of the preceding sentence is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. "Real Property Asset" means, at any time of determination, any interest then owned by any Loan Party in any real property. "Register" has the meaning assigned to that term in subsection 2.1E. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning assigned to that term in subsection 3.3B. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), or into or out of any Facility, including the movement of any Hazardous Materials through the air, soil, surface water, groundwater or property. "Request for Issuance of Letter of Credit" means a request in the form of Exhibit III annexed hereto delivered by Company to Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit. "Requirement of Law" means (a) the certificates or articles of incorporation, by-laws and other organizational or governing documents of a Person, (b) any law, treaty, rule, regulation or determination of an arbitrator, court or other governmental authority, or (c) any franchise, license, lease, permit, certificate, authorization, qualification, easement, right of way, right or approval binding on a Person or any of its property. "Requisite Lenders" means Lenders having or holding more than 50% of the aggregate Revolving Loan Exposure of all Lenders. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness. "Restructuring Capital Expenditures" means Consolidated Capital Expenditures related to the Company's restructuring incurred in connection with transactions with respect to which the related expenses, charges and costs are Restructuring Charges, the projected estimated amounts of which are set forth on Schedule 1.1 hereto. "Restructuring Charges" means those expenses or charges directly related to the restructuring of the operations of Company and its Subsidiaries, which expenses and charges are properly classified as "restructuring charges" or other similar items reflected in its reports on Forms 10-Q and 10-K (including management discussion and analysis) on a basis consistent with the rules and regulations promulgated by the Securities and Exchange Commission, the projected estimated amounts of which are set forth on Schedule 1.1 attached hereto. "Revolving Lender" means a Lender that has a Revolving Loan Commitment and/or that has an outstanding Revolving Loan. "Revolving Loan Commitment" means the commitment of a Lender to make Revolving Loans to Company pursuant to subsection 2.1A, and "Revolving Loan Commitments" means such commitments of all Lenders in the aggregate. "Revolving Loan Commitment Termination Date" means April 30, 2004. "Revolving Loan Exposure" means, with respect to any Revolving Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or in any unreimbursed drawings thereunder) plus (c) the aggregate amount of all participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit. "Revolving Loans" means the Loans made by Lenders to Company pursuant to subsection 2.1A. "Revolving Notes" means (i) the promissory notes of Company issued pursuant to subsection 2.1F on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Revolving Loan Commitments and Revolving Loans of any Revolving Lenders, in each case substantially in the form of Exhibit IV annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Secured Notes/Mortgages" shall mean the items identified as such in Schedule 7.1. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute. "Security Agreement" means the Security Agreement executed and delivered by Company and the Domestic Subsidiaries (other than any Inactive Subsidiary) on the Closing Date, substantially in the form of Exhibit XV annexed hereto, as such Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "Senior Note Agreement" means, collectively, the Note Purchase Agreements dated as of October 1, 1997, among Company, the subsidiary guarantors signatory thereto and the various purchasers listed on Schedule A thereto, pursuant to which the Senior Notes were issued, as such Note Purchase Agreement may be amended from time to time to the extent permitted under subsection 7.15. "Senior Notes" means the $50,000,000 in initial aggregate principal amount of 7.09% Series A Senior Notes due October 28, 2004 of Company and the $50,000,000 in initial aggregate principal amount of 7.25% Series B Senior Notes due October 28, 2007 of Company, in each case issued pursuant to the Senior Note Agreement, as such notes may be amended from time to time to the extent permitted under subsection 7.15. "Significant Subsidiary" means any subsidiary of a Person which accounts for 5% or more of the assets of such Person and all of its Subsidiaries taken as a whole. "Solvent" means, with respect to any Person, that as of the date of determination both (A) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (B) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (ii) workers' compensation liabilities of Company or any of its Subsidiaries, (iii) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (iv) obligations with respect to Capital Leases or Operating Leases of Company or any of its Subsidiaries, and (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry; provided that Standby Letters of Credit may not be issued for the purpose of supporting (a) trade payables or (b) any Indebtedness constituting "antecedent debt" (as that term is used in Section 547 of the Bankruptcy Code). "Subordinated Indebtedness" means any unsecured Indebtedness of Company (other than Indebtedness to any of its Subsidiaries) or, with respect to Acquisition Subordinated Debt, of its Subsidiaries, that is subordinated in right of payment to the Obligations pursuant to (i) with respect to Subordinated Indebtedness incurred in connection with acquisitions permitted by this Agreement ("Acquisition Subordinated Debt"), subordination provisions substantially in the form set forth in Exhibit VII annexed hereto; provided that the principal amount of Acquisition Subordinated Debt incurred in an individual transaction or related transactions shall not exceed $3,000,000 and the aggregate principal amount of all Acquisition Subordinated Debt shall not exceed $10,000,000 at any time outstanding; or (ii) documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to Agent and Requisite Lenders. "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Subsidiary Guarantors" means the Guarantors. "Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered by Company's existing Domestic Subsidiaries (other than any Inactive Subsidiary) on the Closing Date and to be executed and delivered by Company's additional Subsidiaries from time to time thereafter in accordance with subsection 6.8, substantially in the form of Exhibit V annexed hereto, as such Subsidiary Guaranty may be amended, supplemented or otherwise modified from time to time. "SunMed Finance" means SunMed Finance Inc., a Delaware corporation. "Supplemental Collateral Agent" has the meaning assigned to that term in subsection 9.1B. "Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded taxes that are imposed on the overall net income or net profits (including franchise taxes imposed in lieu thereof) by the United States, any state or other Government Authority with respect to any state, or by any other Government Authority under the laws of which the Lender is organized or has its principal office or maintains its applicable lending office. "Total Utilization of Revolving Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans made to Company plus (ii) the Letter of Credit Usage with respect to all Letters of Credit issued for the account of Company plus (iii) the amount of any Hedge Exposure with respect to Company. "Transaction Costs" means the fees, costs and expenses payable by any Loan Party on or before the Closing Date in connection with the transactions contemplated by the Loan Documents. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement. Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (ii), (iii) and (xii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(v)). Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with those used to prepare the financial statements referred to in subsection 5.3. The parties hereto agree that, if any change in GAAP occurs from GAAP as used to prepare the financial statements referred to in subsection 5.3 which affects the calculations necessary to determine compliance with any of the financial covenants in Section 7 of this Agreement, the parties shall negotiate in good faith to adjust the affected financial covenants so as to take into account the relevant accounting changes, provided, however, until any such agreement on adjustments is reached, Company will continue to perform all calculations based on GAAP as it existed at the time the financial statements referred to in subsection 5.3 were prepared. 1.3 Other Definitional Provisions. A. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. B. Any of the terms defined in subsection 1.1 may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. C. The use in any of the Loan Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments; Making of Loans; the Register; Notes. A. Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to make the Loans described in subsection 2.1A(i). > > (i) Revolving Loans. Each Revolving Lender severally agrees, subject to the > > limitations set forth below with respect to the maximum amount of Revolving > > Loans permitted to be outstanding from time to time, to lend to Company from > > time to time during the period from the Closing Date to but excluding the > > Revolving Loan Commitment Termination Date an aggregate amount not exceeding > > its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments > > to be used for the purposes identified in subsection 2.5B. The original > > amount of each Revolving Lender's Revolving Loan Commitment is set forth > > opposite its name on Schedule 2.1 annexed hereto and the aggregate original > > amount of the Revolving Loan Commitments is $58,000,000; provided that the > > Revolving Loan Commitments of Revolving Lenders shall be adjusted to give > > effect to any assignments of the Revolving Loan Commitments pursuant to > > subsection 10.1B; and provided, further that the amount of the Revolving > > Loan Commitments shall be reduced from time to time by the amount of any > > reductions thereto made pursuant to subsections 2.4A(ii) and 6.4C. Each > > Revolving Lender's Revolving Loan Commitment shall expire on the Revolving > > Loan Commitment Termination Date and all Revolving Loans and all other > > amounts owed hereunder with respect to the Revolving Loans and the Revolving > > Loan Commitments shall be paid in full no later than that date; provided > > that each Revolving Lender's Revolving Loan Commitment shall expire > > immediately and without further action on September 30, 2000 if the initial > > Revolving Loans are not made on or before that date. Amounts borrowed under > > this subsection 2.1A(i) may be repaid and reborrowed to but excluding the > > Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the following limitations in the amounts indicated: > > (a) in no event shall the sum of the Total Utilization of Revolving Loan > > Commitments at any time exceed the Revolving Loan Commitments then in > > effect; > > > > (b) in no event shall the Total Utilization of Revolving Loan Commitments at > > any time exceed the Borrowing Base then in effect; > > > > (c) in no event shall the outstanding Revolving Loans at any time exceed an > > amount equal to the Revolving Loan Commitments then in effect minus the sum > > of the Maximum Letter of Credit Usage pursuant to subsection 3.1A(ii) and > > the amount of any Hedge Exposure; and > > > > (d) so long as the Senior Notes are outstanding, in no event shall the > > Revolving Lenders be required to make Revolving Loans if the Total > > Utilization of Revolving Loan Commitments would exceed the limitations on > > the incurrence of debt contained in Sections 11.3(c) and 11.4 of the Senior > > Note Agreement. B. Borrowing Mechanics. Revolving Loans made on any Funding Date (other than Revolving Loans made pursuant to subsection 3.3B) shall be in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount; provided that Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $2,000,000 and multiples of $250,000 in excess of that amount. Whenever Company desires that Lenders make Revolving Loans it shall deliver to Agent a Notice of Borrowing no later than 1:00 P.M. (New York City time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. Notwithstanding anything to the contrary herein contained, during the period commencing on and including the Closing Date and ending on the earlier of (i) the date which is 90 days after the Closing Date and (ii) the date on which Agent sends notice to Company indicating that Lenders' primary syndication has been concluded, Company may only request the borrowing of Base Rate Loans or Eurodollar Rate Loans with an Interest Period of one month. In lieu of delivering a Notice of Borrowing, Company may give Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or before the applicable Funding Date. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B or under subsection 2.2D, and upon funding of Loans by Daily Funding Lender and/or Lenders, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans pursuant to subsection 2.2D, in each case in accordance with this Agreement, pursuant to any such telephonic notice Company shall have effected Loans or a conversion or continuation, as the case may be, hereunder. Company shall notify Agent prior to the funding of any Loans in the event that any of the matters to which Company is required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Company of the proceeds of any Loans shall constitute a re-certification by Company, as of the applicable Funding Date, as to the matters to which Company is required to certify in the applicable Notice of Borrowing. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for, or a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing or to effect a conversion or continuation in accordance therewith. C. Disbursement of Funds. > > (i) Subject to this subsection 2.1C and subsection 2.1D, all Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that neither Agent nor any Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. (ii) Notwithstanding anything to the contrary contained in this Agreement, the provisions of this subsection 2.1C(ii) shall only be effective upon the occurrence of a Cash Management Triggering Event. Upon receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof) for Revolving Loans that consist of Base Rate Loans and upon satisfaction or waiver of the conditions precedent specified in subsection 4.1 (in the case of Loans made on the Closing Date) and, subject to the provisions set forth in the immediately succeeding paragraph, subsection 4.2 (in the case of all Loans), Daily Funding Lender shall, without prior notice to the other Lenders, make such Revolving Loans for its own account on the applicable Funding Date (subject to settlement with the other Lenders in accordance with subsection 2.1D) by making the proceeds of such Revolving Loans available to Company on such Funding Date by causing an amount of same day funds equal to the proceeds of such Revolving Loans to be credited to the account of Company at the Funding and Payment Office. Such Revolving Loans shall constitute Revolving Loans by Daily Funding Lender for all purposes under the Loan Documents, subject to settlement with the other Lenders pursuant to subsection 2.1D. All interest accrued on any such Revolving Loans from the date made by Daily Funding Lender to the Settlement Date with respect thereto shall be for Daily Funding Lender's own account. Daily Funding Lender shall make Revolving Loans for its own account pursuant to this subsection 2.1C(ii) notwithstanding the fact that the principal amount of such Revolving Loans, when added to the aggregate principal amount of Daily Funding Lender's Revolving Loans then outstanding, may exceed Daily Funding Lender's Revolving Loan Commitment then in effect; provided that such Revolving Loans shall at all times be Obligations owed to Daily Funding Lender under this Agreement; and provided further that in no event shall the aggregate principal amount of all Revolving Loans, including such Revolving Loans, outstanding at any time exceed the limitations set forth in clauses (a), (c) and (d) of subsection 2.1A(i). Notwithstanding anything in this Agreement to the contrary, if the conditions precedent specified in subsection 4.2 cannot be fulfilled with respect to any proposed Revolving Loans that consist of Base Rate Loans, Company shall, in its Notice of Borrowing or otherwise, give immediate written notice thereof (specifying the circumstances which prevent the conditions precedent from being fulfilled) to Agent, with a copy to each Lender, and Daily Funding Lender may (and each Lender hereby authorizes Daily Funding Lender to), but is not obligated to, continue to make Revolving Loans that are Base Rate Loans for 20 Business Days from the date Agent first receives such notice, or until sooner instructed by Requisite Lenders to cease making such Revolving Loans (the "Daily Funding Lender Discretionary Period"). Once notice is given by Company that circumstances exist which prevent the conditions precedent to borrowing from being fulfilled, no additional notice with respect to the same circumstances will be effective to commence a new Daily Funding Lender Discretionary Period. (iii) Promptly after receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof) for any Loans (other than for Revolving Loans that consist of Base Rate Loans, which Notice of Borrowing is given after the occurrence of a Cash Management Triggering Event), Agent shall notify each Lender of the proposed borrowing. Each Lender shall make the amount of its Loan available to Agent, in same day funds in Dollars, at the Funding and Payment Office, not later than 12:00 Noon (New York City time) on the applicable Funding Date, in each case in same day funds in Dollars, at the Funding and Payment Office. Except as provided in subsection 3.3B with respect to Revolving Loans used to reimburse any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Loans made on the Closing Date) and, subject to the provisions set forth in the immediately preceding paragraph, 4.2 (in the case of all Loans), Agent shall make the proceeds of such Loans available to Company on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Agent from Lenders to be credited to the account of Company at the Funding and Payment Office. Unless Agent shall have been notified by any Lender prior to the Funding Date for any Loans pursuant to this subsection 2.1C that such Lender does not intend to make available to Agent the amount of such Lender's Loan requested on such Funding Date, Agent may assume that such Lender has made such amount available to Agent on such Funding Date and Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the customary rate set by Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Agent's demand therefor, Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. Settlement Procedures. Notwithstanding anything to the contrary contained in this Agreement, the provisions of this subsection 2.1D shall only be effective upon the occurrence of a Cash Management Triggering Event. > > (i) Daily Funding Lender will from time to time notify the other Lenders, > > not later than 12:00 Noon (New York time) (a) on at least one Business Day > > during each seven calendar-day period, (b) on each date on which payment of > > interest on any Revolving Loans is required to be made pursuant to > > subsection 2.2C, (c) on the Revolving Loan Commitment Termination Date, and > > (d) at such other times as Daily Funding Lender in its discretion may > > determine (each such notice by Daily Funding Lender being a "Settlement > > Notice" and the date of each Settlement Notice being a "Settlement Date") of > > the aggregate principal amount of outstanding Revolving Loans made by Daily > > Funding Lender and each other Lender as of the close of business on the > > Business Day immediately preceding the applicable Settlement Date. > > > > (ii) If a Settlement Notice indicates that the aggregate principal amount of > > outstanding Revolving Loans made by Daily Funding Lender (including > > Revolving Loans made for its own account pursuant to subsection 2.1C(ii)) is > > in excess of Daily Funding Lender's Pro Rata Share of the aggregate > > principal amount of outstanding Revolving Loans made by all Lenders (the > > amount of such excess being the "Excess Funded Amount"), each other Lender > > will, not later than 4:00 P.M. (New York time) on the applicable Settlement > > Date, pay to Daily Funding Lender, by depositing same day funds in the > > account specified by Daily Funding Lender at the Funding and Payment Office, > > an amount equal to such Lender's Adjusted Pro Rata Share of the Excess > > Funded Amount, upon which payment Daily Funding Lender shall be deemed to > > have sold, and such Lender shall be deemed to have purchased, as of the > > applicable Settlement Date, a portion of the outstanding Revolving Loans > > made by Daily Funding Lender for its own account pursuant to subsection > > 2.1C(ii) on or after the immediately preceding Settlement Date equal to such > > Lender's Adjusted Pro Rata Share of the Excess Funded Amount. The obligation > > of each Lender to purchase a portion of any Revolving Loan made by Daily > > Funding Lender as provided in this subsection 2.1D(ii) is subject to the > > condition that at the time such Revolving Loan was made by Daily Funding > > Lender (a) the duly authorized officer of Daily Funding Lender responsible > > for the administration of Daily Funding Lender's credit relationship with > > Company believed in good faith that either (X) no Event of Default had > > occurred and was continuing or (Y) any Event of Default that had occurred > > and was continuing had been waived by Requisite Lenders at the time such > > Revolving Loan was made or (b) a Daily Funding Lender Discretionary Period > > was in effect. > > > > (iii) If a Settlement Notice indicates that the aggregate principal amount > > of outstanding Revolving Loans made by Daily Funding Lender is less than > > Daily Funding Lender's Pro Rata Share of the aggregate principal amount of > > outstanding Revolving Loans made by all Lenders (the amount of such > > difference being the "Excess Paydown Amount"), Daily Funding Lender will, no > > later than 4:00 P.M. (New York time) on the applicable Settlement Date, > > unconditionally pay to each other Lender, by depositing same day funds in > > the account specified by such Lender to Daily Funding Lender, an amount > > equal to such Lender's Adjusted Pro Rata Share of the Excess Paydown Amount, > > upon which payment such Lender shall be deemed to have sold, and Daily > > Funding Lender shall be deemed to have purchased, as of the applicable > > Settlement Date, a portion of the outstanding Revolving Loans of such Lender > > equal to such Lender's Adjusted Pro Rata Share of the Excess Paydown Amount. > > > > (iv) Except as provided in subsection 2.1D(ii), the obligations of Daily > > Funding Lender and each other Lender pursuant to subsections 2.1D(ii) and > > 2.1D(iii) shall be absolute and unconditional and shall not be affected by > > any circumstance, including, without limitation, (a) any set-off, > > counterclaim, recoupment, defense or other right which Agent or any Lender > > may have against Agent, any other Lender, any Loan Party or any other Person > > for any reason whatsoever; (b) the occurrence or continuance of an Event of > > Default or a Potential Event of Default; (c) any adverse change in the > > condition (financial or otherwise) of any Loan Party; (d) any breach of this > > Agreement by Company, Agent or any Lender; or (e) any other circumstance, > > happening, or event whatsoever, whether or not similar to any of the > > foregoing. In the event that any Person (the "Payor") obligated to make a > > payment to any other Person (the "Payee") pursuant to this subsection 2.1D > > fails to make available to the Payee the amount of such payment required to > > be made by the Payor, the Payee shall be entitled to recover such amount on > > demand from the Payor together with interest at the customary rate set by > > BTCo for the correction of errors among Lenders for three Business Days and > > thereafter at the sum of the Base Rate plus 1.50% per annum. > > > > (v) In the event that all or any portion of any repayment of principal of > > the Revolving Loans is thereafter recovered by or on behalf of Company from > > Daily Funding Lender (including any such recovery in a proceeding under any > > applicable bankruptcy, insolvency or other similar law now or hereafter in > > effect) in an amount that is proportionately greater (based on the > > respective Pro Rata Shares of Lenders) than any such recovery from the other > > Lenders, the loss of the amount so recovered shall be ratably shared among > > all Lenders in the manner contemplated by subsection 10.5. E. The Register. Agent, acting for these purposes solely as an agent of Company (it being acknowledged that Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 10.3), shall maintain (and make available for inspection by Company and Lenders upon reasonable prior notice at reasonable times) at its address referred to in subsection 10.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the Revolving Loan Commitment, and Revolving Loans of each Lender from time to time (the "Register"). Company, Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof; all amounts owed with respect to any Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. Each Lender shall record on its internal records the amount of its Loans and Commitments and each payment in respect hereof, and any such recordation shall be conclusive and binding on Company, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any inconsistency with any Lender's records. Failure to make any recordation in the Register or in any Lender's records, or any error in such recordation, shall not affect any Loans or Commitments or any Obligations in respect of any Loans. F. Notes. Company shall execute and deliver on the Closing Date to Lenders (or to Agent for Lenders) a Revolving Note substantially in the form of Exhibit IV annexed hereto to evidence each Revolving Lender's Revolving Loans, in the principal amount of that Lender's Revolving Loan Commitment and with other appropriate insertions. 2.2 Interest on the Loans. A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to, in the case of Loans, the Base Rate or the Adjusted Eurodollar Rate. The applicable basis for determining the rate of interest with respect to any Revolving Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. > > (i) Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the > > Revolving Loans shall bear interest through maturity as follows: > > > > > (a) if a Base Rate Loan, then at the sum of the Base Rate plus the Base > > > Rate Margin set forth in the table below opposite the Consolidated > > > Leverage Ratio for the four Fiscal Quarter period for which the applicable > > > Pricing Certificate has been delivered pursuant to subsection 6.1(iv); or > > > > > > (b) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar > > > Rate plus the Eurodollar Rate Margin set forth in the table below opposite > > > the Consolidated Leverage Ratio for the four Fiscal Quarter period for > > > which the applicable Pricing Certificate has been delivered pursuant to > > > subsection 6.1(iv): Consolidated Leverage Ratio Eurodollar Rate Margin Base Rate Margin 4.50 and above 3.00% 2.00% 3.50 to 4.49 2.75% 1.75% 3.00 to 3.49 2.50% 1.50% 2.50 to 2.99 2.25% 1.25% less than 2.50 2.00% 1.00%   > > provided > > > > that, until the delivery of the Pricing Certificate and Company's audited > > annual financial statements pursuant to subsection 6.1(iii) for the Fiscal > > Year ending on or about June 30, 2001, the applicable margin for Revolving > > Loans that are Eurodollar Rate Loans shall be 2.50% per annum and Revolving > > Loans that are Base Rate Loans shall be 1.50% per annum. > > > > > > > > > (ii) Upon delivery of the Pricing Certificate by Company to Agent pursuant > > > to subsection 6.1(iv), the Base Rate Margin and the Eurodollar Rate Margin > > > shall automatically be adjusted in accordance with such Pricing > > > Certificate, such adjustment to become effective on the first day of the > > > month following the month in which Agent receives such Pricing Certificate > > > (subject to the provisions of the foregoing clause (i)); provided that, if > > > at any time a Pricing Certificate is not delivered at the time required > > > pursuant to subsection 6.1(iv), from the time such Pricing Certificate was > > > required to be delivered until delivery of such Pricing Certificate, such > > > applicable margins shall be the maximum percentage amount for the relevant > > > Loan set forth above. B. Interest Periods. In connection with each Eurodollar Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be, at Company's option, either a one, two, three or six month period; provided that: > > > (i) the initial Interest Period for any Eurodollar Rate Loan shall > > > commence on the Funding Date in respect of such Loan, in the case of a > > > Loan initially made as a Eurodollar Rate Loan, or on the date specified in > > > the applicable Notice of Conversion/Continuation, in the case of a Loan > > > converted to a Eurodollar Rate Loan; > > > > > > (ii) in the case of immediately successive Interest Periods applicable to > > > a Eurodollar Rate Loan continued as such pursuant to a Notice of > > > Conversion/Continuation, each successive Interest Period shall commence on > > > the day on which the next preceding Interest Period expires; > > > > > > (iii) if an Interest Period would otherwise expire on a day that is not a > > > Business Day, such Interest Period shall expire on the next succeeding > > > Business Day; provided that, if any Interest Period would otherwise expire > > > on a day that is not a Business Day but is a day of the month after which > > > no further Business Day occurs in such month, such Interest Period shall > > > expire on the next preceding Business Day; > > > > > > (iv) any Interest Period that begins on the last Business Day of a > > > calendar month (or on a day for which there is no numerically > > > corresponding day in the calendar month at the end of such Interest > > > Period) shall, subject to clause (v) of this subsection 2.2B, end on the > > > last Business Day of a calendar month; > > > > > > (v) no Interest Period with respect to any portion of the Revolving Loans > > > shall extend beyond the Revolving Loan Commitment Termination Date; > > > > > > (vi) there shall be no more than seven (7) Interest Periods outstanding at > > > any time; and > > > > > > (vii) in the event Company fails to specify an Interest Period for any > > > Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of > > > Conversion/Continuation, Company shall be deemed to have selected an > > > Interest Period of one month. C. Interest Payments. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); provided that in the event any Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4A(i), interest accrued on such Revolving Loans through the date of such prepayment shall be payable on the next succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity). D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time all or any part of its outstanding Revolving Loans equal to $2,000,000 and multiples of $250,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis, or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $2,000,000 and multiples of $250,000 in excess of that amount as a Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto, unless Company pays on such conversion date all amounts owing to Lenders under subsection 2.6D and provided further during the period commencing on the Closing Date and ending on the earlier to occur of (a) the date which is 90 days after the Closing Date and (b) the date on which Agent notifies Company that the primary syndication of the Commitments and the Loans has been completed, no Loan may be continued as or converted to a Eurodollar Rate Loan with an Interest Period of longer than one month. Company shall deliver a Notice of Conversion/Continuation to Agent no later than 1:00 P.M. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). In lieu of delivering a Notice of Conversion/Continuation, Company may give Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Agent on or before the proposed conversion/continuation date. Upon receipt of written or telephonic notice of any proposed conversion/continuation under this subsection 2.2D, Agent shall promptly transmit such notice by telefacsimile or telephone to each Lender of the Loan subject to the Notice of Conversion/Continuation. E. Default Rate. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable Insolvency Laws) payable upon demand at a rate that is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. G. Limitation on Interest. It is the intention of the parties hereto to comply with all applicable usury laws, whether now existing or hereafter enacted. Accordingly, notwithstanding any provision to the contrary in this Agreement, the Notes, the other Loan Documents or any other document evidencing, securing, guaranteeing or otherwise pertaining to the Obligations of Company to the Lenders, in no contingency or event whatsoever, whether by acceleration of the maturity of indebtedness of Company to the Lenders or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If from any circumstances whatsoever fulfillment of any provisions of this Agreement, the Notes, the other Loan Documents or of any other document evidencing, securing, guaranteeing or otherwise pertaining to the Obligations of Company to the Lenders, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstances the Lenders shall ever receive anything of value as interest or deemed interest by applicable law under this Agreement, the Notes, the other Loan Documents or any other document evidencing, securing, guaranteeing or otherwise pertaining to the Obligations of Company to the Lenders or otherwise an amount that would exceed the highest lawful amount (the "Maximum Rate"), such amount that would be excessive interest shall be applied to the reduction of the principal amount owing in connection with this Agreement or on account of any other indebtedness of Company to the Lenders, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal owing in connection with this Agreement and such other indebtedness, such excess shall be refunded to Company. In determining whether or not the interest paid or payable with respect to indebtedness of Company to the Lenders, under any specific contingency, exceeds the maximum nonusurious rate permitted under applicable law, the Lenders may, at their option (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, (c) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of interest on account of such indebtedness does not exceed the maximum amount permitted by applicable law, and/or (d) allocate interest between portions of the Obligations, to the end that no such portion shall bear interest at a rate greater than that permitted by law. Notwithstanding the foregoing, if for any period of time interest on any Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall remain at the Maximum Rate until each Lender shall have received the amount of interest which such Lender would have received during such period on such Obligations had the rate of interest not been limited to the Maximum Rate during such period. 2.3 Fees. A. Commitment Fees. Company agrees to pay to Agent, for distribution to each Revolving Lender in proportion to that Revolving Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitments over the Total Utilization of Revolving Loan Commitments multiplied by the commitment fee set forth in the table below opposite the Consolidated Leverage Ratio for which the applicable Pricing Certificate has been delivered pursuant to subsection 6.1(iv), such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on the first Business Day of each calendar month, commencing on the first such date to occur after the Closing Date, and on the Revolving Loan Commitment Termination Date: Consolidated Leverage Ratio Commitment Fee 3.00 and above 0.50% less than 3.00 0.375%   provided that until the delivery of the Pricing Certificate and Company's audited annual financial statements pursuant to subsection 6.1(iii) for the Fiscal Year ending on or about June 30, 2001, the applicable commitment fee shall be 0.50% per annum. B. Other Fees. Company agrees to pay to Agent such other fees in the amounts and at the times separately agreed upon between Company and Agent. 2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments; Application of Proceeds of Collateral and Payments Under Subsidiary Guaranty. A. Prepayments and Reductions in Revolving Loan Commitments. > > (i) Voluntary Prepayments. Company may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Agent by 12:00 Noon (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Agent (which original written or telephonic notice Agent will promptly transmit by telefacsimile or telephone to each Lender for the Loans to be prepaid), at any time and from time to time prepay any Revolving Loans on any Business Day in whole or in part in an aggregate minimum amount of $500,000 and multiples of $250,000 in excess of that amount; provided, however, that a Eurodollar Rate Loan may only be prepaid on the expiration of the Interest Period applicable thereto unless Company pays on such date of prepayment all amounts owing to Lenders under subsection 2.6D. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv). (ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Agent (which original written or telephonic notice Agent will promptly transmit by telefacsimile or telephone to each Revolving Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; provided that any such partial reduction of the Revolving Loan Commitments shall be in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount. Company's notice to Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Loan Commitment of each Revolving Lender proportionately to its Pro Rata Share. (iii) Deposits into Overadvance Deposit Account and Mandatory Prepayments of Revolving Loans. The Loans shall be prepaid in the amounts and under the circumstances set forth below, all such prepayments to be applied as set forth in subsection 2.4A(iv): > (a) Deposits into Overadvance Deposit Account Due to Reductions or > Restrictions of Revolving Loan Commitments or Due to Insufficient Borrowing > Base. Company shall from time to time make cash deposits into the Overadvance > Deposit Account to the extent necessary to comply with the limitations set > forth in clauses (a)-(c) of subsection 2.1A(i). > > (b) Prepayments of Revolving Loans from Amounts Transferred to BTCo Account. > Notwithstanding anything to the contrary contained in this Agreement, the > provisions of this subsection 2.4A(iii)(b) shall only be effective upon the > occurrence of a Cash Management Triggering Event caused by the occurrence of > an Event of Default. If any amounts are transferred to the BTCo Account on any > Business Day pursuant to the terms of any Blocked Account Agreement, if any, > then on such Business Day, if such amounts are transferred to the BTCo Account > prior to 12:00 Noon (New York time) on such Business Day, or on the next > succeeding Business Day, if such amounts are transferred to the BTCo Account > on or after 12:00 Noon (New York time) on such Business Day, Company shall > prepay Company's Revolving Loans in an amount equal to the amount transferred > to the BTCo Account pursuant to the terms of the applicable Blocked Account > Agreement on such Business Day (to the extent such amount relates to payments > received in respect of Accounts of Company or any of its Subsidiaries) until > all of Company's Revolving Loans shall have been paid in full. > > (iv) Application of Prepayments. > > (a) Application of Voluntary Prepayments. Any voluntary prepayments pursuant > to subsection 2.4A(i) shall be applied as specified by Company in the > applicable notice of prepayment. > > (b) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans. > Any prepayment of Revolving Loans shall be applied first to Base Rate Loans to > the full extent thereof before application to Eurodollar Rate Loans, in each > case in a manner which minimizes the amount of any payments required to be > made by Company pursuant to subsection 2.6D. B. General Provisions Regarding Payments. > > (i) Manner and Time of Payment. All payments by Company of principal, interest, fees and other Obligations hereunder and under the Notes shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Agent not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders. Funds received by Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. In order to effect timely payment of any interest, fees, commissions or other amounts due hereunder upon the occurrence of a Cash Management Triggering Event, Company hereby authorizes Agent to request Daily Funding Lender to make Revolving Loans for its own account (subject to settlement pursuant to subsection 2.1D) in a principal amount equal to such interest, fees, commissions or other amounts; provided that Agent shall not have the right to request such Revolving Loans if, after giving effect to such Revolving Loans, the aggregate outstanding principal amount of Revolving Loans would exceed the limitations set forth in clauses (a)-(d) of subsection 2.1A(i). Daily Funding Lender shall make the amount of such Revolving Loans (which shall be made as Base Rate Loans) available to Agent, in same day funds, at the Funding and Payment Office, not later than 1:00 P.M. (New York time) on the date requested by Agent, and Company and Lenders hereby authorize Agent, whether or not the conditions specified in subsection 4.2 have been satisfied or waived, to apply the proceeds of such Revolving Loans directly to the payment of such unpaid interest, fees, commissions or other amounts. Company hereby agrees that, upon the funding of any such Revolving Loans by Daily Funding Lender in accordance with the provisions of this subsection 2.4C(i), Company shall have effected Revolving Loans hereunder, which Revolving Loans shall for all purposes of this Agreement be deemed to have been made by Daily Funding Lender pursuant to and in accordance with the provisions of subsection 2.1C(ii). Agent shall deliver prompt notice to Company of the amount of Revolving Loans made pursuant to this subsection 2.4C together with copies of all invoices or other statements evidencing the fees, commissions or other amounts due hereunder (other than interest) paid with the proceeds of such Revolving Loans; provided that Agent shall give notice to Company five days in advance of the making of any such Revolving Loans for the payment of any amounts owed under subsection 10.2 together with copies of all invoices or other statements evidencing such amounts. In addition, Company hereby authorizes Agent to charge its accounts with Agent in order to cause timely payment to be made to Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (ii) Application of Payments to Principal and Interest. Except as provided in subsection 2.2C, all payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. (iii) Apportionment of Payments. Aggregate principal and interest payments in respect of Revolving Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares of such Loans; provided that (i) payments of principal in respect of the Revolving Loans pursuant to subsection 2.4A(iii)(b) shall be applied to reduce the outstanding Revolving Loans of Daily Funding Lender (subject to settlement pursuant to subsection 2.1D) prior to application to the outstanding Revolving Loans of any other Lender and (ii) payments of interest in respect of Revolving Loans which are Base Rate Loans shall be apportioned ratably among Lenders in proportion to the average daily amount of such Base Rate Loans of each Lender outstanding during the period in which such interest shall have accrued. Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Agent in respect of Loans and the commitment fees of such Lender when received by Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in apportioning payments received thereafter. (iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. (v) Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. C. Application of Proceeds of Collateral and Payments after Event of Default. Upon the occurrence and during the continuation of an Event of Default, (a) all payments received on account of the Obligations, whether from Company, from any Guarantor or otherwise, shall be applied by Agent against the Obligations and (b) all proceeds received by Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document may, in the discretion of Agent, be held by Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Agent against, the applicable Secured Obligations (as defined in such Collateral Document), in each case in the following order of priority: > > (i) to the payment of all reasonable costs and expenses of such sale, > > collection or other realization, all other reasonable expenses, liabilities > > and advances made or incurred by Agent in connection therewith, and all > > amounts for which Agent is entitled to compensation (including the fees > > described in subsection 2.3), reimbursement and indemnification under any > > Loan Document and all advances made by Agent thereunder for the account of > > the applicable Loan Party, and to the payment of all reasonable costs and > > expenses paid or incurred by Agent in connection with the Loan Documents, > > all in accordance with subsections 9.4, 10.2 and 10.3 and the other terms of > > this Agreement and the Loan Documents; > > > > (ii) thereafter, to the extent of any excess such proceeds, to the payment > > of all other Obligations for the ratable benefit of the holders thereof > > (subject to the provisions of subsection 2.4B(ii) hereof); and > > > > (iii) thereafter, to the extent of any excess such proceeds, to the payment > > to or upon the order of such Loan Party or to whosoever may be lawfully > > entitled to receive the same or as a court of competent jurisdiction may > > direct. 2.5 Use of Proceeds. A. Revolving Loans. The proceeds of any other Revolving Loans shall be applied by Company to refinance its existing indebtedness under the Third Amended and Restated Credit Agreement referred to in subsection 4.1 N(i) and may be used to refinance the Secured Notes/Mortgages and for working capital and other general corporate purposes, which may include the making of intercompany loans to any of Company's wholly-owned Subsidiaries, in accordance with subsection 7.1(iv), for their own general corporate purposes. B. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 Special Provisions Governing Eurodollar Rate Loans. Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: A. Determination of Applicable Interest Rate. As soon as practicable after 10:00 A.M. (New York City time) on each Interest Rate Determination Date, Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. Inability to Determine Applicable Interest Rate. In the event that Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Agent notifies Company and such Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be for a Base Rate Loan. C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Agent of such determination (which notice Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "Affected Loans"), shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth in reasonable detail the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment or conversion occasioned by the circumstances described in subsection 2.6C) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company in the repayment of its Eurodollar Rate Loans when required by the terms of this Agreement. E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had funded each of its Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period, whether or not its Eurodollar Rate Loans had been funded in such manner. G. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed for a Base Rate Loan or, if the conditions to making a Loan set forth in subsection 4.2 cannot then be satisfied, to be rescinded by Company. 2.7 Increased Costs; Taxes; Capital Adequacy. A. Compensation for Increased Costs. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender (including any Issuing Lender) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other Government Authority (whether or not having the force of law): > > (i) subjects such Lender to any additional Tax with respect to this > > Agreement or any of its obligations hereunder (including with respect to > > issuing or maintaining any Letters of Credit or purchasing or maintaining > > any participations therein or maintaining any Commitment hereunder) or any > > payments to such Lender of principal, interest, fees or any other amount > > payable hereunder; > > > > (ii) imposes, modifies or holds applicable any reserve, special deposit, > > compulsory loan, insurance charge or similar requirement against assets held > > by, or deposits or other liabilities in or for the account of, or advances > > or loans by, or other credit extended by, or any other acquisition of funds > > by, any office of such Lender (other than any such reserve or other > > requirements with respect to Eurodollar Rate Loans that are reflected in the > > definition of Adjusted Eurodollar Rate); or > > > > (iii) imposes any other condition (other than with respect to Taxes) on or > > affecting such Lender or its obligations hereunder or the interbank > > Eurodollar market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Loans or Commitments or agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in subsection 2.8A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder; provided that Company shall not be obligated to pay such additional amounts to the extent such additional amounts are incurred more than nine (9) months prior to the giving of such statement. B. Taxes. > > (i) Payments to Be Free and Clear. All sums payable by Company under this Agreement and the other Loan Documents shall be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (ii) Grossing-up of Payments. If Company or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Agent or any Lender under any of the Loan Documents: > (a) Company shall notify Agent of any such requirement or any change in any > such requirement as soon as Company becomes aware of it; > > (b) Company shall pay any such Tax when such Tax is due, such payment to be > made (if the liability to pay is imposed on Company) for its own account or > (if that liability is imposed on Agent or such Lender, as the case may be) on > behalf of and in the name of Agent or such Lender; > > (c) the sum payable by Company in respect of which the relevant deduction, > withholding or payment is required shall be increased to the extent necessary > to ensure that, after the making of that deduction, withholding or payment, > Agent or such Lender, as the case may be, receives on the due date a net sum > equal to what it would have received had no such deduction, withholding or > payment been required or made; and > > (d) within 30 days after paying any sum from which it is required by law to > make any deduction or withholding, and within 30 days after the due date of > payment of any Tax which it is required by clause (b) above to pay, Company > shall deliver to Agent evidence satisfactory to the other affected parties of > such deduction, withholding or payment and of the remittance thereof to the > relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date on which such Lender became a Lender in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date on which such Lender became a Lender, in respect of payments to such Lender. > > (iii) Evidence of Exemption from U.S. Withholding Tax. > > > > > (a) Each Lender that is organized under the laws of any jurisdiction other > > > than the United States or any state or other political subdivision thereof > > > (for purposes of this subsection 2.7B(iii), a "Non-US Lender") shall > > > deliver to Agent and to Company, on or prior to the Closing Date (in the > > > case of each Lender listed on the signature pages hereof) or on or prior > > > to the date of the Assignment Agreement pursuant to which it becomes a > > > Lender (in the case of each other Lender), and at such other times as may > > > be necessary in the determination of Company or Agent (each in the > > > reasonable exercise of its discretion), two original copies of Internal > > > Revenue Service Form W-8BEN or W-8ECI (or any successor forms) properly > > > completed and duly executed by such Lender, together with any other > > > certificate or statement of exemption required under the Internal Revenue > > > Code or the regulations issued thereunder to establish that such Lender is > > > not subject to United States withholding tax with respect to any payments > > > to such Lender of interest, fees or other amounts payable under any of the > > > Loan Documents. > > > > > > (b) Each Non-US Lender hereby agrees, from time to time after the initial > > > delivery by such Lender of such forms, certificates or other evidence, > > > whenever a lapse in time or change in circumstances renders such forms, > > > certificates or other evidence so delivered obsolete or inaccurate in any > > > material respect, that such Lender shall promptly (1) deliver to Agent and > > > to Company two original copies of renewals, amendments or additional or > > > successor forms, properly completed and duly executed by such Lender, > > > together with any other certificate or statement of exemption required in > > > order to confirm or establish that such Lender is not subject to United > > > States withholding tax with respect to payments to such Lender under the > > > Loan Documents or (2) notify Agent and Company of its inability to deliver > > > any such forms, certificates or other evidence. > > > > > > (c) Company shall not be required to pay any additional amount to any > > > Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall > > > have failed to satisfy the requirements of clause (a) or (b)(1) of this > > > subsection 2.7B(iii); provided that if such Lender shall have satisfied > > > the requirements of subsection 2.7B(iii)(a) on the date such Lender became > > > a Lender, nothing in this subsection 2.7B(iii)(c) shall relieve Company of > > > its obligation to pay any amounts pursuant to subsection 2.7B(ii)(c) in > > > the event that, as a result of any change in any applicable law, treaty or > > > governmental rule, regulation or order, or any change in the > > > interpretation, administration or application thereof, such Lender is no > > > longer properly entitled to deliver forms, certificates or other evidence > > > at a subsequent date establishing the fact that such Lender is not subject > > > to withholding as described in subsection 2.7B(iii)(a). C. Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in subsection 2.8A, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction; provided that Company shall not be obligated to pay such additional amounts to the extent such additional amounts are incurred more than nine (9) months prior to the giving of such statement. 2.8 Statement of Lenders; Obligation of Lenders and Issuing Lenders to Mitigate. A. Statements. Each Lender claiming compensation or reimbursement pursuant to subsection 2.6D, 2.7 or 2.8B shall deliver to Company (with a copy to Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive and binding upon all parties hereto absent manifest error. B. Mitigation. Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7, use reasonable effort to make, issue, fund or maintain the Commitments of such Lender or the Affected Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing Lender, if (i) as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 would be materially reduced and (ii) as determined by such Lender or Issuing Lender in its sole discretion, such action would not otherwise be disadvantageous to such Lender or Issuing Lender; provided that such Lender or Issuing Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8B unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other lending or letter of credit office as described above. 2.9 Replacement of a Lender. If Company receives a statement of amounts due pursuant to subsection 2.7A or 2.8A from a Lender or a Lender becomes an Affected Lender (any such Lender, a "Subject Lender"), so long as (i) no Potential Event of Default or Event of Default shall have occurred and be continuing and Company has obtained a commitment from another Lender or an Eligible Assignee to purchase at par the Subject Lender's Loans and assume the Subject Lender's Commitments and all other obligations of the Subject Lender hereunder, (ii) such Lender is not an Issuing Lender with respect to any Letters of Credit outstanding (unless all such Letters of Credit are terminated or arrangements acceptable to such Issuing Lender (such as a "back-to-back" letter of credit) are made) and (iii), if applicable, the Subject Lender is unwilling to withdraw the notice delivered to Company pursuant to subsection 2.8 upon 10 days prior written notice to the Subject Lender and Agent, Company may require the Subject Lender to assign all of its Loans and Commitments to such other Lender, Lenders, Eligible Assignee or Eligible Assignees pursuant to the provisions of subsection 10.1B; provided that, prior to or concurrently with such replacement (1) Company has paid to the Lender giving such notice all amounts under subsections 2.6D, 2.7 and/or 2.8B (if applicable) through such date of replacement, (2) the processing fee required to be paid by subsection 10.1B(i) shall have been paid to Agent, and (3) all of the requirements for such assignment contained in subsection 10.1B, including, without limitation, the consent of Agent (if required) and the receipt by Agent of an executed Assignment Agreement and other supporting documents, have been fulfilled. 2.10 Collection, Deposit and Transfer of Payments in Respect of Accounts. Subject to subsection 2.10G, Company shall, and shall cause each of its Domestic Subsidiaries to, maintain in effect at all times a system of accounts and procedures reasonably satisfactory to Agent for the collection and deposit of payments in respect of such Person's Accounts and the transfer of amounts so deposited to the applicable Concentration Account and BTCo Account. Without limiting the generality of the foregoing: A. Maintenance of Lock Boxes, Lock Box Accounts and Concentration Accounts. > > (i) Except as permitted under subsection 2.10A(ii), Company shall, and shall cause each of its Domestic Subsidiaries to, at all times maintain any Lock Boxes, Lock Box Accounts and Concentration Accounts established pursuant to the terms of this Agreement, the Lock Box Agreements and the Blocked Account Agreements, if any. (ii) Without the prior written approval of Agent, Company shall not, and shall not permit any of its Domestic Subsidiaries to, close any Lock Box Account or Concentration Account or open a new Lock Box Account or Concentration Account. As soon as practicable, the Company shall, and shall cause each of its Domestic Subsidiaries to, transfer each of its Deposit Accounts to Agent and, in any event, after the six-month anniversary of the Closing Date, the Company will not, and will not permit any of its Domestic Subsidiaries to, maintain a Deposit Account at any other financial institution other than Agent without the prior written consent of Agent. Notwithstanding anything herein to the contrary, Company and its Domestic Subsidiaries may maintain certain petty cash Deposit Accounts with financial institutions other than Agent (the "Petty Cash Accounts") which Petty Cash Accounts are not required to be subject to a Lock Box Agreement or Blocked Account Agreement provided that individual Petty Cash Accounts do not contain more than $50,000 at any time and that all such Petty Cash Accounts do not contain more than $300,000 in the aggregate at any time. B. Collection and Deposit of Payments in Respect of Accounts. > > (i) Company shall, and shall cause each of its Domestic Subsidiaries to, deliver such notices to account debtors and take all such other actions as may reasonably be necessary to cause all payments in respect of such Person's Accounts to be made directly to a Lock Box. (ii) Until such time as a Lock Box Agreement has been executed and delivered with respect to such Lock Box, Company shall, or shall cause each of its Domestic Subsidiaries to, direct its authorized representative, at least once on each Business Day, to retrieve all checks and other instruments delivered to a Lock Box and, as promptly as possible on the same Business Day so retrieved, to endorse for payment and deposit each such check or other instrument in the Lock Box Account related to such Lock Box. Notwithstanding the foregoing, if a Cash Management Triggering Event has occurred and is continuing and Agent has notified Company of its election to exercise its rights under this subsection 2.10B(ii), Company shall not, and shall not permit its Subsidiaries to, retrieve any items from any Lock Box unless accompanied by a representative of Agent, and Company hereby appoint Agent or any of its designees as Company's attorneys-in-fact with powers, upon notification by Agent as aforesaid, to (a) access all Lock Boxes and (b) endorse for payment any checks or other instruments representing payment in respect of any Accounts of such Persons that are delivered to any Lock Box. All acts of said attorneys or designees are hereby ratified and approved, and said attorneys or designees shall not be liable for any acts of omission or commission (other than acts or omissions constituting gross negligence or wilful misconduct as determined in a final order by a court of competent jurisdiction), nor for any error of judgment or mistake of fact or law. The power of attorney set forth in this subsection 2.10B(ii) is irrevocable until all Obligations shall have been paid in full and the Commitments shall have terminated. (iii) In the event that Company or any of its Domestic Subsidiaries receives any check, cash, note or other instrument representing payment of an Account (other than any item delivered to a Lock Box), Company shall, or shall cause such Domestic Subsidiary to, hold such item in trust for Agent and shall, as soon as practicable (and in any event within one Business Day) after receipt thereof, cause such item to be deposited into a Lock Box Account with any necessary endorsements. (iv) Company hereby agrees, if a Cash Management Triggering Event has occurred and is continuing and Agent has notified Company in writing that the provisions of this subsection 2.10B(iv) are to become effective until such later time, if any, as Agent shall have notified Company in writing that such provisions are no longer to be effective, not to deposit any monies into the Lock Box Accounts or to Concentration Accounts or to otherwise permit any monies to be deposited into any of such accounts, except payments received in respect of Company's Accounts. C. Transfer of Amounts Deposited in the Lock Box Accounts to the Concentration Accounts. Company shall cause all amounts deposited in each Lock Box Account to be transferred on each Business Day to the applicable Concentration Account in accordance with the terms of the applicable Lock Box Agreement. D. Transfer of Amounts Deposited in the Concentration Accounts to the BTCo Account. Company shall cause all amounts deposited in each Concentration Account to be transferred on each Business Day to the BTCo Account. Any amounts so transferred to the BTCo Account first shall be applied as provided in subsection 2.4A(iii)(b) to the extent therein provided and thereafter, so long as no Event of Default shall have occurred and be continuing, shall be available for disbursement to the applicable Loan Parties for working capital and other general corporate purposes. E. Treatment of Accounts. Company shall not, without Agent's prior written consent, grant any extension of the time of payment of any Account, compromise or settle any Account for less than the full amount thereof, release, in whole or in part, any person or property liable for the payment thereof, or allow any credit or discount whatsoever thereon, except, so long as no Event of Default has occurred and is continuing, in accordance with their usual and customary business practices. F. Company to Provide Information. Company shall, at such intervals as Agent may reasonably request, furnish such statements, schedules and/or information as Agent may request relating to Company's and its Domestic Subsidiaries' Accounts and the collection, deposit and transfer of payments in respect thereof, including, without limitation, all invoices evidencing such Accounts. G. Interim Cash Management Arrangements. Notwithstanding the foregoing provisions of this subsection 2.10, the procedures described in subsections 2.10A through 2.10F (the "Credit Agreement Cash Management Procedures") shall be implemented as soon as practical after the Closing Date but in any event on or before the six-month anniversary of the Closing Date and, prior to such implementation, Company and Domestic Subsidiaries may continue utilizing their existing cash collection and cash management systems in accordance with the provisions of this subsection 2.10G. Company has advised Agent that Company currently has a lockbox arrangement (the "BOA Lockbox") with Bank of America N.A. ("BOA") pursuant to which Company and its Domestic Subsidiaries cause to be deposited upon receipt into the accounts (the "Blocked Accounts") identified in the Third Party Agreement Relating to Lockbox Services dated as of September 8, 2000 (the "BOA Blocked Account Agreement") among Company, certain of Company's Domestic Subsidiaries, Agent and BOA all of the cash, checks, drafts or other orders for payment of money relating to or constituting payments made in respect of all present and future accounts receivable and proceeds thereof of Company and such Domestic Subsidiaries. Prior to the implementation of the Credit Agreement Cash Management Procedures, Company shall, and shall cause its Domestic Subsidiaries to, continue to operate their existing cash collection and cash management systems, including the BOA Lockbox, in accordance with the procedures in effect on the Closing Date, and without the prior written approval of Agent, Company shall not, and shall not permit any of its Domestic Subsidiaries to, terminate or otherwise modify the BOA Lockbox procedures from those in effect on the Closing Date. Company acknowledges and agrees that upon the occurrence of an Event of Default or a Cash Management Triggering Event, Agent may implement the procedures provided for in the BOA Blocked Account Agreement and exercise all of its rights and remedies thereunder. Company agrees to furnish from time to time upon Agent's request therefor such information with respect to the Blocked Accounts and the BOA Lockbox, including without limitation statements of account, copies of checks or other remittances or deposit advices, as may be reasonably requested by Agent. Section 3. LETTERS OF CREDIT 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein. A. Letters of Credit. In addition to Company requesting that Lenders make Revolving Loans pursuant to subsection 2.1A(i), Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to the date that is thirty (30) days prior to the Revolving Loan Commitment Termination Date, that one or more Revolving Lenders issue Commercial Letters of Credit or Standby Letters of Credit for the account of Company for the purposes specified in the definition of Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, any one or more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this subsection 3.1; provided that neither Company shall request that any Revolving Lender issue (and no Revolving Lender shall issue): > > (i) any Letter of Credit if, after giving effect to such issuance, the sum > > of the Total Utilization of Revolving Loan Commitments would exceed the > > Revolving Loan Commitments then in effect; > > > > (ii) any Letter of Credit if, after giving effect to such issuance, the > > Letter of Credit Usage would exceed an amount (the "Maximum Letter of Credit > > Usage") equal to $2,000,000 minus the amount of any Hedge Exposure; > > > > (iii) any Letter of Credit if, after giving effect to such issuance, the > > Total Utilization of Revolving Loan Commitments would exceed the Borrowing > > Base then in effect; > > > > (iv) so long as the Senior Notes are outstanding, any Letter of Credit, if > > after giving effect to such issuance, the Total Utilization of Revolving > > Loan Commitments would exceed the limitations on the incurrence of debt > > contained in Sections 11.3(c) and 11.4 of the Senior Note Agreement; > > > > (v) any Standby Letter of Credit having an expiration date later than the > > earlier of (a) five Business Days prior to the Revolving Loan Commitment > > Termination Date and (b) the date which is one year from the date of > > issuance of such Letter of Credit; provided that the immediately preceding > > clause (b) shall not prevent any Issuing Lender from agreeing that a Standby > > Letter of Credit will automatically be extended for one or more successive > > periods not to exceed one year each unless such Issuing Lender elects not to > > extend for any such additional period; and provided, further that such > > Issuing Lender shall elect not to extend such Standby Letter of Credit if it > > has knowledge that an Event of Default has occurred and is continuing (and > > has not been waived in accordance with subsection 10.6) at the time such > > Issuing Lender must elect whether or not to allow such extension; > > > > (vi) any Commercial Letter of Credit having an expiration date (a) later > > than the earlier of (X) the date which is 30 days prior to the Revolving > > Loan Commitment Termination Date and (Y) the date which is 180 days from the > > date of issuance of such Commercial Letter of Credit or (b) that is > > otherwise unacceptable to the applicable Issuing Lender in its reasonable > > discretion; or > > > > (vii) any Letter of Credit denominated in a currency other than Dollars or > > Canadian Dollars. > > > > (viii) any Letter of Credit which would require drawings other than sight > > drawings. B. Mechanics of Issuance. > > > > (i) Notice of Issuance. Whenever Company desires the issuance of a Letter of Credit, it shall deliver to Agent, in any manner provided for in subsection 10.8, a Request for Issuance of Letter of Credit in the form of Exhibit III annexed hereto no later than 12:00 Noon (New York City time) at least three Business Days (in the case of Standby Letters of Credit) or five Business Days (in the case of Commercial Letters of Credit), or such shorter period as may be agreed to by the Issuing Lender in any particular instance, in advance of the proposed date of issuance. The Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any documents described in or attached to the Request for Issuance of Letter of Credit. Company shall notify the applicable Issuing Lender (and Agent, if Agent is not such Issuing Lender) prior to the issuance of any Letter of Credit in the event that any of the matters to which Company is required to certify in the applicable Request for Issuance of Letter of Credit is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit Company shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which Company is required to certify in the applicable Request for Issuance of Letter of Credit. (ii) Determination of Issuing Lender. Upon receipt by Agent of a Request for Issuance of Letter of Credit pursuant to subsection 3.1B(i) requesting the issuance of a Letter of Credit, in the event Agent elects to issue such Letter of Credit, Agent shall promptly so notify Company, and Agent shall be the Issuing Lender with respect thereto. In the event that Agent, in its sole discretion, elects not to issue such Letter of Credit, Agent shall promptly so notify Company, whereupon Company may request any other Revolving Lender to issue such Letter of Credit by delivering to such Revolving Lender a copy of the applicable Request for Issuance of Letter of Credit. Any Revolving Lender so requested to issue such Letter of Credit shall promptly notify Company and Agent whether or not, in its sole discretion, it has elected to issue such Letter of Credit, and any such Revolving Lender which so elects to issue such Letter of Credit shall be the Issuing Lender with respect thereto. In the event that all other Revolving Lenders shall have declined to issue such Letter of Credit, notwithstanding the prior election of Agent not to issue such Letter of Credit, Agent shall be obligated to issue such Letter of Credit and shall be the Issuing Lender with respect thereto, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by Agent, when aggregated with Agent's outstanding Revolving Loans, may exceed Agent's Revolving Loan Commitment then in effect. (iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures. (iv) Notification to Revolving Lenders. Upon the issuance of or amendment to any Standby Letter of Credit the Issuing Lender shall promptly notify Agent and Company, in writing, of such issuance or amendment and such notice shall be accompanied by a copy of such issuance or amendment. Promptly upon receipt of such notice (or, if Agent is the Issuing Lender, together with such notice), Agent shall notify each Revolving Lender of such issuance or amendment, and if so requested by any Revolving Lender, Agent shall provide such Lender with copies of any such Standby Letter of Credit issuance or amendment. In the case of Commercial Letters of Credit, in the event that the Issuing Lender is other than Agent, such Issuing Lender will send by facsimile transmission to the Agent, promptly on the first Business Day of each week, a report of its daily aggregate maximum amount available for drawing under Commercial Letters of Credit for the previous week. Promptly upon receipt of such report, Agent shall notify each Revolving Lender, in writing, of the contents of such reports. C. Revolving Lenders' Purchase of Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Revolving Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. 3.2 Letter of Credit Fees. Company agrees to pay the following amounts with respect to Letters of Credit issued hereunder: > > (i) with respect to each Letter of Credit, (a) a fronting fee, payable > > directly to the applicable Issuing Lender for its own account, equal to the > > greater of (X) $150 and (Y) 0.25% per annum of the daily amount available to > > be drawn under such Letter of Credit and (b) a letter of credit fee, payable > > to Agent for the account of Revolving Lenders, equal to the applicable > > Eurodollar Rate Margin for Revolving Loans multiplied by the daily amount > > available to be drawn under such Letter of Credit, in each case payable in > > arrears on and to (but excluding) the first Business Day of each March, > > June, September and December of each year and computed on the basis of a > > 360-day year for the actual number of days elapsed; > > > > (ii) with respect to the issuance, amendment or transfer of each Letter of > > Credit and each payment of a drawing made thereunder (without duplication of > > the fees payable under clause (i) above), documentary and processing > > charges, payable directly to the applicable Issuing Lender for its own > > account, in accordance with such Issuing Lender's standard schedule for such > > charges in effect at the time of such issuance, amendment, transfer or > > payment, as the case may be; and > > > > (iii) For purposes of calculating any fees payable under clause (i) of this > > subsection 3.2, the daily amount available to be drawn under any Letter of > > Credit shall be determined as of the close of business on any date of > > determination. Promptly upon receipt by Agent of any amount described in > > clause (i)(b) of this subsection 3.2, Agent shall distribute to each > > Revolving Lender its Pro Rata Share of such amount. 3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of Credit. A. Responsibility of Issuing Lender With Respect to Drawings. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be substantially in accordance with the terms and conditions of such Letter of Credit. B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In the event an Issuing Lender has determined to honor a drawing under a Letter of Credit issued by it, such Issuing Lender shall immediately notify Company and Agent, and Company shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "Reimbursement Date") in an amount in Dollars and in same day funds equal to the amount of such payment; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Company shall have notified Agent and such Issuing Lender prior to 10:00 A.M. (New York City time) on the date such drawing is honored that Company intends to reimburse such Issuing Lender for the amount of such payment with funds other than the proceeds of Revolving Loans, Agent shall request Revolving Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such drawing and Company agrees that the Revolving Loans under this subsection 3.3B shall be treated as Revolving Loans for all purposes hereunder and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2B, Revolving Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such payment, the proceeds of which shall be applied directly by Agent to reimburse such Issuing Lender for the amount of such payment; and provided, further that if for any reason proceeds of Revolving Loans are not received by such Issuing Lender on the Reimbursement Date in an amount equal to the amount of such payment, Company shall reimburse such Issuing Lender, on demand, in an amount in same day funds equal to the excess of the amount of such payment over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Revolving Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Revolving Lender resulting from the failure of such Revolving Lender to make such Revolving Loans under this subsection 3.3B. In the event that there shall be a drawing under a Letter of Credit denominated in Canadian Dollars, the reimbursement obligation therefore shall be converted into U.S. Dollars at the spot exchange rate for conversion of Canadian Dollars into U.S. Dollars at the time of such conversion and the reimbursement obligation of Company, the amount of any Revolving Loans made pursuant to this subsection 3.3B and the payment obligations owed to the Issuing Lender shall all be obligations owing in U.S. Dollars. C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit. > > (i) Payment by Revolving Lenders. In the event that Company shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any payment by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify each other Lender of the unreimbursed amount of such honored drawing and of such other Revolving Lender's respective participation therein based on such Revolving Lender's Pro Rata Share. Each Revolving Lender shall make available to such Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of such Issuing Lender specified in such notice, not later than 12:00 Noon (New York City time) on the first business day (under the laws of the jurisdiction in which such office of such Issuing Lender is located) after the date notified by such Issuing Lender. In the event that any Revolving Lender fails to make available to such Issuing Lender on such business day the amount of such Revolving Lender's participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Revolving Lender together with interest thereon at the rate customarily used by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from any Issuing Lender any amounts made available by such Revolving Lender to such Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payment was made by such Revolving Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender. (ii) Distribution to Lenders of Reimbursements Received From Company. In the event any Issuing Lender shall have been reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for all or any portion of any payment by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall distribute to each other Revolving Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Revolving Lender's Pro Rata Share of all payments subsequently received by such Issuing Lender from Company in reimbursement of such payment under the Letter of Credit when such payments are received. Any such distribution shall be made to a Revolving Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Revolving Lender may request. D. Interest on Amounts Paid Under Letters of Credit. > > (i) Payment of Interest by Company. Company agrees to pay to each Issuing Lender, with respect to payments under any Letters of Credit issued by it, interest on the amount paid by such Issuing Lender in respect of each such payment from the date a drawing is honored to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) Distribution of Interest Payments by Issuing Lender. Promptly upon receipt by any Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a payment under a Letter of Credit issued by it, (a) such Issuing Lender shall distribute to each other Revolving Lender, out of the interest received by such Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which such Issuing Lender is reimbursed for the amount of such payment (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such other Revolving Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event such Issuing Lender shall have been reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for all or any portion of such payment, such Issuing Lender shall distribute to each other Revolving Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Revolving Lender's Pro Rata Share of any interest received by such Issuing Lender in respect of that portion of such payment so reimbursed by other Revolving Lenders for the period from the date on which such Issuing Lender was so reimbursed by other Revolving Lenders to but excluding the date on which such portion of such payment is reimbursed by Company. Any such distribution shall be made to a Revolving Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Revolving Lender may request. 3.4 Obligations Absolute. The obligation of Company to reimburse each Issuing Lender for payments under the Letters of Credit issued by it and to repay any Revolving Loans made by Revolving Lenders pursuant to subsection 3.3B and the obligations of Revolving Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances: > > (i) any lack of validity or enforceability of any Letter of Credit; > > > > (ii) the existence of any claim, set-off, defense or other right which > > Company or any Lender may have at any time against a beneficiary or any > > transferee of any Letter of Credit (or any Persons for whom any such > > transferee may be acting), any Issuing Lender or other Revolving Lender or > > any other Person or, in the case of a Revolving Lender, against Company, > > whether in connection with this Agreement, the transactions contemplated > > herein or any unrelated transaction (including any underlying transaction > > between Company or one of its Subsidiaries and the beneficiary for which any > > Letter of Credit was procured); > > > > (iii) any draft or other document presented under any Letter of Credit > > proving to be forged, fraudulent, invalid or insufficient in any respect or > > any statement therein being untrue or inaccurate in any respect; > > > > (iv) payment to the beneficiary of such Letter of Credit by the applicable > > Issuing Lender under any Letter of Credit against presentation of a draft or > > other document which does not substantially comply with the terms of such > > Letter of Credit; > > > > (v) any adverse change in the business, operations, properties, assets, > > condition (financial or otherwise) or prospects of Company or any of its > > Subsidiaries; > > > > (vi) any breach of this Agreement or any other Loan Document by any party > > thereto; > > > > (vii) any other circumstance or happening whatsoever, whether or not similar > > to any of the foregoing; or > > > > (viii) the fact that an Event of Default or a Potential Event of Default > > shall have occurred and be continuing; provided , in each case, that payment by the applicable Issuing Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 3.5 Indemnification; Nature of Issuing Lenders' Duties. A. Indemnification. In addition to amounts payable as provided in subsection 2.7, Company hereby agrees to protect, indemnify, pay and save harmless each Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of outside counsel and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of such Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of such Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority. B. Nature of Issuing Lenders' Duties. As between Company and any Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Issuing Lender, including any act or omission by a Government Authority specified in subsection 3.5A, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 3.5, Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction or the wrongful dishonor of a demand for payment substantially in accordance with the terms and conditions of such Letter of Credit, provided such dishonor is not the result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority. Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to make Revolving Loans and the issuance of Letters of Credit hereunder are subject to the satisfaction of the following conditions. 4.1 Conditions to Initial Revolving Loans. The obligations of Lenders to make the Revolving Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: A. Loan Party Documents. On or before the Closing Date, Company shall, and shall cause each other Loan Party to, deliver to Lenders (or to Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Company or such Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date: > > (i) Copies of the Organizational Documents of such Person, certified by the > > Secretary of State of its jurisdiction of organization or, if such document > > is of a type that may not be so certified, certified by the secretary or > > similar officer of the applicable Loan Party, together with a good standing > > certificate from the Secretary of State of its jurisdiction of organization > > and each other state in which such Person is qualified to do business and, > > to the extent generally available, a certificate or other evidence of good > > standing as to payment of any applicable franchise or similar taxes from the > > appropriate taxing authority of each of such jurisdictions, each dated a > > recent date prior to the Closing Date except in jurisdictions where the > > failure to be so qualified or in good standing has not had and could not > > reasonably be expected to have a Material Adverse Effect; > > > > (ii) Resolutions of the Governing Body of such Person approving and > > authorizing the execution, delivery and performance of the Loan Documents to > > which it is a party, certified as of the Closing Date by the secretary or > > similar officer of such Person as being in full force and effect without > > modification or amendment; > > > > (iii) Signature and incumbency certificates of the officers of such Person > > executing the Loan Documents to which it is a party; > > > > (iv) Executed originals of the Loan Documents to which such Person is a > > party; and > > > > (v) Such other documents as Agent may reasonably request. B. Fees. Company shall have paid to Agent, for distribution (as appropriate) to Agent and Lenders, the fees payable on the Closing Date referred to in subsection 2.3. C. Corporate and Capital Structure, and Ownership. > > (i) Corporate Structure. The corporate organizational structure of Company and its Subsidiaries shall be satisfactory to Agent. (ii) Capital Structure and Ownership. The capital structure and ownership of Company shall be satisfactory to Agent. D. Representations and Warranties; Performance of Agreements. Company shall have delivered to Agent an Officer's Certificate, in form and substance satisfactory to Agent, to the effect that the representations and warranties in Section 5 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Agent. E. Financial Statements; Pro Forma Balance Sheet. On or before the Closing Date, Lenders shall have received from Company (i) audited financial statements of Company and its Subsidiaries for Fiscal Years ended July 2, 1999 and July 3, 1998, consisting of consolidated balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for each such Fiscal Year, (ii) unaudited financial statements of Company and its Subsidiaries as at March 31, 2000, consisting of consolidated balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for the nine-month period ending on such date, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, (iii) unaudited financial statements of Company and its Subsidiaries as at June 30, 2000, consisting of consolidated balance sheets and the related consolidated statements of income, stockholder's equity and cash flows for the twelve-month period ending on such date, which financial statements shall demonstrate that Company's Consolidated EBITDA for the twelve-month period then ending shall not be less than $49,000,000 (provided that such $49,000,000 may be reduced by up to $500,000 of non-cash, non-recurring charges which are reasonably satisfactory to Agent), all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, (iv) pro forma consolidated balance sheets of Company and its Subsidiaries as at June 30, 2000 giving effect to the transactions consummated on the Closing Date, prepared in accordance with GAAP and reflecting the consummation of the financings and other transactions contemplated hereby, (v) projected quarterly consolidated statements of income, balance sheets and statements of cash flows of Company and its Subsidiaries for each remaining month in Fiscal Year 2001, and (vi) projected consolidated balance sheets and the related consolidated statements of income, operations, stockholders' equity and cash flows for the five-year period after the Closing Date, all of the foregoing in clauses (i) through (vi) to be substantially consistent with any financial statements previously delivered to Agent and, in the case of any such financial statements for subsequent periods, substantially consistent with any projected financial results for such periods previously delivered to Agent and otherwise in form and substance satisfactory to Agent and the Lenders. F. Borrowing Base Certificate. On or before the Closing Date, Company shall have delivered to Agent and Lenders a Borrowing Base Certificate substantially in the form of Exhibit VIII annexed hereto, prepared as of a recent date prior to the Closing Date. G. Opinions of Counsel to Loan Parties. Lenders shall have received originally executed copies of one or more favorable written opinions of Latham & Watkins, counsel for Loan Parties, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in Exhibit IX annexed hereto and as to such other matters as Agent acting on behalf of Lenders may reasonably request (this Credit Agreement constituting a written request by Company to such counsel to deliver such opinions to Lenders). H. Opinions of Agent's Counsel. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers LLP, counsel to Agent, dated as of the Closing Date, substantially in the form of Exhibit X annexed hereto. I. Evidence of Insurance. Agent shall have reviewed the adequacy of the types and amounts of Loan Parties' insurance coverage, including without limitation, casualty, hazard, business interruption and product liability insurance, and such review shall be in form and substance satisfactory to Agent. Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 6.4 is in full force and effect and that Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 6.4. J. Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc. Company shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the continued operation of the business conducted by Company and its Subsidiaries in substantially the same manner as conducted prior to the Closing Date. Each such Governmental Authorization or consent shall be in full force and effect, except in a case where the failure to obtain or maintain a Governmental Authorization or consent, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. K. Officer's Certificate Concerning Senior Note Purchase Agreement . Company shall have delivered to Agent an Officer's Certificate, in form and substance reasonably satisfactory to Agent, to the effect that the making of the Loans on the Closing Date and the creation of the Liens under the Loan Documents complies in all respects with Sections 11.3(c), 11.4 and 11.6(j) of the Senior Note Agreement and attaching a schedule with the related calculations demonstrating such compliance. L. Security Interests in Personal Property. Agent shall have received evidence satisfactory to it that Company and Subsidiary Guarantors shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clauses (ii) and (iii) below) that may be necessary or, in the opinion of Agent, desirable in order to create in favor of Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire personal property Collateral. Such actions shall include the following: > > (i) Schedules to Collateral Documents. Delivery to Agent of accurate and > > complete schedules to all of the applicable Collateral Documents; > > > > (ii) Lien Searches and UCC Termination Statements. Delivery to Agent of (a) > > the results of a recent search, by a Person satisfactory to Agent, of all > > effective UCC financing statements and fixture filings and all judgment and > > tax lien filings which may have been made with respect to any personal or > > mixed property of any Loan Party, together with copies of all such filings > > disclosed by such search, and (b) UCC termination statements duly executed > > or agreements to execute by all applicable Persons for filing in all > > applicable jurisdictions as may be necessary to terminate any effective UCC > > financing statements or fixture filings disclosed in such search (other than > > any such financing statements or fixture filings in respect of Liens > > permitted to remain outstanding pursuant to the terms of this Agreement); > > > > (iii) UCC Financing Statements. Delivery to Agent of UCC financing > > statements duly executed by each applicable Loan Party with respect to all > > personal property Collateral of such Loan Party, for filing in all > > jurisdictions as may be necessary or, in the opinion of Agent, desirable to > > perfect the security interests created in such Collateral pursuant to the > > Collateral Documents; and > > > > (iv) Cash Management. Delivery to Agent of a Lock Box Agreement or a Blocked > > Account Agreement executed by each Person that is a party thereto with > > respect to each Deposit Account listed on Schedule I annexed to the Security > > Agreement (other than the BT Concentration Account). M. [Intentionally Omitted] N. Matters Relating to Existing Indebtedness of Company and its Subsidiaries. > > (i) Termination of Existing Credit Arrangements and Related Liens; Existing Letters of Credit. On the Closing Date, Company and its Subsidiaries shall have (a) repaid in full all Indebtedness outstanding under the Third Amended and Restated Credit Agreement dated as of August 28, 1997 among the Company, certain of the Company's Subsidiaries, Bank of America National Trust and Savings Association, as Agent, and certain other financial institutions party thereto, (b) terminated any commitments to lend or make other extensions of credit thereunder, (c) delivered or agreed to deliver to Agent all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Company and its Subsidiaries thereunder, and (d) made arrangements satisfactory to Agent with respect to the cancellation of any letters of credit outstanding thereunder or the issuance of Letters of Credit to support the obligations of Company and its Subsidiaries with respect thereto. (ii) Existing Indebtedness to Remain Outstanding. Agent shall have received an Officer's Certificate of Company stating that, after giving effect to the transactions described in this subsection 4.1N, the Indebtedness of Loan Parties (other than Indebtedness under the Loan Documents and the Senior Notes) shall consist of approximately $10,000,000 in aggregate principal amount of outstanding Indebtedness described in Schedule 7.1 annexed hereto. The terms and conditions of all such Indebtedness shall be in form and in substance reasonably satisfactory to Agent. O. Collateral Audits and Appraisals. Agent shall have received audits of the Inventory and Accounts of Company and its Subsidiaries in form, scope and substance reasonably satisfactory to Agent and the Lenders. P. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. 4.2 Conditions to All Loans. The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent: A. Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by a duly authorized Officer of Company. B. As of that Funding Date: > > (i) The representations and warranties contained herein and in the other > > Loan Documents shall be true, correct and complete in all material respects > > on and as of that Funding Date to the same extent as though made on and as > > of that date, except to the extent such representations and warranties > > specifically relate to an earlier date, in which case such representations > > and warranties shall have been true, correct and complete in all material > > respects on and as of such earlier date; > > > > (ii) No event shall have occurred and be continuing or would result from the > > consummation of the borrowing contemplated by such Notice of Borrowing that > > would constitute an Event of Default or a Potential Event of Default; > > > > (iii) Each Loan Party shall have performed in all material respects all > > agreements and satisfied all conditions which this Agreement provides shall > > be performed or satisfied by it on or before that Funding Date; > > > > (iv) No order, judgment or decree of any arbitrator or Government Authority > > shall purport to enjoin or restrain any Lender from making the Loans to be > > made by it on that Funding Date; and > > > > (v) Company shall have delivered such other certificates or documents that > > Agent shall reasonably request, in form and substance reasonably > > satisfactory to Agent. 4.3 Conditions to Letters of Credit. The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: A. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement, the initial Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an executed Request for Issuance of Letter of Credit in each case signed by a duly authorized Officer of Company, together with all other information specified in subsection 3.1B(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. C. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce Revolving Lenders to purchase participations therein, Company represents and warrants to each Lender, on the date of this Agreement, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete: 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries. A . Organization and Powers. Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as specified in Schedule 5.1 annexed hereto. Each Loan Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. B. Qualification and Good Standing. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. C. Conduct of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.14. D. Subsidiaries. All of the Subsidiaries of Company are identified in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time to time pursuant to the provisions of subsection 6.1(xvi). The capital stock or similar equity interests of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto (as so supplemented) are duly authorized, validly issued, fully paid and nonassessable and none of such capital stock or similar equity interests constitutes Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto (as so supplemented) is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Schedule 5.1 annexed hereto (as so supplemented) correctly sets forth the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein. 5.2 Authorization of Borrowing, etc. A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action on the part of each Loan Party that is a party thereto. B. No Conflict. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, including without limitation the Senior Note Purchase Agreement, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for (a) such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders, and (b) with respect to the foregoing clauses (i), (ii) and (iv) above, such violations, conflicts, breaches, defaults and failures to obtain approvals or consents which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. C. Governmental Consents. The execution, delivery and performance by Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not require any Governmental Authorization except for (i) filings and recordings required in connection with the perfection of the security interests granted pursuant to the Loan Documents; (ii) registrations, consents, approvals, notices and other actions which have been taken or obtained prior to the Closing Date; (iii) notices and other actions required to be taken after the Closing Date relating to operating licenses, which notices and other action will be given or taken as required in due course; and (iv) registrations, consents, approvals, notices and other actions the failure to obtain or take have not and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. D. Binding Obligation. Each of the Loan Documents has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 5.3 Financial Condition. Company has heretofore delivered to Lenders, at Lenders' request, the financial statements and information described in subsection 4.1E. All such statements other than pro forma financial statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. None of the Loan Parties have (and none of the Loan Parties will have following the funding of the initial Loans) any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that, as of the Closing Date, is not reflected in the foregoing financial statements or the notes thereto and, as of any Funding Date subsequent to the Closing Date, is not reflected in the most recent financial statements delivered to Lenders pursuant to subsection 6.1 or the notes thereto and that, in any such case, is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries taken as a whole. 5.4 No Material Adverse Change; No Restricted Junior Payments. Since March 31, 2000, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since March 31, 2000, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted by subsection 7.5. 5.5 Title to Properties; Liens; Real Property. A. Title to Properties; Liens. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. B. Real Property. As of the Closing Date, Schedule 5.5 annexed hereto contains a true, accurate and complete list of (i) all Real Property Assets and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset of any Loan Party, regardless of whether such Loan Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in Schedule 5.5 annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect (except for any such agreements terminated in the ordinary course of business) and Company does not have knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Loan Party, enforceable against such Loan Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. 5.6 Litigation; Adverse Facts. Except as set forth in Schedule 5.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or other Government Authority, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 5.7 Payment of Taxes. Except to the extent permitted by subsection 6.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries that (i) could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts. A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreements or instruments or any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. C. All Material Contracts of Company and its Subsidiaries are in full force and effect and no material defaults currently exist thereunder. 5.9 Governmental Regulation. Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 5.10 Securities Activities. A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. B. Following application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock. 5.11 Employee Benefit Plans. A. Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in substantial compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their material obligations under each Employee Benefit Plan. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. B. No ERISA Event has occurred or is reasonably expected to occur. C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as set forth in Schedule 5.11 annexed hereto, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company, any of its Subsidiaries or any of their respective ERISA Affiliates. D. As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $1,000,000. E. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Company, its Subsidiaries could reasonably be expected to incur as a result of a complete withdrawal by Company or its Subsidiaries or any ERISA Affiliate from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $1,000,000. 5.12 Certain Fees. No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 5.13 Environmental Protection. Except as set forth in Schedule 5.13 annexed hereto: > > (i) neither Company nor any of its Subsidiaries nor any of their respective > > Facilities or operations are subject to any outstanding written order, > > consent decree or settlement agreement with any Person relating to (a) any > > Environmental Law, (b) any Environmental Claim, or (c) any Hazardous > > Materials Activity that, individually or in the aggregate, could reasonably > > be expected to have a Material Adverse Effect; > > > > (ii) neither Company nor any of its Subsidiaries has received any letter or > > request for information under Section 104 of the Comprehensive Environmental > > Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any > > comparable state law that, individually or in the aggregate, could > > reasonably be expected to have a Material Adverse Effect; > > > > (iii) there are and, to Company's knowledge, have been no conditions, > > occurrences, or Hazardous Materials Activities that could reasonably be > > expected to form the basis of an Environmental Claim against Company or any > > of its Subsidiaries that, individually or in the aggregate, could reasonably > > be expected to have a Material Adverse Effect; > > > > (iv) compliance with all current or reasonably foreseeable future > > requirements pursuant to or under Environmental Laws will not, individually > > or in the aggregate, have a reasonable possibility of giving rise to a > > Material Adverse Effect. 5.14 Employee Matters. There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 5.15 Solvency. Each Loan Party is and, upon the incurrence of any Obligations by such Loan Party on any date on which this representation is made, will be, Solvent. 5.16 Matters Relating to Collateral. A. Creation, Perfection and Priority of Liens. The execution and delivery of the Collateral Documents by Loan Parties, together with (i) the actions taken on or prior to the date hereof pursuant to subsections 4.1L and 6.8 and (ii) the delivery to Agent of any Pledged Collateral not delivered to Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Agent for the benefit of Lenders, as security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid and perfected First Priority Lien on all of the Collateral, and all filings and other actions necessary or desirable to perfect and maintain the perfection and First Priority status of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Agent. B. Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any Government Authority is required for either (i) the pledge or grant by any Loan Party of the Liens purported to be created in favor of Agent pursuant to any of the Collateral Documents or (ii) the exercise by Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 5.16A and except as may be required, in connection with the disposition of any Pledged Collateral, by laws generally affecting the offering and sale of securities. C. Absence of Third-Party Filings. Except such as may have been filed in favor of Agent as contemplated by subsection 5.16A and to evidence permitted lease obligations and other Liens permitted pursuant to subsection 7.2, no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. D. Margin Regulations. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. E. Information Regarding Collateral. All information supplied to Agent by or on behalf of any Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects. 5.17 Disclosure. No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. Section 6. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 Financial Statements and Other Reports. Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Agent and Lenders: > > (i) Events of Default, etc.: promptly upon any officer of Company obtaining > > knowledge (a) of any condition or event that constitutes an Event of Default > > or Potential Event of Default, or becoming aware that any Lender has given > > any notice (other than to Agent) or taken any other action with respect to a > > claimed Event of Default or Potential Event of Default, (b) that any Person > > has given any notice to Company or any of its Subsidiaries or taken any > > other action with respect to a claimed default or event or condition of the > > type referred to in subsection 8.2, (c) of any condition or event that would > > be required to be disclosed in a current report filed by Company with the > > Securities and Exchange Commission on Form 8-K if Company were required to > > file such reports under the Exchange Act, or (d) of the occurrence of any > > event or change that has caused or evidences, either in any case or in the > > aggregate, a Material Adverse Effect, an Officer's Certificate specifying > > the nature and period of existence of such condition, event or change, or > > specifying the notice given or action taken by any such Person and the > > nature of such claimed Event of Default, Potential Event of Default, > > default, event or condition, and what action Company has taken, is taking > > and proposes to take with respect thereto; > > > > (ii) Monthly and Quarterly Financials: as soon as available and in any event > > within 30 days after the end of each Fiscal Month ending after the Closing > > Date (other than a Fiscal Month that is also the end of a Fiscal Quarter) > > and within 50 days after the end of each Fiscal Quarter (or, with respect to > > the fourth Fiscal Quarter, 95 days), for Fiscal Quarters ending after the > > Closing Date, (a) the consolidated and consolidating balance sheets of > > Company and its Subsidiaries as at the end of such fiscal period and the > > related consolidated and consolidating statements of income and cash flows > > of Company and its Subsidiaries for such fiscal period and for the period > > from the beginning of the then current Fiscal Year to the end of such fiscal > > period, setting forth in each case in comparative form the corresponding > > figures for the corresponding periods of the previous Fiscal Year and the > > corresponding figures from the Financial Plan for the current Fiscal Year, > > to the extent prepared for such fiscal period, all in reasonable detail and > > certified by the chief executive officer or the chief financial officer of > > Company that they fairly present, in all material respects, the financial > > condition of Company and its Subsidiaries as at the dates indicated and the > > results of their operations and their cash flows for the periods indicated, > > subject to changes resulting from audit and normal year-end adjustments, and > > (b) for Fiscal Quarters, a narrative report describing the operations of > > Company and its Subsidiaries in the form prepared for presentation to senior > > management for such fiscal period and for the period from the beginning of > > the then current Fiscal Year to the end of such fiscal period; > > > > (iii) Year-End Financials: as soon as available and in any event within 95 > > days after the end of each Fiscal Year, (a) the consolidated and > > consolidating balance sheets of Company and its Subsidiaries as at the end > > of such Fiscal Year and the related consolidated and (other than for > > stockholders' equity) consolidating statements of income, stockholders' > > equity and cash flows of Company and its Subsidiaries for such Fiscal Year, > > setting forth in each case in comparative form the corresponding figures for > > the previous Fiscal Year and the corresponding figures from the Financial > > Plan for the Fiscal Year covered by such financial statements, all in > > reasonable detail and certified by the chief executive officer or the chief > > financial officer of Company that they fairly present, in all material > > respects, the financial condition of Company and its Subsidiaries as at the > > dates indicated and the results of their operations and their cash flows for > > the periods indicated, (b) a narrative report describing the operations of > > Company and its Subsidiaries in the form prepared for presentation to senior > > management for such Fiscal Year, and (c) in the case of such consolidated > > financial statements, a report thereon of KPMG or other independent > > certified public accountants of recognized national standing selected by > > Company and satisfactory to Agent, which report shall be unqualified as to > > scope of audit, shall express no doubts about the ability of Company and its > > Subsidiaries taken as a whole to continue as a going concern, and shall > > state that such consolidated financial statements fairly present, in all > > material respects, the consolidated financial position of Company and its > > Subsidiaries as at the dates indicated and the results of their operations > > and their cash flows for the periods indicated in conformity with GAAP > > applied on a basis consistent with prior years (except as otherwise > > disclosed in such financial statements) and that the examination by such > > accountants in connection with such consolidated financial statements has > > been made in accordance with generally accepted auditing standards; > > > > (iv) Pricing and Compliance Certificates: together with each delivery of > > quarterly and annual financial statements of Company and its Subsidiaries > > pursuant to subdivisions (ii) and (iii) above, (a) an Officer's Certificate > > of Company stating that the signers have reviewed the terms of this > > Agreement and have made, or caused to be made under their supervision, a > > review in reasonable detail of the transactions and condition of Company and > > its Subsidiaries during the accounting period covered by such financial > > statements and that such review has not disclosed the existence at the end > > of such accounting period, and that the signers do not have knowledge of the > > existence as at the date of such Officer's Certificate, of any condition or > > event that constitutes an Event of Default or Potential Event of Default, > > or, if any such condition or event existed or exists, specifying the nature > > and period of existence thereof and what action Company has taken, is taking > > and proposes to take with respect thereto; and (b) a Compliance Certificate > > demonstrating in reasonable detail compliance during and at the end of the > > applicable accounting periods with the restrictions contained in Section 7; > > in addition, on or before the 50th day following the end of each Fiscal > > Quarter (95th day for the final Fiscal Quarter or each Fiscal Year), a > > Pricing Certificate demonstrating in reasonable detail the calculation of > > the Consolidated Leverage Ratio as of the end of the four Fiscal Quarter > > period then ended; > > > > (v) Reconciliation Statements: if, as a result of any change in accounting > > principles and policies from those used in the preparation of the audited > > financial statements referred to in subsection 5.3 (other than changes > > resulting from the application of FAS 133), the consolidated financial > > statements of Company and its Subsidiaries delivered pursuant to > > subdivisions (ii), (iii) or (xii) of this subsection 6.1 will differ in any > > material respect from the consolidated financial statements that would have > > been delivered pursuant to such subdivisions had no such change in > > accounting principles and policies been made, then (a) together with the > > first delivery of financial statements pursuant to subdivision (ii), (iii) > > or (xii) of this subsection 6.1 following such change, consolidated > > financial statements of Company and its Subsidiaries for (y) the current > > Fiscal Year to the effective date of such change and (z) the two full Fiscal > > Years immediately preceding the Fiscal Year in which such change is made, in > > each case prepared on a pro forma basis as if such change had been in effect > > during such periods, and (b) together with each delivery of financial > > statements pursuant to subdivision (ii), (iii) or (xii) of this subsection > > 6.1 following such change, a written statement of the chief accounting > > officer or chief financial officer of Company setting forth the differences > > (including any differences that would affect any calculations relating to > > the financial covenants set forth in subsections 7.6 and 7.8) which would > > have resulted if such financial statements had been prepared without giving > > effect to such change; > > > > (vi) Accountants' Certification: together with each delivery of consolidated > > financial statements of Company and its Subsidiaries pursuant to subdivision > > (iii) above, a written statement by the independent certified public > > accountants giving the report thereon (a) stating that their audit > > examination has included a review of the terms of this Agreement and the > > other Loan Documents as they relate to accounting matters, and (b) stating > > whether, in connection with their audit examination, any condition or event > > that constitutes a breach of certain covenants herein as they relate to > > accounting matters has come to their attention and, if such a condition or > > event has come to their attention, specifying the nature and period of > > existence thereof; provided that such accountants shall not be liable by > > reason of any failure to obtain knowledge of any such condition or event > > that would not be disclosed in the course of their audit examination; > > > > (vii) Accountants' Reports: promptly upon receipt thereof (unless restricted > > by applicable professional standards), copies of all reports submitted to > > Company by independent certified public accountants in connection with each > > annual, interim or special audit of the financial statements of Company and > > its Subsidiaries made by such accountants, including any comment letter > > submitted by such accountants to management in connection with their annual > > audit; > > > > (viii) SEC Filings and Press Releases: promptly upon their becoming > > available, copies of (a) all financial statements, reports, notices and > > proxy statements sent or made available generally by Company to its security > > holders or by any Subsidiary of Company to its security holders other than > > Company or another Subsidiary of Company, (b) all regular and periodic > > reports and all registration statements (other than on Form S-8 or a similar > > form) and prospectuses, if any, filed by Company or any of its Subsidiaries > > with any securities exchange or with the Securities and Exchange Commission > > or any governmental or private regulatory authority, and (c) all press > > releases and other statements made available generally by Company or any of > > its Subsidiaries to the public concerning material developments in the > > business of Company or any of its Subsidiaries; > > > > (ix) Litigation or Other Proceedings: (a) concurrently with the delivery of > > each Compliance Certificate, a report of (X) the institution of, or > > non-frivolous threat of, any Proceeding against or affecting Company or any > > of its Subsidiaries or any property of Company or any of its Subsidiaries > > not previously disclosed in writing by Company to Lenders or (Y) any > > material development in any Proceeding that, in any case: > > > > > (1) if adversely determined, has a reasonable possibility after giving > > > effect to the coverage and policy limits of insurance policies issued to > > > Company and its Subsidiaries of giving rise to a Material Adverse Effect > > > or a monetary liability in excess of $1,000,000; or > > > > > > (2) seeks to enjoin or otherwise prevent the consummation of, or to > > > recover any damages or obtain relief as a result of, the transactions > > > contemplated hereby; > > > > written notice thereof together with such other information as may be > > reasonably available to Company to enable Lenders and their counsel to > > evaluate such matters; and (b) concurrently with the delivery of each > > Compliance Certificate, a schedule of all Proceedings involving an alleged > > liability of, or claims against or affecting, Company or any of its > > Subsidiaries equal to or greater than $1,000,000, and promptly after request > > by Agent such other information as may be reasonably requested by Agent to > > enable Agent and its counsel to evaluate any of such Proceedings; > > > > (x) ERISA Events: promptly upon becoming aware of the occurrence of or > > forthcoming occurrence of any ERISA Event, a written notice specifying the > > nature thereof, what action Company, any of its Subsidiaries or any of their > > respective ERISA Affiliates has taken, is taking or proposes to take with > > respect thereto and, when known, any action taken or threatened by the > > Internal Revenue Service, the Department of Labor or the PBGC with respect > > thereto; > > > > (xi) ERISA Notices: with reasonable promptness, copies of (a) all notices > > received by Company, any of its Subsidiaries or any of their respective > > ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA > > Event; and (b) copies of such other documents or governmental reports or > > filings relating to any Employee Benefit Plan as Agent shall reasonably > > request; > > > > (xii) Financial Plans: as soon as practicable and in any event no later than > > 60 days after the beginning of each Fiscal Year, a consolidated and > > consolidating plan and financial forecast for such Fiscal Year and the next > > four succeeding Fiscal Years (the "Financial Plan" for such Fiscal Years), > > including (a) forecasted consolidated and consolidating balance sheets and > > forecasted consolidated and consolidating statements of income and cash > > flows of Company and its Subsidiaries for each such Fiscal Year and an > > explanation of the assumptions on which such forecasts are based, (b) > > forecasted consolidated and consolidating statements of income and cash > > flows of Company and its Subsidiaries for each Fiscal Quarter of the first > > such Fiscal Year, together with an explanation of the assumptions on which > > such forecasts are based, and (c) such other information and projections as > > any Lender may reasonably request; > > > > (xiii) Governing Body: with reasonable promptness, written notice of any > > change in the Governing Body of Company; > > > > (xiv) Insurance: as soon as practicable and in any event by the last day of > > each Fiscal Year, a report in form and substance reasonably satisfactory to > > Agent outlining all material insurance coverage maintained as of the date of > > such report by Company and its Subsidiaries and all material insurance > > coverage planned to be maintained by Company and its Subsidiaries in the > > immediately succeeding Fiscal Year and confirming the status of Agent as > > additional insured and/or loss payee under all such insurance to the extent > > required by subsection 6.4; > > > > (xv) Environmental Audits and Reports: as soon as practicable following > > receipt thereof, copies of all environmental audits and reports received by > > or made available to Company or its Subsidiaries, whether prepared by > > personnel of Company or any of its Subsidiaries or by independent > > consultants, with respect to significant environmental matters at any > > Facility or which relate to an Environmental Claim in either case which > > could reasonably be expected to result in a Material Adverse Effect; > > > > (xvi) New Subsidiaries: concurrently with the delivery of financial > > statements relating of each Fiscal Month, a written notice setting forth > > with respect to any Person becoming a Subsidiary of Company (a) the date on > > which such Person became a Subsidiary of Company and (b) all of the data > > required to be set forth in Schedule 5.1 annexed hereto with respect to all > > Subsidiaries of Company (it being understood that such written notice shall > > be deemed to supplement Schedule 5.1 annexed hereto for all purposes of this > > Agreement; > > > > (xvii) Material Contracts: promptly, and in any event within 10 Business > > Days after any Material Contract of Company or any of its Subsidiaries is > > terminated or amended in a manner that is materially adverse to Company or > > such Subsidiary, as the case may be, or any new Material Contract is entered > > into, a written statement describing such event with copies of such material > > amendments or new contracts, and an explanation of any actions being taken > > with respect thereto; > > > > (xviii) Borrowing Base Certificates: as soon as available and in any event > > within ten Business Days after the last Business Day of each Fiscal Month > > ending after the Closing Date, a Borrowing Base Certificate dated as of the > > last Business Day of such Fiscal Month, together with any additional > > schedules and other information as Agent may reasonably request (it being > > understood that (a) Company, in addition to such monthly Borrowing Base > > Certificates, may from time to time deliver to Agent and Lenders on any > > Business Day after the Closing Date a Borrowing Base Certificate dated as of > > such Business Day, together with any additional schedules and other > > information as Agent may reasonably request), and (b) the most recent > > Borrowing Base Certificate described in this clause (xviii) that is > > delivered to Agent shall be used in calculating the Borrowing Base as of any > > date of determination; and > > > > (xix) Restructuring Reports: as soon as practicable following receipt or > > production thereof, copies of all reports received by or produced for the > > Chief Executive Officer, Chief Financial Officer or members of the board of > > directors of the Company relating to Restructuring Charges or Restructuring > > Capital Expenditures; and > > > > (xx) Other Information: with reasonable promptness, such other information > > and data with respect to Company or any of its Subsidiaries as from time to > > time may be reasonably requested by any Lender. 6.2 Existence, etc. Except as permitted under subsection 7.7, Company will, and will cause each of its Significant Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises material to its business; provided, however, that neither Company nor any of its Significant Subsidiaries shall be required to preserve any such right or franchise if the Governing Body of Company or such Significant Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Significant Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Significant Subsidiary or Lenders. 6.3 Payment of Taxes and Claims; Tax. A. Company will, and will cause each of its Subsidiaries to, pay all material taxes, assessments and other governmental charges imposed upon it or any of its material properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided that no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (1) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (2) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim. B. Company will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation Proceeds. A. Maintenance of Properties. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. B. Insurance. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Agent in its commercially reasonable judgment. Each such policy of insurance shall (a) name Agent for the benefit of Lenders as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Agent, that names Agent for the benefit of Lenders as the loss payee thereunder for any covered loss in excess of $250,000 and provides for at least 30 days prior written notice to Agent of any modification or cancellation of such policy. C. Deposit of Net Insurance/Condemnation Proceeds. Upon the occurrence and during the continuance of an Event of Default described in subsection 8.1 or during any time and to the extent that Company is not in compliance with subsection 2.4A(iii)(a), upon receipt by Company or by Agent of any Net Insurance/Condemnation Proceeds as loss payee, if the aggregate amount of Net Insurance/Condemnation Proceeds received (and reasonably expected to be received) by Company or by Agent in respect of any covered loss exceeds $5,000,000, Company or Agent, as the case may be, shall deposit the proceeds so received into the Collateral Account to be held as Collateral as provided in the Security Agreement. To the extent Agent otherwise receives Net Insurance/Condemnation Proceeds as loss payee, Agent shall promptly turn over such proceeds to Company. 6.5 Inspection; Lender Meeting. Company shall, and shall cause each of its Domestic Subsidiaries to, permit (i) any authorized representatives designated by any Lender upon reasonable notice and at reasonable times to visit and inspect any of the properties of Company or any of its Domestic Subsidiaries up to five times per year (but without limitation on the number of visits and inspections during the pendency of an Event of Default), including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), and (ii) any authorized representatives designated by Agent to conduct at least two audits of all Inventory and Accounts of Loan Parties during each twelve-month period after the Closing Date (exclusive of the audit of Inventory and Accounts referred to in subsection 4.1O (the "Base Audit")), each such audit to be substantially similar in scope and substance to the Base Audit, all upon three Business Days' notice and during normal business hours and as often as may be reasonably requested. Without in any way limiting the foregoing, Company will, upon the request of Agent or Requisite Lenders, participate in a meeting of Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or such other location as may be agreed to by Company and Agent) at such time as may be agreed to by Company and Agent. 6.6 Compliance with Laws, etc. Company shall, and shall cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect. 6.7 Company's Remedial Action Regarding Hazardous Materials. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all remedial action in connection with the presence, storage, use, disposal, transportation or Release of any Hazardous Materials on, under or about any Facility in order to comply in all material respects with all applicable Environmental Laws and Governmental Authorizations. In the event Company or any of its Subsidiaries undertakes any remedial action with respect to any Hazardous Materials on, under or about any Facility, Company or such Subsidiary shall conduct and complete such remedial action in substantial compliance in all material respects with all applicable Environmental Laws, and in accordance with the policies, orders and directives of all federal, state and local governmental authorities except when, and only to the extent that, Company's or such Subsidiary's liability for such presence, storage, use, disposal, transportation or discharge of any Hazardous Materials is being contested in good faith by Company or such Subsidiary. 6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents After the Closing Date. A. Execution of Subsidiary Guaranty and Personal Property Collateral Documents. In the event that any Person becomes a Domestic Subsidiary of Company (other than any Inactive Subsidiary) after the date hereof, Company will promptly notify Agent of that fact and cause such Domestic Subsidiary to execute and deliver to Agent a counterpart of the Subsidiary Guaranty and Security Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1L) as may be necessary or, in the opinion of Agent, desirable to create in favor of Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all of the Accounts and Inventory of such Domestic Subsidiary described in the applicable forms of Collateral Documents. B. Subsidiary Organizational Documents, Legal Opinions, Etc. Company shall deliver to Agent, together with such Loan Documents, (i) certified copies of such Subsidiary's Organizational Documents, together with a good standing certificate from the Secretary of State of the jurisdiction of its organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Agent, (ii) a certificate executed by the secretary or similar officer of such Subsidiary as to (a) the fact that the attached resolutions of the Governing Body of such Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Loan Documents, and (iii) if such Subsidiary would constitute a Significant Subsidiary, a favorable opinion of counsel to such Subsidiary, in form and substance reasonably satisfactory to Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Subsidiary and (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Agent may reasonably request, all of the foregoing to be reasonably satisfactory in form and substance to Agent and its counsel. C. Post-closing Actions with respect to Certain Accounts . > > (i) Within 15 days after the Closing Date (or such later date as may be > > agreed to by Agent in its discretion), Agent shall have received a perfected > > security interest in the securities account maintained by Company with > > Salomon Smith Barney on terms and conditions reasonably satisfactory to > > Agent. > > > > (ii) Within 15 days after the Closing Date (or such later date as may be > > agreed to by Agent in its discretion), the Deposit Accounts maintained by > > Company and/or any of its Domestic Subsidiaries with PNC Bank shall be > > covered by a Blocked Account Agreement among PNC Bank, Agent and Company and > > such Domestic Subsidiaries. > > > > (iii) Within 15 days after the Closing Date (or such later date as may be > > agreed to by Agent in its discretion), the Agent shall have received a > > perfected security interest in such of the Petty Cash Accounts in which > > perfection may be obtained by notification to the depositary bank. Section 7. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 Indebtedness. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: > > (i) Company and its Subsidiaries may become and remain liable with respect > > to the Obligations; > > > > (ii) Company and its Subsidiaries may become and remain liable with respect > > to Contingent Obligations permitted by subsection 7.4 and, upon any matured > > obligations actually arising pursuant thereto, the Indebtedness > > corresponding to the Contingent Obligations so extinguished; > > > > (iii) Company and its Subsidiaries may become and remain liable with respect > > to Indebtedness in respect of Capital Leases; > > > > (iv) Company may become and remain liable with respect to Indebtedness to > > any of its Dominant Domestic Subsidiaries, and any Dominant Domestic > > Subsidiary of Company may become and remain liable with respect to > > Indebtedness to Company or any other Dominant Domestic Subsidiary of > > Company; provided that (a) all such intercompany Indebtedness shall be > > evidenced by promissory notes that are pledged to Agent pursuant to the > > terms of the applicable Security Agreement, (b) all such intercompany > > Indebtedness owed by Company to any of its Dominant Domestic Subsidiaries > > shall be subordinated in right of payment to the payment in full of the > > Obligations pursuant to the terms of the applicable promissory notes or an > > intercompany subordination agreement, and (c) any payment by any Dominant > > Domestic Subsidiary of Company under any guaranty of the Obligations shall > > result in a pro tanto reduction of the amount of any intercompany > > Indebtedness owed by such Dominant Domestic Subsidiary to Company or to any > > of its Dominant Domestic Subsidiaries for whose benefit such payment is > > made; > > > > (v) Company and its Subsidiaries, as applicable, may remain liable with > > respect to Indebtedness described in Schedule 7.1 annexed hereto and any > > refinancings thereof; provided the principal amount thereof is not > > increased; > > > > (vi) the Senior Notes; > > > > (vii) Company and its Subsidiaries may become and remain liable with respect > > to other unsecured senior Indebtedness in an aggregate principal amount not > > to exceed $25,000,000 at any time outstanding; > > > > (viii) Company may become and remain liable with respect to Subordinated > > Indebtedness and Company and its Subsidiaries may become and remain liable > > with respect to Acquisition Subordinated Debt; provided that (a) no > > Potential Event of Default or Event of Default shall then exist or shall > > occur as a result of the incurrence of such Subordinated Indebtedness, and > > (b) at the time of such incurrence, the ratio of Consolidated Total Debt to > > Consolidated EBITDA for the four Fiscal Quarter period most recently ended > > does not exceed the ratio of (x) Consolidated Total Debt minus Subordinated > > Indebtedness as of the last day of the Fiscal Quarter most recently ended to > > (y) Consolidated EBITDA for the four Fiscal Quarter period most recently > > ended by greater than one multiple; > > > > (ix) Company and its Subsidiaries may become and remain liable with respect > > to other Indebtedness in an aggregate principal amount not to exceed > > $10,000,000 at any time outstanding; > > > > (x) Company may maintain unsecured overdraft lines with commercial banks in > > the ordinary course of business and consistent with past practices; provided > > that the aggregate amount of Indebtedness created thereunder shall not > > exceed $10,000,000 any time outstanding; and > > > > (xi) (i) Foreign Subsidiaries may become and remain liable with respect to > > Indebtedness to any other Foreign Subsidiary; (ii) Foreign Subsidiaries may > > become and remain liable with respect to Indebtedness to Company consistent > > with past practices; (iii) Foreign Subsidiaries may become and remain liable > > with respect to Indebtedness to Domestic Subsidiaries, in an aggregate > > principal amount not to exceed $10,000,000 at any time outstanding; and (iv) > > Company and its Domestic Subsidiaries may become and remain liable to any of > > its Foreign Subsidiaries. 7.2 Liens and Related Matters. A. Prohibition on Liens. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC or under any similar recording or notice statute, except: > > (i) Permitted Encumbrances; > > > > (ii) Liens granted pursuant to the Collateral Documents; > > > > (iii) Liens described in Schedule 7.2 annexed hereto; > > > > (iv) Liens evidencing Capital Leases permitted by subsection 7.1; > > > > (v) Liens related to sales of installment sale contracts and/or receivables > > owned or formerly owned by SunMed Finance portfolio; > > > > (vi) Liens securing purchase money Indebtedness permitted by subsection > > 7.1(ix); and > > > > (vii) Other Liens up to $5,000,000 at any time outstanding. B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. C. No Further Negative Pledges. Except with respect to specific property encumbered to secure payment of particular Indebtedness or Lease or to be sold pursuant to an executed agreement with respect to an Asset Sale, none of Company or any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. D. No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Except as provided herein, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company. 7.3 Investments; Acquisitions. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or capital stock or other ownership interest of any Person, or any division or line of business of any Person except: > > (i) Company and its Subsidiaries may make and own Investments in Cash > > Equivalents and Foreign Subsidiaries may make and own similar Investments > > customary for the countries in which they conduct business; > > > > (ii) Company and its Dominant Domestic Subsidiaries may make and own > > additional equity Investments in their respective Dominant Domestic > > Subsidiaries; > > > > (iii) Company and its Subsidiaries may make intercompany loans to the extent > > permitted under subsection 7.1(iv); > > > > (iv) Company and its Subsidiaries may make Consolidated Capital Expenditures > > permitted by subsection 7.8; > > > > (v) Company and its Subsidiaries may continue to own the Investments owned > > by them and described in Schedule 7.3 annexed hereto; > > > > (vi) Company and its Subsidiaries may make finance and enter into, and > > receive contingent payment rights received in sales under subsection 7.11 > > under, installment sales contracts in the ordinary course of business and > > consistent with past practices; > > > > (vii) Company and its Subsidiaries may incur and remain liable with respect > > to recourse obligations arising under vendor financings provided to > > customers; > > > > (viii) Company and Domestic Subsidiaries may make and own Investments in > > Foreign Subsidiaries; provided that (i) with respect to Investments by > > Company, such Investments are consistent with prior practices, and (ii) with > > respect to Investments by Domestic Subsidiaries, such Investments after the > > Closing Date do not exceed in the aggregate $10,000,000 at any time; and > > > > (ix) Company and its Subsidiaries may make other Investments having a fair > > market value determined at the time made not in excess of $10,000,000 in any > > one Fiscal Year and continue to own such assets after the acquisition > > thereof; provided that Company shall, and shall cause its Subsidiaries to, > > comply with the requirements of subsection 6.8 with respect to each such > > acquisition that results in a Person becoming a Subsidiary. 7.4 Contingent Obligations. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: > > (i) Subsidiaries of Company may become and remain liable with respect to > > Contingent Obligations in respect of the Subsidiary Guaranty; > > > > (ii) Company may become and remain liable with respect to Contingent > > Obligations in respect of Letters of Credit; > > > > (iii) Company and its Subsidiaries may become and remain liable with respect > > to Contingent Obligations under Hedge Agreements; > > > > (iv) Company and its Subsidiaries may become and remain liable with respect > > to Contingent Obligations in respect of customary indemnification and > > purchase price adjustment obligations incurred in connection with Asset > > Sales or other sales of assets; > > > > (v) Company and its Subsidiaries may become and remain liable with respect > > to Contingent Obligations under guarantees in the ordinary course of > > business of the obligations of suppliers, customers, franchisees and > > licensees of Company and its Subsidiaries in an aggregate amount not to > > exceed at any time $1,000,000; > > > > (vi) Company may become and remain liable with respect to Contingent > > Obligations in respect of any leases and Indebtedness and other obligations > > permitted under the Agreement of any of Company's Subsidiaries; > > > > (vii) Company and its Subsidiaries, as applicable, may remain liable with > > respect to Contingent Obligations described in Schedule 7.4 annexed hereto; > > > > (viii) Subsidiaries of Company may become and remain liable with respect to > > Contingent Obligations in respect of unsecured guaranties of the Senior > > Notes contained in the Senior Note Agreement; provided that each such > > Subsidiary is also a Subsidiary Guarantor with respect to the Obligations > > under the Loan Documents; and > > > > (ix) Company and its Subsidiaries may become and remain liable with respect > > to Contingent Obligations arising under shared loss agreements relating to > > vendor financings provided to customers in the ordinary course of business > > and consistent with past practices; and > > > > (x) Company and its Subsidiaries may become and remain liable with respect > > to other Contingent Obligations in an aggregate amount not to exceed at any > > time $10,000,000. 7.5 Restricted Junior Payments. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that so long as no Event of Default or Potential Event of Default shall have occurred and be continuing or shall be caused thereby, (i) Company may make regularly scheduled payments of interest and principal in respect of any Subordinated Indebtedness, and in the case of Acquisition Subordinated Debt only, prepayments of principal, in each case in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, as such indenture or other agreement may be amended from time to time to the extent permitted under subsection 7.15; and (ii) Company may repurchase shares of its common stock and stock options from its current and former employees pursuant to the terms of any stock option plan approved by its Board of Directors and Company may make payments to its stockholders pursuant to the terms of the Amended and Restated Rights Agreement dated May 16, 1997 and approved by its Board of Directors up to an amount for all such repurchases and payments of $2,000,000. 7.6 Minimum Consolidated Adjusted EBITDA. Company shall not permit Consolidated Adjusted EBITDA for any four Fiscal Quarter period ending as of the last day of any Fiscal Quarter set forth below to be less than the correlative amount indicated: Fiscal Quarter Ending on or about Minimum Consolidated Adjusted EBITDA September 30, 2000 $41,000,000 December 31, 2000 42,000,000 March 31, 2001 46,000,000 June 30, 2001 50,000,000     September 30, 2001 57,000,000 December 31, 2001 63,000,000 March 31, 2002 66,000,000 June 30, 2002 and each Fiscal    Quarter thereafter 70,000,000   ; provided however that upon the occurrence of an Asset Sale permitted under subsection 7.7(iv) the minimum Consolidated Adjusted EBITDA numbers set forth above shall be reduced by the Consolidated Adjusted EBITDA attributable to the business or operations so sold or disposed of for the four Fiscal Quarter period most recently ended, such reduction to be set forth in an Officer's Certificate delivered to Agent and to be approved by Agent. 7.7 Restriction on Fundamental Changes; Asset Sales. Company shall not, and shall not permit any of its Subsidiaries to, alter the corporate, capital or legal structure of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets (including its notes or receivables and stock or other ownership interests of a Subsidiary, whether newly issued or outstanding), whether now owned or hereafter acquired, except: > > (i) any Subsidiary of Company may be merged with or into Company or any > > wholly-owned Subsidiary Guarantor, or be liquidated, wound up or dissolved, > > or all or any part of its business, property or assets may be conveyed, > > sold, leased, transferred or otherwise disposed of, in one transaction or a > > series of transactions, to Company or any wholly-owned Subsidiary Guarantor; > > provided that, in the case of such a merger, Company or such wholly-owned > > Subsidiary Guarantor shall be the continuing or surviving Person; > > > > (ii) Company and its Subsidiaries may sell or otherwise dispose of assets in > > transactions that do not constitute Asset Sales; provided that the > > consideration received for such assets shall be in an amount at least equal > > to the fair market value thereof as reasonably determined by the Company's > > Chief Financial Officer or Chief Executive Officer; > > > > (iii) Company and its Subsidiaries may dispose of obsolete, worn out or > > surplus property in the ordinary course of business; > > > > (iv) Company and its Subsidiaries may make Asset Sales of "Project Alpha" > > and of "Project Beta," as such Assets Sales have been identified and > > described by Company in a letter to Agent dated of even date with this > > Agreement; provided that the consideration received for such Asset Sales > > shall be equal to the fair market value thereof as reasonably determined by > > the Company's Chief Financial Officer or Chief Executive Officer; > > > > (v) Company and its Subsidiaries may make Asset Sales of assets located in > > the United States having an aggregate fair market value not in excess of > > $5,000,000 in any Fiscal Year and of assets located outside of the United > > States having an aggregate fair market value not in excess of $5,000,000 in > > any Fiscal Year; provided that in each case the consideration received for > > such assets shall be in an amount at least equal to the fair market value > > thereof as reasonably determined by the Company's Chief Financial Officer or > > Chief Executive Officer; > > > > (vi) Company or a Subsidiary may sell or dispose of shares of capital stock > > or other equity Securities of any of its Subsidiaries, in order to qualify > > members of the Governing Body of the Subsidiary if required by applicable > > law; > > > > (vii) any non-Subsidiary Guarantor may be merged with or into any other > > non-Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or > > any part of its business, property or assets may be conveyed, sold, leased, > > transferred or otherwise disposed of, in one transaction or a series of > > transactions, to another non-Guarantor Subsidiary; > > > > (viii) Company and its Subsidiaries may make Asset Sales in connection with > > sale and leaseback transactions provided that the aggregate fair market > > value as reasonably determined by the Company's Chief Financial Officer or > > Chief Executive Officer of the assets so sold and leased back after the > > Closing Date does not exceed $30,000,000; and > > > > (ix) Company and its Subsidiaries may sell notes or accounts receivables > > permitted by subsection 7.11. 7.8 Maximum Consolidated Adjusted Capital Expenditures. Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Adjusted Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount (the "Maximum Consolidated Adjusted Capital Expenditures Amount") set forth below opposite such Fiscal Year; provided that the Maximum Consolidated Adjusted Capital Expenditures Amount for any Fiscal Year shall be increased by an amount equal to the excess, if any, of the Maximum Consolidated Adjusted Capital Expenditures Amount permitted for the previous Fiscal Year (as set forth in the table below) over the actual amount of Consolidated Adjusted Capital Expenditures for such previous Fiscal Year: Fiscal Year Maximum Consolidated Adjusted Capital Expenditures 2001 $19,500,000 2002 19,700,000 2003 19,900,000 2004 20,100,000   7.9 Deposit Accounts. On and after the implementation of the collection, deposit and transfer of payment procedures provided in subsection 2.10, Company shall not, and shall not permit any of its Domestic Subsidiaries to, maintain any Deposit Account which is not a Lock Box Account or a Concentration Account or a disbursement account under the exclusive dominion and control of Agent. 7.10 Sales and Lease-Backs. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease; provided that Company and its Subsidiaries may become and remain liable as lessee, guarantor or other surety with respect to any such lease if and to the extent that Company or any of its Subsidiaries would be permitted to enter into, and remain liable under, such lease under subsection 7.7(viii). 7.11 Sale or Discount of Receivables. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable; provided that Company may sell with recourse or discount installment sale contracts and/or receivables owned or formerly owned by Sun Med Finance. 7.12 Transactions with Shareholders and Affiliates. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries and (ii) reasonable and customary fees paid to members of the Governing Bodies of Company and its Subsidiaries. 7.13 Disposal of Subsidiary Stock. Except pursuant to the Collateral Documents and except for any sale or other disposition of 100% of the capital stock or other equity Securities of any of its Subsidiaries in compliance with the provisions of subsection 7.7, Company shall not: > > > > (i) directly or indirectly sell, assign, pledge or otherwise encumber or > > > > dispose of any shares of capital stock or other equity Securities of any > > > > of its Subsidiaries, except to qualify directors if required by > > > > applicable law; or > > > > > > > > (ii) permit any of its Subsidiaries directly or indirectly to sell, > > > > assign, pledge or otherwise encumber or dispose of any shares of capital > > > > stock or other equity Securities of any of its Subsidiaries (including > > > > such Subsidiary), except to Company, another Subsidiary of Company, or > > > > to qualify directors if required by applicable law. 7.14 Conduct of Business. From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by Company and its Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders. 7.15 Amendments of Documents Relating to Certain Indebtedness. A. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Senior Notes, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Senior Notes, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the provisions of any guaranty thereof, or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Senior Notes (or a trustee or other representative on their behalf) which would be adverse to Company or Lenders. B. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the subordination provisions of any Subordinated Indebtedness, if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf) which would be adverse to Company or Lenders. 7.16 Fiscal Year. Company shall not change its Fiscal Year-end from the Friday closest to June 30. Section 8. EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur: 8.1 Failure to Make Payments When Due. Failure by Company to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Company to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 8.2 Default in Other Agreements. > > (i) Failure of Company or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent Obligations in an individual principal amount of $1,000,000 or more or with an aggregate principal amount of $1,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or 8.3 Breach of Certain Covenants. Failure of Company to perform or comply with any term or condition contained in subsection 2.5, 6.1(i)(a) or 6.2 or Section 7 of this Agreement; or 8.4 Breach of Warranty. Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Loan Documents. Company or any of its Subsidiaries shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after receipt by Company or such Subsidiary of notice from Agent or any Lender of such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. > > (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any Significant Subsidiary of Company in an involuntary case under the Bankruptcy Code or under any other Insolvency Laws which decree or order is not stayed; or any other similar relief shall be granted under any applicable Insolvency Laws; or (ii) an involuntary case shall be commenced against Company or any Significant Subsidiary of Company under the Bankruptcy Code or under any other Insolvency Laws; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any Significant Subsidiary of Company, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any Significant Subsidiary of Company for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any Significant Subsidiary of Company, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. > > (i) Company or any Significant Subsidiary of Company shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other Insolvency Laws, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any Significant Subsidiary of Company shall make any assignment for the benefit of creditors; or (ii) Company or any Significant Subsidiary of Company shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of Company or any Significant Subsidiary of Company (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 8.8 Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of $1,000,000 or (ii) in the aggregate at any time an amount in excess of $1,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 Dissolution. Any order, judgment or decree shall be entered against Company or any of its Subsidiaries decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 Employee Benefit Plans. There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $1,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $1,000,000; or 8.11 Change in Control. > > (i) A change shall occur in the Board of Directors of Company so that a majority of the Board of Directors of Company ceases to consist of the individuals who constituted the Board of Directors of Company on the Closing Date (or individuals whose election or nomination for election was approved by a vote of at least 75% of the directors then in office who either were directors of Company on the Closing Date or whose election or nomination for election previously was so approved); or (ii) any Person or Group (within the meaning of Rule 13d-3 of the Securities and Exchange Commission), shall become or be the owner, directly or indirectly, beneficially or of record, of shares representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Company on a fully diluted basis; or 8.12 Invalidity of Subsidiary Guaranty. Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, ceases to be in full force and effect (other than in accordance with its terms) or is declared to be null and void, or any Loan Party contests the validity or enforceability of any Loan Document in writing or denies in writing that it has any further liability, including without limitation with respect to future advances by Lenders, under any Loan Document to which it is a party, or gives notice to such effect; or 8.13 Failure of Security. Any Collateral Document shall, at any time, cease to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms thereof) or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Loan Party, or Agent shall not have or cease to have a valid and perfected First Priority Lien in the Collateral: THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan, the obligation of Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any way the obligations of Lenders under subsection 3.3C(i). Any amounts described in clause (b) above, when received by Agent, shall be held by Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided. Notwithstanding anything contained in the second preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended, directly or indirectly, to benefit Company, and such provisions shall not at any time be construed so as to grant Company the right to require Lenders to rescind or annul any acceleration hereunder or to preclude Agent or Lenders from exercising any of the rights or remedies available to them under any of the Loan Documents, even if the conditions set forth in this paragraph are met. Section 9. AGENT 9.1 Appointment. A. Appointment of Agent. BTCo is hereby appointed Agent hereunder and under the other Loan Documents. Each Lender hereby authorizes Loan Documents. Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agent and Lenders and, except as specifically provided herein, no Loan Party shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Agent (other than as provided in subsection 2.1E) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any other Loan Party. B. Appointment of Supplemental Collateral Agents. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "Supplemental Collateral Agent" and collectively as "Supplemental Collateral Agents"). In the event that Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to Agent shall be deemed to be references to Agent and/or such Supplemental Collateral Agent, as the context may require. Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Agent so appointed by Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Agent until the appointment of a new Supplemental Collateral Agent. 9.2 Powers and Duties; General Immunity. A. Powers; Duties Specified. Each Lender irrevocably authorizes Agent take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. No Responsibility for Certain Matters. Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Agent to Lenders or by or on behalf of Company to Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. Exculpatory Provisions. Neither Agent nor any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by Agent under or in connection with any of the Loan Documents except to the extent caused by Agent's gross negligence or willful misconduct. Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6). D. Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity. Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 9.3 Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness. Each Lender agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.4 Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Agent and the officers, directors, employees, agents, attorneys, professional advisors and affiliates of Agent to the extent that any such Person shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Agent) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent or and other such Persons in exercising the powers, rights and remedies of Agent or performing duties of Agent hereunder or under the other Loan Documents or otherwise in its capacity as Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent or any other such Person for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Successor Agent. Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Company. Upon any such notice of resignation, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint (1) any Lender as the successor Agent, (2) with the consent of Company, which consent shall not be unreasonably withheld, any other Person as successor Agent; provided that if Company and Requisite Lenders shall fail to agree upon a successor Agent, upon the effectiveness of the resignation of prior Agent, this Agreement shall be administered directly between Company and Lenders without any diminution of the substantive rights and obligations of Company and Lenders. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 9.6 Collateral Documents and Guaranties. Each Lender hereby further authorizes Agent, on behalf of and for the benefit of Lenders, to enter into each Collateral Document as secured party and to be the agent for and representative of Lenders under the Subsidiary Guaranty, and each Lender agrees to be bound by the terms of each Collateral Document and the Subsidiary Guaranty; provided that Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or the Subsidiary Guaranty or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders); provided further, however, that, without further written consent or authorization from Lenders, Agent may execute any documents or instruments necessary to (a) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or to which Requisite Lenders have otherwise consented or (b) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital stock of such Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company) pursuant to a sale or other disposition permitted hereunder or to which Requisite Lenders have otherwise consented. Anything contained in any of the Loan Documents to the contrary notwithstanding, Company, Agent and each Lender hereby agree that (X) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document or to enforce the Subsidiary Guaranty, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and the Subsidiary Guaranty may be exercised solely by Agent for the benefit of Lenders in accordance with the terms thereof, and (Y) in the event of a foreclosure by Agent on any of the Collateral pursuant to a public or private sale, Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Agent at such sale. 9.7 Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to Company or any of the Subsidiaries of Company, Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on Company) shall be entitled and empowered, by intervention in such proceeding or otherwise > > (i) to file and prove a claim for the whole amount of principal and interest > > owing and unpaid in respect of the Loans and any other Obligations that are > > owing and unpaid and to file such other papers or documents as may be > > necessary or advisable in order to have the claims of Lenders and Agent > > (including any claim for the reasonable compensation, expenses, > > disbursements and advances of Lenders and Agent and their agents and counsel > > and all other amounts due Lenders and Agent under subsections 2.3 and 10.2) > > allowed in such judicial proceeding, and > > > > (ii) to collect and receive any moneys or other property payable or > > deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent under subsections 2.3 and 10.2 hereof. Nothing herein contained shall be deemed to authorize Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Agent to vote in respect of the claim of any Lender in any such proceeding. Section 10. MISCELLANEOUS 10.1 Successors and Assigns; Assignments and Participations in Loans and Letters of Credit. A. General. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to the further provisions of this subsection 10.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. Subject to subsection 10.1B, each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided that (x) except as provided in subsection 10.5, no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Agent and recorded in the Register as provided in subsection 10.1B(ii) and (y) no such sale, assignment, transfer or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; and provided further that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Revolving Loan Commitment and the Revolving Loans of the Revolving Lender effecting such sale, assignment, transfer or participation. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. B. Assignments. > > (i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter of Credit or participation therein, or other Obligation may (a) be assigned in any amount to another Lender, or to an Affiliate or Affiliated Fund of the assigning Lender or another Lender, with the giving of notice to Company and Agent and with the consent of Agent and, so long as no Event of Default shall have occurred and be continuing, of Company (which consents shall not be unreasonably withheld or delayed) or (b) be assigned in an aggregate amount of not less than $5,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitments, Loans, Letters of Credit and participations therein, and other Obligations of the assigning Lender) to any other Eligible Assignee with the giving of notice to Company and with the consent of Agent and, so long as no Event of Default shall have occurred and be continuing, of Company (which consents shall not be unreasonably withheld or delayed). To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans, Letters of Credit or participations therein, or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording in the Register, an Assignment Agreement, together with a processing and recordation fee of $3,500 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Agent pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance and recordation, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). If any such assignment occurs after the issuance of the Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Agent for cancellation, and thereupon new Notes shall be issued to the assignee and/or to the assigning Lender, substantially in the form of Exhibit IV annexed hereto, with appropriate insertions, to reflect the new Commitments and/or outstanding Revolving Loans, as the case may be, of the assignee and/or the assigning Lender. (ii) Acceptance by Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Agent pursuant to subsection 2.7B(iii)(a), Agent shall, if Agent and Company consented to the assignment evidenced thereby (to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii). C. Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including amounts payable to such Lender pursuant to subsections 2.6D and 2.7) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5, (a) any participation will give rise to a direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. Assignments to Federal Reserve Banks. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Note or Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. E. Information. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.19. F. Agreements of Lenders. Each Lender listed on the signature pages hereof hereby agrees (i) that it is an Eligible Assignee described in clause (A) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the agreements of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 10.2 Expenses. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) all the costs of furnishing all opinions by counsel for Company (including any opinions reasonably requested by Agent or Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents including with respect to confirming compliance with environmental, insurance and solvency requirements; (iii) the reasonable fees, expenses and disbursements of counsel to Agent (including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (iv) all the actual and reasonable costs and expenses of creating and perfecting Liens in favor of Agent on behalf of Lenders pursuant to any Loan Document, including costs of conducting record searches, examining Collateral, opening bank accounts and lockboxes, depositing checks, receiving and transferring funds (including charges for checks for which there are insufficient funds), and fees and taxes in connection with the filing of financing statements, costs of preparing and recording Loan Documents, reasonable fees and expenses of counsel for providing such opinions as Agent or Requisite Lenders may reasonably request, and reasonable fees and expenses of legal counsel to Agent; (v) all the actual and reasonable costs and expenses (including the reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any consultants, advisors and agents employed or retained by Agent or its counsel) of obtaining and reviewing any appraisals provided for under this Agreement; (vi) the actual and reasonable costs of the custody or preservation of any of the Collateral; (vii) after the occurrence and during the continuance of any Event of Default, all other actual and reasonable costs and expenses incurred by Agent in connection with the syndication of the Commitments and the negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (viii) all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 10.3 Indemnity. In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Agent and Lenders, and the officers, directors, employees, agents and affiliates of Agent and Lenders (collectively called the "Indemnitees"), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction. As used herein, "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof or the issuance of Letters of Credit hereunder or the use or intended use of any thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty, or any liability, cost, expense, indemnity, claim or damages incurred by Agent with respect to the BOA Blocked Account Agreement or the BOA Blocked Accounts), (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. 10.4 Set-Off; Security Interest in Deposit Accounts. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default and consultation with Agent each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company and each other Loan Party against and on account of the obligations and liabilities of Company or any other Loan Party to that Lender or to any other Lender under this Agreement, the Letters of Credit and participations therein and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Company hereby further grants to Agent and each Lender a security interest in all deposits and accounts maintained with Agent or such Lender as security for the Obligations. 10.5 Ratable Sharing. Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code or under any other Insolvency Laws, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) that is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments (which it shall be deemed to have purchased from each seller of an assignment simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 10.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an Assignment Agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably satisfactory to each such Lender. 10.6 Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of (a) each Lender with Obligations directly affected (whose consent shall be required for any such amendment, modification, termination or waiver in addition to that of Requisite Lenders) (1) reduce the principal amount of any Loan, (2) increase the maximum aggregate amount of Letters of Credit, (3) postpone the scheduled final maturity date (but not the date of any scheduled installment of principal) of any Loan, (4) postpone the date on which any interest or any fees are payable, (5) decrease the interest rate borne by any Loan (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder, (6) reduce the amount or postpone the due date of any amount payable in respect of any Letter of Credit, (7) extend the expiration date of any Letter of Credit beyond the Revolving Loan Commitment Termination Date, (8) increase the Commitment of such Lender, or (9) change in any manner the obligations of Revolving Lenders relating to the purchase of participations in Letters of Credit; (b) each Lender, (1) change in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders" (except for any changes resulting solely from an increase in Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) increase the maximum duration of Interest Periods permitted hereunder, (4) release any Lien granted in favor of Agent with respect to all or substantially all of the Collateral or release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty, in each case other than in accordance with the terms of the Loan Documents, (5) change in any manner or waive the provisions contained in subsection 8.1 or this subsection 10.6; (6) change in any manner the provisions contained in the second paragraph of subsection 2.1C(ii); or (7) increase the advance rate with respect to the Revolving Loans (except for the restoration by Agent of an advance rate in whole or in part to its original level after the prior reduction thereof by Agent). In addition, (i) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (ii) no amendment, modification, termination or waiver of any provision of Section 3 shall be effective without the written concurrence of Agent and, with respect to the purchase of participations in Letters of Credit, without the written concurrence of each Issuing Lender that has issued an outstanding Letter of Credit or has not been reimbursed for a payment under a Letter of Credit, and (iii) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Agent shall be effective without the written concurrence of Agent. If, in connection with any proposed amendment, modification, termination or waiver of any of the provisions of this Agreement or the Notes which requires the consent of all Lenders, the consent of Requisite Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then Company shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clause (i) or (ii) below, to either (i) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to subsection 2.9 so long as at the time of such replacement, each such Replacement Lender consents to the proposed amendment, modification, termination or waiver, or (ii) terminate such non-consenting Lender's Commitments and repay in full its outstanding Loans in accordance with subsections 2.4B(i) and 2.4B(ii); provided that unless the Commitments that are terminated and the Loans that are repaid pursuant to the preceding clause (ii) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (ii), the Requisite Lenders (determined before giving effect to the proposed action) shall specifically consent thereto; provided further that Company shall not have the right to terminate such non-consenting Lender's Commitment and repay in full its outstanding Loans pursuant to clause (ii) of this subsection 10.6 if, immediately after the termination of such Lender's Revolving Loan Commitment in accordance with subsection 2.4B(ii)(b), the Revolving Loan Exposure of all Lenders would exceed the Revolving Loan Commitments of all Lenders; provided still further that Company shall not have the right to replace a Lender solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to the second paragraph of this subsection 10.6. Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company. 10.7 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.8 Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Agent shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Company and Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Agent. 10.9 Survival of Representations, Warranties and Agreements. A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 Marshalling; Payments Set Aside. Neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Agent or Lenders (or to Agent for the benefit of Lenders), or Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.12 Severability. In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 Obligations Several; Independent Nature of Lenders' Rights. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW. 10.16 Construction of Agreement. Each of the parties hereto acknowledges that it has been represented by counsel in the negotiation and documentation of the terms of this Agreement, that it has had full and fair opportunity to review and revise the terms of this Agreement, and that this Agreement has been drafted jointly by all of the parties hereto. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this Agreement shall not be construed against or in favor of another party. 10.17 Consent to Jurisdiction and Service of Process. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, COUNTY AND CITY OF LOS ANGELES. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY: > (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND > VENUE OF SUCH COURTS; > > (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; > > (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH > COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, > TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8; > > (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO > CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH > COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY > RESPECT; > > (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER > PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY > OTHER JURISDICTION; AND > > (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO > JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT > PERMISSIBLE UNDER CALIFORNIA OR OTHERWISE. 10.18 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 Confidentiality. Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Company that in any event a Lender may make (a) disclosures to Affiliates and professional advisors of such Lender, (b) disclosures reasonably required by (i) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein, or (ii) any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided that such assignee, transferee, participant, contractual counterparty or professional advisor agrees in writing to keep such information confidential to the same extent required of the Lenders hereunder, or (c) disclosures required or requested by any Government Authority or representative thereof or pursuant to legal process and that no written or oral communications from counsel to Agent and no information that is or is designated as privileged or as attorney work product may be disclosed to any Person unless such Person is a Lender or a participant hereunder; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. 10.20 Counterparts; Effectiveness. This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. > > > > > > Company: > > > > > > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > By:  ____________________ > > > > > > Title:  ___________________ > > > > > > > > > > > > Notice Address: > > > > > > > > > > > > 2382 Faraday Avenue > > > > > > Carlsbad, CA 92008 > > > > > > Attention: Mr. Ted N. Tarbet > > > > > > Senior Vice President & Chief Financial Officer > > > > > > Facsimile: (760) 930-1580 > > > > > > > > > > > > LENDERS: > > > > > > > > > > > > BANKERS TRUST COMPANY > > > > > > > > > > > > , > > > > > > as a Lender and as Agent > > > > > > > > > > > > > > > > > > > > > > > > By:  ____________________ > > > > > > Name: Eric S. Miller > > > > > > Title: Vice President > > > > > > > > > > > > Notice Address: > > > > > > > > > > > > 130 Liberty Street, 14th Floor > > > > > > New York, New York 10006 > > > > > > Facsimile: (212) 669-0142 > > > > > > Attention: Ira Lubinsky > > > > > > > > > > > >   > > > > > > > > > > > > DEUTSCHE BANK, AG, New York Branch, > > > > > > > > > > > > > > > > > > as an Issuing Lender > > > > > > > > > > > > > > > > > > > > > > > > By:  ____________________ > > > > > > Name: Eric S. Miller > > > > > > Title: Vice President > > > > > > > > > > > > Notice Address: > > > > > > > > > > > > 130 Liberty Street, 14th Floor > > > > > > New York, New York 10006 > > > > > > Attention: Ira Lubinsky > > > > > > Facsimile: (212) 669-0142 > > > > > > > > > > > > > > > > > >       -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT I FORM OF NOTICE OF BORROWING Pursuant to that certain Credit Agreement dated as of September 8, 2000 as amended, supplemented or otherwise modified to the date hereof (said Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Sunrise Medical, Inc., a Delaware corporation ("Company"), the financial institutions listed therein as Lenders ("Lenders"), and Bankers Trust Company, as Agent ("Agent"), this represents Company's request to borrow as follows: > 1. Date of borrowing: ___________________, 200_ 2. Amount of borrowing: > $___________________ 3. Interest rate option: [ ] a. Base Rate Loan(s) [ ] b. > Eurodollar Rate Loans with an initial Interest Period of ____________ month(s) The proceeds of such Loans are to be deposited in Company's account at the Funding and Payment Office. The undersigned officer, solely in his or her capacity as an officer of the Company, to the best of his or her knowledge, and Company certify that: > (i) The representations and warranties contained in the Credit Agreement and > the other Loan Documents are true, correct and complete in all material > respects on and as of the date hereof to the same extent as though made on and > as of the date hereof, except to the extent such representations and > warranties specifically relate to an earlier date, in which case such > representations and warranties were true, correct and complete in all material > respects on and as of such earlier date; > > (ii) No event has occurred and is continuing or would result from the > consummation of the borrowing contemplated hereby that would constitute an > Event of Default or a Potential Event of Default; > > (iii) Each Loan Party has performed in all material respects all agreements > and satisfied all conditions which the Credit Agreement provides shall be > performed or satisfied by it on or before the date hereof; and > > (iv) After giving effect to the requested Loans, the Total Utilization of > Revolving Loan Commitments will not exceed the Revolving Loan Commitments then > in effect and the Borrowing Base then in effect and the requested Loan will > otherwise comply with the requirements of subsection 2.1A of the Credit > Agreement. > > >   DATED: ____________________ > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By:___________________________ > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   > > > > > > > > > > > > > >   EXHIBIT II FORM OF NOTICE OF CONVERSION/CONTINUATION Pursuant to that certain Credit Agreement dated as of September 8, 2000, as amended, supplemented or otherwise modified to the date hereof (said Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Sunrise Medical, Inc., a Delaware corporation ("Company"), the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent ("Agent"), this represents Company's request to convert or continue Loans as follows: > 1. Date of conversion/continuation: __________________, 200__ > > 2. Amount of Loans being converted/continued: $___________________ > > 3. Nature of conversion/continuation: > > > [ ] a. Conversion of Base Rate Loans to Eurodollar Rate Loans > > [ ] b. Conversion of Eurodollar Rate Loans to Base Rate Loans > > [ ] c. Continuation of Eurodollar Rate Loans as such > > 4. If Loans are being continued as or converted to Eurodollar Rate Loans, the > duration of the new Interest Period that commences on the conversion/ > continuation date: _______________ month(s) In the case of a conversion to or continuation of Eurodollar Rate Loans, the undersigned officer, solely in his or her capacity as an officer of the Company, to the best of his or her knowledge, and Company certify that no Event of Default or Potential Event of Default has occurred and is continuing under the Credit Agreement.   DATED: ____________________ > > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > > > By:__________________________ > > > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   EXHIBIT III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT Pursuant to that certain Credit Agreement dated as of September 8, 2000, as amended, supplemented or otherwise modified to the date hereof (said Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Sunrise Medical, Inc., a Delaware corporation ("Company"), the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent ("Agent"), this represents Company's request for the issuance of a Letter of Credit as follows: > 1. Issuing Lender:  > > > [ ] a. Agent > > [ ] b. _________________________________ > > 2. Letter of Credit Type:   > > > [ ] a. Commercial Letter of Credit > > [ ] b. Standby Letter of Credit > 3. Date of issuance of Letter of Credit: ________________, 200__ > > 4. Face amount of Letter of Credit: $________________________ > > 5. Expiration date of Letter of Credit: ________________, 200__ > > 6. Name and address of beneficiary: > > > ___________________________________________ > > ___________________________________________ > > ___________________________________________ > > ___________________________________________ > > 7. Attached hereto is: > > > [ ] a. the verbatim text of such proposed Letter of Credit > > > > [ ] b. a description of the proposed terms and conditions of such Letter of > > Credit, including a precise description of any documents to be presented by > > the beneficiary which, if presented by the beneficiary prior to the > > expiration date of such Letter of Credit, would require the Issuing Lender > > to make payment under such Letter of Credit. The undersigned officer, solely in his or her capacity as an officer of the Company and to the best of his or her knowledge, and Company certify that: > (i) The representations and warranties contained in the Credit Agreement and > the other Loan Documents are true, correct and complete in all material > respects on and as of the date hereof to the same extent as though made on and > as of the date hereof, except to the extent such representations and > warranties specifically relate to an earlier date, in which case such > representations and warranties were true, correct and complete in all material > respects on and as of such earlier date; > > (ii) No event has occurred and is continuing or would result from the issuance > of the Letter of Credit contemplated hereby that would constitute an Event of > Default or a Potential Event of Default; > > (iii) Each Loan Party has performed in all material respects all agreements > and satisfied all conditions which the Credit Agreement provides shall be > performed or satisfied by it on or before the date hereof; and > > (iv) After giving effect to the requested Letter of Credit, the Total > Utilization of Revolving Loan Commitments will not exceed the Revolving Loan > Commitments then in effect or the Borrowing Base then in effect, and the > requested Letter of Credit will otherwise comply with the provisions of > subsection 3.1A of the Credit Agreement. > > >   DATED: ____________________ > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By:__________________________ > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > > > > > > > > >     > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT IV FORM OF REVOLVING NOTE SUNRISE MEDICAL, INC. $58,000,000  Los Angeles, California September 8, 2000   FOR VALUE RECEIVED, Sunrise Medical, Inc., a Delaware corporation ("Company"), promises to pay to BANKERS TRUST COMPANY ("Payee") or its registered assigns, the lesser of (x) fifty eight million dollars ($58,000,000) and (y) the unpaid principal amount of all advances made by Payee to Company as Revolving Loans under the Credit Agreement referred to below. The principal amount of this Note shall be payable on the dates and in the amounts specified in the Credit Agreement; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon. Company also promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Credit Agreement dated as of September 8_, 2000 by and among Company, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (said Credit Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined). This Note is one of Company's "Revolving Notes" and is issued pursuant to and entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the Funding and Payment Office or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment Agreement effecting the assignment or transfer of this Note shall have been accepted by Agent and recorded in the Register as provided in the Credit Agreement, Company and Agent shall be entitled to deem and treat Payee as the owner and holder of this Note and the Loans evidenced hereby. Payee hereby agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligations of Company hereunder with respect to payments of principal of or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in the Credit Agreement and to prepayment at the option of Company as provided in the Credit Agreement. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. This Note is subject to restrictions on transfer or assignment as provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Company, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. Company promises to pay all costs and expenses, including reasonable attorneys' fees, all as provided in the Credit Agreement, incurred in the collection and enforcement of this Note. Company and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.   IN WITNESS WHEREOF, Company has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date and at the place first written above. > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By:__________________________ > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   TRANSACTIONS ON REVOLVING NOTE       Date Type of Loan Made This Date Amount of Loan Made   This Date   Amount of Principal Paid    This Date   Outstanding Principal Balance    This Date     Notation Made By               > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT V FORM OF SUBSIDIARY GUARANTY This SUBSIDIARY GUARANTY is entered into as of September 8, 2000 by the undersigned (each a "Guarantor", and together with any future Subsidiaries executing this Guaranty, being collectively referred to herein as the "Guarantors") in favor of and for the benefit of BANKERS TRUST COMPANY, as agent for and representative of (in such capacity herein called "Guarantied Party") the financial institutions ("Lenders") party to the Credit Agreement referred to below and any Exchangers (as hereinafter defined), and for the benefit of the other Beneficiaries (as hereinafter defined). RECITALS. Sunrise Medical, Inc., a Delaware corporation ("Company"), has entered into that certain Credit Agreement dated as of September 8, 2000 with Lenders and Guarantied Party, as Agent for Lenders (said Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement"; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined). Company may from time to time enter, or may from time to time have entered, into one or more Interest Rate Agreements and/or one or more Currency Agreements (collectively, the "Hedge Agreements") with one or more Persons that are Lenders or Affiliates of Lenders at the time such Hedge Agreements are entered into (in such capacity, collectively, "Exchangers") in accordance with the terms of the Credit Agreement, and it is desired that the obligations of Company under the Hedge Agreements, including without limitation any obligation of Company to make payments thereunder in the event of early termination thereof, together with all obligations of Company under the Credit Agreement and the other Loan Documents, be guarantied hereunder. Guarantied Party and Lenders and each Exchanger for which Guarantied Party has received the notice required by Section 18 hereof are sometimes referred to herein as "Beneficiaries". A portion of the proceeds of the Loans may be advanced to Guarantors and thus the Guarantied Obligations (as hereinafter defined) are being incurred for and will inure to the benefit of Guarantors (which benefits are hereby acknowledged). It is a condition precedent to the making of the initial Loans under the Credit Agreement that Company's obligations thereunder be guarantied by Guarantors. Guarantors are willing irrevocably and unconditionally to guaranty such obligations of Company. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lenders and Guarantied Party to enter into the Credit Agreement and to make Loans and other extensions of credit thereunder and to induce Exchangers to enter into the Hedge Agreements, Guarantors hereby agree as follows: 1. Guaranty. (a) In order to induce Lenders to extend credit to Company pursuant to the Credit Agreement and the entry by Exchangers into the Hedge Agreements, Guarantors jointly and severally irrevocably and unconditionally guaranty, as primary obligors and not merely as sureties, the due and punctual payment in full of all Guarantied Obligations (as hereinafter defined) when the same shall become due, whether at stated maturity, by acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)). The term "Guarantied Obligations" is used herein in its most comprehensive sense and includes any and all Obligations of Company and all obligations of Company under Hedge Agreements, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Credit Agreement, the Hedge Agreements, this Guaranty and the other Loan Documents, including those arising under successive borrowing transactions under the Credit Agreement which shall either continue such obligations of Company or from time to time renew them after they have been satisfied. Each Guarantor acknowledges that a portion of the Loans may be advanced to it, that Letters of Credit may be issued for the benefit of its business and that the Guarantied Obligations are being incurred for and will inure to its benefit. Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Company (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention of each Guarantor and Guarantied Party that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve Company of any portion of such Guarantied Obligations. In the event that all or any portion of the Guarantied Obligations is paid by Company, the obligations of each Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from Guarantied Party or any other Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations. Subject to the other provisions of this Section 1, upon the failure of Company to pay any of the Guarantied Obligations when and as the same shall become due, each Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to the aggregate of the unpaid Guarantied Obligations. (b) Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor under this Guaranty shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (x) in respect of intercompany indebtedness to Company or other affiliates of Company to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder and (y) under any guaranty of Subordinated Indebtedness which guaranty contains a limitation as to maximum amount similar to that set forth in this Section 1(b), pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms of any agreement. (c) Each Guarantor under this Guaranty, and each guarantor under other guaranties, if any, relating to the Credit Agreement (the "Related Guaranties") that contain a contribution provision similar to that set forth in this Section 1(c), together desire to allocate among themselves (collectively, the "Contributing Guarantors"), in a fair and equitable manner, their obligations arising under this Guaranty and the Related Guaranties. Accordingly, in the event any payment or distribution is made on any date by a Guarantor under this Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such other guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in the maximum amount permitted by law so as to maximize the aggregate amount of the Guarantied Obligations paid to Beneficiaries. 2. Guaranty Absolute; Continuing Guaranty. The obligations of each Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) Guarantied Party may enforce this Guaranty upon the occurrence of an Event of Default under the Credit Agreement or the occurrence of an early termination date or similar event under any Hedge Agreements notwithstanding the existence of any dispute between Company and any Beneficiary with respect to the existence of such event; (c) the obligations of each Guarantor hereunder are independent of the obligations of Company under the Loan Documents or the Hedge Agreements and the obligations of any other Guarantor and a separate action or actions may be brought and prosecuted against each Guarantor whether or not any action is brought against Company or any of such other Guarantors and whether or not Company is joined in any such action or actions; and (d) a payment of a portion, but not all, of the Guarantied Obligations by one or more Guarantors shall in no way limit, affect, modify or abridge the liability of such or any other Guarantor for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon each Guarantor and its successors and assigns, and each Guarantor irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guarantied Obligations. 3. Actions by Beneficiaries. Any Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of any Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of any Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Guarantied Party or the other Beneficiaries, or any of them, may have against any such security, as Guarantied Party in its discretion may determine consistent with the Credit Agreement, the Hedge Agreements and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to Guarantied Party or the other Beneficiaries, or any of them, under the Loan Documents or the Hedge Agreements. 4. No Discharge. This Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of the Credit Agreement, any of the other Loan Documents, the Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even though Guarantied Party or the other Beneficiaries, or any of them, might have elected to apply such payment to any part or all of the Guarantied Obligations (other than payments made by the applicable Guarantor pursuant to the Loan Documents or the Hedge Agreements, as the case may be, or from the proceeds of any security granted by the applicable Guarantor for the Guarantied Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guarantied Obligations), (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which Company may assert against Guarantied Party or any Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of a Guarantor as an obligor in respect of the Guarantied Obligations. 5. Waivers. Each Guarantor waives, for the benefit of Beneficiaries: (a) any right to require Guarantied Party or the other Beneficiaries, as a condition of payment or performance by such Guarantor, to (i) proceed against Company, any other guarantor (including any other Guarantor) of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from Company, any other guarantor of the Guarantied Obligations or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of any Beneficiary in favor of Company or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Company including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Company from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon Guarantied Party's or any other Beneficiary's errors or omissions in the administration of the Guarantied Obligations, except behavior that amounts to bad faith, gross negligence or willful misconduct; (e) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any Lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty, notices of default under the Credit Agreement, notices of default or early termination under any Hedge Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guarantied Obligations or any agreement related thereto, notices of any extension of credit to Company and notices of any of the matters referred to in Section 3 and 4 hereof and any right to consent to any thereof; and (g) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. As used in this paragraph, any reference to "the principal" includes Company, and any reference to "the creditor" includes Guarantied Party and each other Beneficiary. In accordance with Section 2856 of the California Civil Code (a) Guarantor waives any and all rights and defenses available to Guarantor by reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code, including without limitation any and all rights or defenses Guarantor may have by reason of protection afforded to the principal with respect to any of the Guarantied Obligations, or to any other guarantor of any of the Guarantied Obligations with respect to any of such guarantor's obligations under its guaranty, in either case pursuant to the antideficiency or other laws of the State of California limiting or discharging the principal's indebtedness or such guarantor's obligations, including without limitation Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and (b) Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guarantied Obligation, has destroyed Guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise; and even though that election of remedies by the creditor, such as nonjudicial foreclosure with respect to security for an obligation of any other guarantor of any of the Guarantied Obligations, has destroyed Guarantor's rights of contribution against such other guarantor. No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this paragraph. 6. Guarantors' Rights of Subrogation, Contribution, Etc.; Subordination of Other Obligations. Each Guarantor waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Company or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute (including without limitation under California Civil Code Section 2847, 2848 or 2849), under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Company, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Company, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guarantied Obligations (other than Guarantied Obligations which, after the occurrence of the foregoing events, are contingent and unliquidated and not due and owing on such date and which pursuant to the provisions of the Credit Agreement, Hedge Agreements, Letters of Credit or the Loan Documents survive the termination of the Credit Agreement, the repayment of the Secured Obligations, the termination of the Commitments, the expiration or cancellation of all Letters of Credit and the termination, expiration or cancellation of all Hedge Agreements) shall have been paid in full and the Commitments shall have terminated, and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor of any of the Guarantied Obligations. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Company or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights Guarantied Party or the other Beneficiaries may have against Company, to all right, title and interest Guarantied Party or the other Beneficiaries may have in any such collateral or security, and to any right Guarantied Party or the other Beneficiaries may have against such other guarantor. Any indebtedness of Company now or hereafter held by any Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of Company to a Guarantor collected or received by such Guarantor after an Event of Default has occurred and is continuing, and any amount paid to a Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to be credited and applied against the Guarantied Obligations but without affecting, impairing or limiting in any manner the liability of such Guarantor under any other provision of this Guaranty; provided that any payment on such indebtedness received by any Guarantor prior to the occurrence and continuance of an Event of Default or Potential Event of Default and in accordance with this Guaranty or the Credit Agreement shall be permitted and need not be held in trust for or paid over to Guarantied Party on behalf of Beneficiaries. 7. Expenses. Guarantors jointly and severally agree to pay, or cause to be paid, on demand, and to save Guarantied Party and the other Beneficiaries harmless against liability for, any and all reasonable costs and expenses (including fees and disbursements of counsel and allocated costs of internal counsel) incurred or expended by Guarantied Party or any other Beneficiary in connection with the enforcement of or preservation of any rights under this Guaranty. 8. Financial Condition of Company. No Beneficiary shall have any obligation, and each Guarantor waives any duty on the part of any Beneficiary, to disclose or discuss with such Guarantor its assessment, or such Guarantor's assessment, of the financial condition of Company or any matter or fact relating to the business, operations or condition of Company. Each Guarantor has adequate means to obtain information from Company on a continuing basis concerning the financial condition of Company and its ability to perform its obligations under the Loan Documents and the Hedge Agreements, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Company and of all circumstances bearing upon the risk of nonpayment of the Guarantied Obligations. 9. Representations and Warranties. Each Guarantor makes, for the benefit of Beneficiaries, each of the representations and warranties made in the Credit Agreement by Company as to such Guarantor, its assets, financial condition, operations, organization, legal status, business and the Loan Documents to which it is a party. 10. Covenants. Each Guarantor agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding, or any Lender shall have any Commitment or any Exchanger shall have any obligation under any Hedge Agreement, such Guarantor will, unless Requisite Lenders shall otherwise consent in writing, perform or observe, and cause its Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that Company is to cause a Guarantor and such Subsidiaries to perform or observe. 11. Set Off. In addition to any other rights any Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by a Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any and all deposits (general or special, including but not limited to indebtedness evidence by certificates of deposit, whether matured or unmatured) and any other indebtedness of such Beneficiary owing to a Guarantor and any other property of such Guarantor held by a Beneficiary to or for the credit or the account of such Guarantor against and on account of the Guarantied Obligations and liabilities of such Guarantor to any Beneficiary under this Guaranty. 12. Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of a Guarantor or any of its successors in interest under this Guaranty shall be sold or otherwise disposed of (including by merger or consolidation) in a sale not prohibited by the Credit Agreement or otherwise consented to by Requisite Lenders, the obligations of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such sale. 13. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by any Guarantor therefrom, shall in any event be effective without the written concurrence of Guarantied Party and, in the case of any such amendment or modification, Guarantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 14. Miscellaneous. It is not necessary for Beneficiaries to inquire into the capacity or powers of any Guarantor or Company or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiaries by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiaries by virtue of any statute or rule of law or in any of the Loan Documents or Hedge Agreements or any agreement between one or more Guarantors and one or more Beneficiaries or between Company and one or more Beneficiaries. Any forbearance or failure to exercise, and any delay by any Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS, GUARANTIED PARTY AND THE OTHER BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. This Guaranty shall inure to the benefit of Beneficiaries and their respective successors and assigns. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY. Each Guarantor agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such Guarantor at its address set forth below its signature hereto, such service being acknowledged by such Guarantor to be sufficient for personal jurisdiction in any action against such Guarantor in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Guarantied Party or any Beneficiary to bring proceedings against such Guarantor in the courts of any other jurisdiction. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, GUARANTIED PARTY EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each Guarantor and, by its acceptance of the benefits hereof, Guarantied Party each (i) acknowledges that this waiver is a material inducement for such Guarantor and Guarantied Party to enter into a business relationship, that such Guarantor and Guarantied Party have already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 15. Additional Guarantors. The initial Guarantor(s) hereunder shall be such of the Subsidiaries of Company as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, Subsidiaries of Company may become parties hereto, as additional Guarantors (each an "Additional Guarantor"), by executing a counterpart, a form of which is attached as Exhibit A, of this Guaranty. Upon delivery of any such counterpart to Guarantied Party, notice of which is hereby waived by Guarantors, each such Additional Guarantor shall be a Guarantor and shall be as fully a party hereto as if such Additional Guarantor were an original signatory hereof. Each Guarantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Guarantor hereunder, nor by any election of the Guarantied Party not to cause any Subsidiary of Company to become an Additional Guarantor hereunder. This Guaranty shall be fully effective as to any Guarantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Guarantor hereunder. 16. Counterparts; Effectiveness. This Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. This Guaranty shall become effective as to each Guarantor upon the execution of a counterpart hereof by such Guarantor (whether or not a counterpart hereof shall have been executed by any other Guarantor) and receipt by the Guaranteed Party of written or telephonic notification of such execution and authorization of delivery thereof. 17. Guarantied Party as Agent. (a) Guarantied Party has been appointed to act as Guarantied Party hereunder by Lenders. Guarantied Party shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action, solely in accordance with this Guaranty and the Credit Agreement. (b) Guarantied Party shall at all times be the same Person that is Agent under the Credit Agreement. Written notice of resignation by Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute notice of resignation as Guarantied Party under this Guaranty; and appointment of a successor Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute appointment of a successor Guarantied Party under this Guaranty. Upon the acceptance of any appointment as Agent under subsection 9.5 of the Credit Agreement by successor Agent, that successor Agent shall thereupon succeed to become vested with all the rights, powers, privileges and duties of the retiring Guarantied party under this Guaranty, and the retiring Guarantied Party under this Guaranty shall promptly (i) transfer to such successor Guarantied Party all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Guarantied Party under this Guaranty, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Guarantied Party of the rights created hereunder, whereupon such retiring Guarantied Party shall be discharged from its duties and obligations under this Guaranty. After any retiring Guarantied Party's resignation hereunder as Guarantied Party, the provisions of this Guaranty shall inure to its benefits as to any actions taken or omitted to be taken by it under this Guaranty while it was Guarantied Party hereunder. 18. Notice of Hedge Agreements. Guarantied Party shall not be deemed to have any duty whatsoever with respect to any Exchanger until it shall have received written notice in form and substance satisfactory to Guarantied Party from Company, a Guarantor or the Exchanger as to the existence and terms of the applicable Hedge Agreement.   IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. SUNRISE MEDICAL HHG INC. By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________ DYNAVOX SYSTEMS INC. By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________ SUNRISE MEDICAL CCG INC. By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________ ` SUNRISE MARIN HOLDINGS INC. By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________ SUNMED FINANCE INC. By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________ ACKNOWLEDGED AND FOR PURPOSES OR THE WAIVER OF JURY TRIAL SET FORTH IN SECTION 14 ONLY, AGREED AS OF THE DATE FIRST WRITTEN ABOVE BANKERS TRUST COMPANY, as Guarantied Party By:_____________________________ > Name: > Title:   > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT A FORM OF COUNTERPART FOR ADDITIONAL GUARANTORS This COUNTERPART (this "Counterpart"), dated _______, 20__, is delivered pursuant to Section 15 of the Guaranty referred to below. The undersigned hereby agrees that this Counterpart may be attached to the Guaranty, dated as of _____________, 20___ (as it may be from time to time amended, modified or supplemented, the "Guaranty"; capitalized terms used herein not otherwise defined herein shall have the meanings ascribed therein), among the Guarantors named therein and Bankers Trust Company, as Guarantied Party. The undersigned, by executing and delivering this Counterpart, hereby becomes an Additional Guarantor under the Guaranty in accordance with Section 15 thereof and agrees to be bound by all of the terms thereof. IN WITNESS WHEREOF, the undersigned has caused this Counterpart to be duly executed and delivered by its officer thereunto duly authorized as of ______________, 20__. [NAME OF ADDITIONAL GUARANTOR] By: __________________________ > Name: > Title: Address: > __________________________ > > __________________________ > > __________________________   > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT VI FORM OF COMPLIANCE CERTIFICATE THE UNDERSIGNED, SOLELY IN HIS OR HER CAPACITY AS AN OFFICER OF THE COMPANY, HEREBY CERTIFIES THAT: (1) I am the duly elected [Title] of Sunrise Medical, Inc., a Delaware corporation ("Company"); (2) I have reviewed the terms of that certain Credit Agreement dated as of September 8, 2000, as amended, supplemented or otherwise modified to the date hereof (said Credit Agreement, as so amended, supplemented or otherwise modified, being the "Credit Agreement", the terms defined therein and not otherwise defined in this Certificate (including Attachment No. 1 annexed hereto and made a part hereof) being used in this Certificate as therein defined), by and among Company, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent, and the terms of the other Loan Documents, and we have made, or have caused to be made under our supervision, a review in reasonable detail of the transactions and condition of Company and its Subsidiaries during the accounting period covered by the attached financial statements; (3) The examination described in paragraph (2) demonstrated and I hereby represent that the Company and its subsidiaries have become and remain liable with respect to Contingent Obligations under guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and its Subsidiaries in an aggregate amount not in excess of $1,000,000; and (4) The examination described in paragraph (2) above did not disclose, and we have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Potential Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth below]. [Set forth [below] [in a separate attachment to this Certificate] are all exceptions to paragraph (4) above listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Company has taken, is taking, or proposes to take with respect to each such condition or event: The foregoing certifications, together with the computations set forth in Attachment No. 1 annexed hereto and made a part hereof and the financial statements delivered with this Certificate in support hereof, are made and delivered this ____ day of _____________, ____ pursuant to subsection 6.1(iv) of the Credit Agreement. > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By:__________________________ > > > > > > > > > > > > > > Name:__________________________ > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > > > > > > > > >     > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE   This Attachment No. 1 is attached to and made a part of a Compliance Certificate dated as of ____________, _______, and pertains to the period from ___________, _______ to ___________, ________. Subsection references herein relate to subsections of the Credit Agreement. A. Indebtedness   1. Other unsecured senior Indebtedness permitted under subsection     7.1(vii): $________________ 2. Maximum unsecured senior Indebtedness permitted under     subsection 7.1(vii): $25,000,000 3. Subordinated Indebtedness incurred during Fiscal Quarter $________________ > a. At time of incurrence:   1. Ratio of incurred Consolidated Total Indebtedness to     Consolidated EBITDA for prior four Fiscal Quarter     period: ___:1.00 2. Ratio of consolidated total senior debt to Consolidated     EBITDA for prior four Fiscal Quarter period (3.a.1 not     to exceed 3.a.2 by greater than one multiple): ___:1.00 b. Acquisition Subordinated Debt in each individual or related     transactions incurred during Fiscal Quarter: $________________ c. Maximum Acquisition Subordinated Debt permitted in individual     or related transactions under subsection 1.1: $3,000,000 d. Aggregate permitted Acquisition Subordinated Debt under     subsection 1.1: $________________ e. Maximum aggregate permitted Acquisition Subordinated Debt: $10,000,000 4. Aggregate other Indebtedness: $________________ 5. Maximum aggregate other Indebtedness permitted under subsection     7.1(ix): $10,000,000 6. Aggregate Indebtedness created under permitted overdraft lines     with commercial banks: $________________ 7. Maximum aggregate Indebtedness created under permitted     overdraft lines with commercial banks under subsection 7.1(x): $10,000,000 8. Aggregate Indebtedness of Foreign Subsidiaries to Domestic     Subsidiaries: $________________ 9. Maximum aggregate Indebtedness of Foreign Subsidiaries to     Domestic Subsidiaries permitted under subsection 7.1(xi): $10,000,000     B. Liens   1. Other Liens permitted under subsection 7.2A(vii): $________________ 6. Maximum other Liens permitted under subsection 7.2A(vii):: $5,000,000     C. Investments   1. Aggregate Investments made after the Closing Date in Foreign     Subsidiaries by Domestic Subsidiaries: $_______________ 2. Maximum aggregate Investments after the Closing Date in Foreign     Subsidiaries by Domestic Subsidiaries permitted under subsection     7.3(viii):: $10,000,000 3. Aggregate fair market value of other Investments in Fiscal     Year-to-date as permitted under subsection 7.3(ix): $_______________ 4. Maximum aggregate fair market value of other Investments in     Fiscal Year as permitted under subsection 7.3(ix): $10,000,000 D. Contingent Obligations   1. Aggregate liability of other Contingent Obligations permitted under     subsection 7.4(x): $_______________ 2. Maximum aggregate liability of other Contingent Obligations     permitted under subsection 7.4(x): $10,000,000 E. Minimum Consolidated Adjusted EBITDA (for the four-Fiscal     Quarter period ending __________, _______) $______________ 1. Consolidated Net Income:   2. Consolidated Interest Expense: $______________ 3. Provisions for taxes based on income: $______________ 4. Total depreciation expense: $______________ 5. Total amortization expense: $______________ 6. Other permitted non-cash items deducted in the calculation of     Consolidated Net Income: $_______________ 7. Other permitted non-cash items added in the calculation of     Consolidated Net Income: $_______________ 8. Consolidated EBITDA (1+2+3+4+5+6-7): $_______________ 9. Income attributable to interest earned on Cash and Cash     Equivalents held by Company and its Subsidiaries: $_______________ 10. To extent deducted in determining Consolidated Net Income for       such period, rental expense attributable to the permitted sale and       leaseback of Facilities: $_______________ 11. To extent deducted in determining Consolidated Net Income for       such period but not in excess of an aggregate $1,500,000 for all       periods, expenses attributable to any unconsummated sale,       merger or transfer of Project Alpha or Project Beta: $_______________ 12. To extent deducted in determining Consolidated Net Income for       such period, fees, expenses and charges related to acquisitions       and mergers of Company and its Subsidiaries incurred not later       than one year after the Closing Date: $_______________ 13. To extent deducted in determining Consolidated Net Income for       such period, any Restructuring Charges (not to exceed maximum       permitted Restructuring Charges as calculated below): $_______________ > a. Maximum Annual Restructuring Charges: 1. FY 2001: $27,000,000 2. FY 2002: $44,000,000 minus the amount of Restructuring Charges included in Consolidated Adjusted EBITDA for FY 2001 3. FY 2003 and thereafter: $57,7000,000 minus the amount of Restructuring Charges included in Consolidated Adjusted EBITDA for all prior Fiscal Years ending on or about June 30, 2001 and thereafter $_______________ 14. Consolidated Adjusted EBITDA (8+9+10+11+12+13): $_______________ 15. Reduction upon Asset Sale under subsection 7.6 (Officer's       Certificate attached): $_______________ 16. Minimum Consolidated Adjusted EBITDA permitted under       subsection 7.6: $_______________ 17. Reduced Minimum Consolidated Adjusted EBITDA permitted       under subsection 7.6 (16-15). $_______________     F. Fundamental Changes; Assets Sales   1. Aggregate fair market value of Asset Sales of assets located in the     United States permitted under subsection 7.7(v): $_______________ 2. Maximum aggregate fair market value of Asset Sales of assets     located in the United States permitted under subsection 7.7(v): $5,000,000 3. Aggregate fair market value of Asset Sales of assets located     outside the United States permitted under subsection 7.7(v): $_______________ 4. Maximum aggregate fair market value of Asset Sales of assets     located outside the United States permitted under subsection     7.7(v): $5,000,000 5. Aggregate fair market value of Asset Sales in connection with     permitted sale and leaseback transactions: $_______________ 6. Maximum aggregate fair market value of Asset Sales in connection     with permitted sale and leaseback transactions under subsection     7.7(viii): $30,000,000     G. Consolidated Adjusted Capital Expenditures   1. Consolidated Capital Expenditures for Fiscal Year-to-date: $______________ 2. Deductible Restructuring Capital Expenditures for Fiscal     Year-to-date (not to exceed maximum permitted deductible     Restructuring Capital Expenditures as calculated below): $______________ a. Maximum annual deductible Restructuring Capital Expenditures: 1. FY 2001: $5,400,000 2. FY 2002: $16,600,000 minus the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for FY 2001 3. FY 2003: $17,400,000 minus the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for FY 2001 and FY 2002 4. FY 2004: $17,400,000 minus the amount of Restructuring Capital Expenditures deducted from Consolidated Capital Expenditures for FY 2001, FY 2002 and FY 2003 $_______________ 3. Consolidated Adjusted Capital Expenditures (1-2): $_______________ 4. Maximum Consolidated Adjusted Capital Expenditures     permitted under subsection 7.8 (as calculated from the table     below): $_______________ a. Maximum annual Consolidated Adjusted Capital Expenditures: 1. FY 2001: $19,500,000 2. FY 2002: $19,700,000 plus the excess, if any, of $19,500,000 over the Consolidated Adjusted Capital Expenditures for FY 2001 3. FY 2003: $19,900,000 plus the excess, if any, of $19,700,000 over the Consolidated Adjusted Capital Expenditures for FY 2002 4. FY 2004: $20,100,000 plus the excess, if any, of $19,900,000 over the Consolidated Adjusted Capital Expenditures for FY 2003       H. Restricted Junior Payments   1. Aggregate amount of stock and stock option repurchases and     poison pill payments made since Closing Date under subsection     7.5(ii): $_______________ 2. Maximum aggregate amount of stock and stock option     repurchases and poison pill payments made since Closing Date     permitted under subsection 7.5(ii): $2,000,000     I. Litigation (attach schedule of all Proceedings involving an alleged liability of, or claims against or affecting, Company or any of its Subsidiaries equal to or greater than $1,000,000 as required by subsection 6.1(ix)).   > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       EXHIBIT VII FORM OF SUBORDINATION PROVISIONS _________________, 20__ FOR VALUE RECEIVED, Sunrise Medical, Inc., a Delaware corporation (the "Maker"), having its principal place of business at 2382 Faraday Avenue, Suite 200, Carlsbad, California 92008, hereby promises to pay ____________________, the principal sum of ______________________________ (_______________), which principal shall be due in five equal payments of ______________________________ (_______________) each on __________, ____, ____, ____, ____ and ____. The outstanding principal amount shall bear interest at the rate of _____% per annum, with interest payable quarterly until this note is fully paid. [The note shall be guaranteed by the general credit of Sunrise Medical, Inc. ("Guarantor"), the 100% shareholder of ______________________________.] This Note may be prepaid at the option of the Maker in whole at any time or in part from time to time without notice or penalty. Each such prepayment shall be applied to accrued but unpaid interest and then to the next installment(s) of principal becoming due. This Note is issued pursuant to a ____________________ Purchase Agreement, dated _______________ (the "Agreement"), between Sunrise Medical, Inc. and the vendors of ____________________. This Note is subject to provisions of the Agreement, including, without limitation, adjustment of, and offset to the principal amount pursuant to the Agreement. If an Event of Default (as hereinafter defined) shall occur, then, at the option of the holder hereof, and subject to the subordination provisions below, this Note shall upon presentment become immediately due and payable. An "Event of Default" shall be deemed to have occurred hereunder if (a) the Maker shall fail to make any payment under this Note in full when due and such failure shall not be cured within twenty (20) days following receipt of written notice thereof; or (b) any proceeding shall be commenced by the Maker, as debtor, under any bankruptcy, reorganization, insolvency, readjustment of debt, arrangement, receivership or liquidation law or statute, and such proceeding is not dismissed within 60 days or is not timely controverted in good faith and on reasonable grounds by the Maker or an order of relief is granted in such proceedings. The indebtedness represented by this Note (including the interest thereon) shall be subordinate and junior in right of payment, to the extent set forth herein, to the prior payment in full of all indebtedness (including, without limitation, all interest accrued thereon and all fees and expenses accrued or incurred in relation thereto) of the Maker or the Guarantor, whether presently existing or hereafter incurred, and any extensions, renewals or modifications thereof, for money borrowed from or guaranteed to any banks, trust companies, insurance companies or other lending institutions (the "Senior Indebtedness"). The indebtedness represented by this Note (including the interest thereon) shall be equal in priority with all other Acquisition Indebtedness (as hereinafter defined) including, without limitation, all interest incurred in relation thereto of the Maker or the Guarantor. "Acquisition Indebtedness" shall mean all indebtedness of the Maker or the Guarantor incurred in full or partial payment for the assets or stock associated with business acquired by the Maker or the Guarantor heretofore except Senior Indebtedness arising as a result of each acquisition. No payment shall be made hereunder if an event which would, or which with the giving of notice or passage of time would, permit any Senior Indebtedness to be accelerated and to became immediately due at the option of the holder thereof shall have occurred and be continuing or would occur and exist by virtue of ouch payment, and such event shall not have been waived or consented to by the holders of such Senior Indebtedness. In the event an Event of Default occurs hereunder, or any voluntary liquidation, dissolution or other winding up of the Maker or Guarantor shall occur, all Senior Indebtedness must first be paid in full before any payment or distribution of any character shall be made in respect of this Note, and all payments and distributions which would otherwise (but for the terms hereof) be payable or deliverable in respect of this Note shall be paid or delivered directly to the holder of Senior Indebtedness at the time outstanding, in accordance with the priorities of payment thereof, until all such Senior Indebtedness shall have been paid in full. If any payment or distribution shall be received by any holder of this Note in contravention of any of the terms hereof and before all Senior Indebtedness shall be paid in full, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of the Senior Indebtedness at the time outstanding for application to the payment of all Senior Indebtedness remaining unpaid, in accordance with the priorities of payment thereof, to the extent necessary to pay all Senior Indebtedness in full. No act or failure to act on the part of the Maker, and no default or breach of any agreement of the maker, whether or not herein set forth, shall in any way prevent or limit the holder of any Senior Indebtedness from enforcing fully the subordination herein provided for, irrespective of any knowledge or notice which such holder hereof may at any time have. So long as any Senior Indebtedness shall be outstanding, the Maker shall not, without the prior written consent of the holders thereof, alter or amend any of the terms of this Note in any manner which might adversely affect the holder of Senior Indebtedness. Nothing in this note shall impair or qualify, as between the Maker and holder hereof, (i) the obligation of the Maker to pay the holder hereof the principal of and interest on this Note when and as due as set forth elsewhere herein, or (ii) the rights of the holder hereof upon an Event of Default, all subject to the rights of the holders of Senior Indebtedness as provided herein. The Maker hereby waives all rights to offset against its obligations hereunder and claims which it may now or hereafter have against the payee or subsequent holder hereof, except for claims arising under the Agreement or any agreement or instruments entered into pursuant thereto. If any action should be commenced to collect this Note or any portion thereof, such sum as the Court may deed reasonable shall be added hereto as attorneys' fees. The prevailing party shall be entitled to recover its reasonable attorneys' fees and costs of suit. In the event that any term, covenant, condition, provision or agreement herein contained is held to be invalid, void or otherwise enforceable by any court of competent jurisdiction, the fact that such term, covenant, condition, provision or agreement is invalid, void or otherwise unenforceable shall in no way affect the validity or enforceability of any other term, covenant, condition, provision or agreement herein contained. This Note shall be governed by and construed in accordance with the laws of ____________________ without regard to principles of conflict of laws, and may not be amended, modified or cancelled orally. > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By: > > > > > > > > > > > > > > Name: > > > > > > > > > > > > > > Title: > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > >   EXHIBIT VIII FORM OF BORROWING BASE CERTIFICATE ____________, ____ Reference is made to the Credit Agreement dated as September 8____, 2000 (as it may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Sunrise Medical, Inc., a Delaware corporation ("Company"), the Lenders listed on the signature pages thereof, and Bankers Trust Company, as Agent. Terms defined in the Credit Agreement and undefined herein are used herein as defined therein. Pursuant to subsection [4.1F][6.1(xviii)] of the Credit Agreement, the undersigned, solely in his or her capacity as the Chief Financial Officer of Company, hereby certifies that attached hereto as Annex 1 is a true and accurate calculation of the Borrowing Base as of __________, _____ determined in accordance with the requirements of the Credit Agreement. IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed as of ____________, ____. > > > > > > > SUNRISE MEDICAL, INC. > > > > > > > > > > > > > > By:__________________________ > > > > > > > > > > > > > > Name:__________________________ > > > > > > > > > > > > > > Title:__________________________ > > > > > > > > > > > > > >   > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > > > > > > > > > > > > > >   ANNEX 1 TO ____________________ BORROWING BASE CERTIFICATE   > > Borrowing Base Certificate #: _______________ As of Date: _______________   Total I. RECEIVABLES   > A. Total Accounts Receivable (Note: parenthetical references are to clauses in > the definition of "Eligible Accounts Receivable") _____ > > Less:   > > > Promissory Notes _____ > > > Chargebacks _____ > > > Sales to Affiliate, including without limitation intra/intercompany > > > receivables and employee/salesperson receivables(a) _____ > > > Payment Terms more than 120 days(b) _____ > > > Unpaid (i) more than 60 days on payment terms of 90 days or less, or (ii) > > > more than 30 days on payment terms of 120 days(c) _____ > > > 50% or more from Account Debtor Past Due(d) _____ > > > Creditor or subject to a claim or setoff, to extent of same(e) _____ > > > Insolvency Event Accounts(f) _____ > > > Non-US Dollar/Foreign Accounts, unless letter of credit to Agent(g) _____ > > > Bill/Hold; Sale/Return; Approval; Guarantied Sale; Consignment(h) _____ > > > Uncertain Collection(i) _____ > > > Medicare/Medicaid; Account Debtor is U.S. Government(j) _____ > > > Goods not Shipped, Delivered, Accepted (valid sale)(k) _____ > > > Account not comply legal requirements(l) _____ > > > Account subject to Security Deposit, Progress Payment or Advance(m) _____ > > > Account not subject to first priority Lien for Agent or not comply with > > > Loan Documents(n) _____ > > > Accounts exceed 10% of A/R of Loan Parties, to extent of such excess, > > > unless letter of credit to Agent(o) _____ > > > Other Ineligibility Imposed by Agent _____ B. Total Ineligible Accounts _____ C. Gross Eligible Accounts (I.A. - I.B.) _____ D. Less:   > Returns, credit memo reserves, discounts (other than secondary cash > discounts), deductions, claims, credits, sales taxes, etc. _____ E. Net Eligible Accounts (I.C. - I.D.) _____     II. INVENTORY   > A. Total Inventory (Note: parenthetical references are to clauses in the > definition of "Eligible Inventory") _____ Less:   Inventory not owned solely by Loan Party or invalid title(a) _____ Inventory not located in the U.S.(b) _____ Consignments; Inventory not located on property of Loan Party and not subject to Collateral Access Agreement(c) _____ Inventory not subject to first priority Lien for Agent(d) _____ Inventory returned by third party or in transit(e) _____ Inventory not first-quality goods or slow moving(f) _____ Unreconciled/reconciled Items(g) _____ Sample Inventory and Promotional Materials and Literature(h) _____ Other Ineligibility imposed by Agent _____ > B. Total Ineligible Inventory _____ > C. Eligible Inventory (II.A. - II.B.) _____ > D. Less:   > freight, duty, brokerage charges and all reserves _____ > E. Net Eligible Inventory (II.C. - II.D.) _____     III. BORROWING BASE   A. 1. Net Eligible Accounts (I.E.) _____ > > 2. Multiplied by Advance Rate of 75% 0.75 > > 3. Total Accounts Availability (III.A.1. x 0.75) _____ B. 1. Net Eligible Inventory (II.E) _____ > > 2. Multiplied by Advance Rate of 50% 0.50 > > 3. Inventory Availability (III.B.1 x 0.50) _____ > > 4. Utilization Limitation (III.H x 0.30) _____ > > 5. Total Inventory Availability (lesser of III.B.3 and III.B.4) _____ C. Qualifying Certificate of Deposit _____ D. Total Borrowing Base Availability (III.A.3. + III.B.5. + III.C.) _____ > > 1. Less:   > >     Reserve Established by Agent _____ > E. Net Borrowing Base (III.D. - III.D.1.) _____ > F. Loans Outstanding _____ > G. Letter of Credit Obligations _____ > H. Hedge Exposure _____ > I. TOTAL UTILIZATION (III.F. + III.G. +III.H.) _____ > J. NET AVAILABILITY FOR COMPANY > (III.E. minus III.I.) _____   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   EXHIBIT IX FORM OF OPINION OF LATHAM & WATKINS [DRAFT] September 8, 2000 Bankers Trust Company, as Administrative Agent 130 Liberty Street New York, New York 10006 and The Lenders Listed on Schedule A Hereto > > Re: Credit Agreement, dated as of September 8, 2000, and entered into by and > > among Sunrise Medical, Inc., a Delaware corporation, the financial > > institutions listed therein, and Bankers Trust Company, as agent Ladies and Gentlemen: We have acted as counsel to Sunrise Medical, Inc., a Delaware corporation ("Borrower"), Sunrise Medical HHG, Inc., a California corporation ("HHG"), Dynavox Systems Inc., a Pennsylvania corporation ("Dynavox"), and Sunrise Medical CCG Inc., a Wisconsin corporation ("CCG", and together with, HHG and Dynavox, "Guarantors" and together with Borrower, collectively, the "Loan Parties" and individually, a "Loan Party") in connection with that certain Credit Agreement dated as of September 8, 2000 (the "Credit Agreement") and entered into by and among Borrower, the financial institutions listed on the signatures pages thereof (collectively, "Lenders", and individually, a "Lender"), and Bankers Trust Company ("Bankers"), as agent for the Lenders (in such capacity, "Agent"). This opinion is rendered to you pursuant to Section 4.1G of the Credit Agreement. Capitalized terms defined in the Credit Agreement, used herein and not otherwise defined herein shall have the meanings given them in the Credit Agreement. As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of rendering the opinions expressed below, except where a statement is qualified as to knowledge or awareness, in which case we have made no or limited inquiry as specified below. We have examined, among other things, the following: > > (a) the Credit Agreement; > > > > (b) that certain Revolving Note, dated September 8_, 2000, in the original > > principal amount of $___________________ made by Borrower payable to Bankers > > (the "Note"); > > > > (c) that certain Subsidiary Guaranty, entered into as of September 8_, 2000 > > (the "Subsidiary Guaranty"), by Guarantors in favor of Bankers, as agent for > > and representative of (in such capacity, "Collateral Agent") the Lenders and > > the Interest Rate Exchangers (as defined therein); > > > > (d) that certain Security Agreement, dated as of September 8_, 2000 (the > > "Security Agreement"), entered into by and among Borrower, the Subsidiaries > > of Borrower signatory thereto and Collateral Agent; > > > > (e) that certain Lockbox Agreement, dated as of September 8_, 2000 (the > > "Lockbox Agreement"), entered into by and among Borrower, Agent and > > ________________________; > > > > (f) [photocopies of the UCC-1 financing statements naming [insert names of > > Loan Parties filing California financing statements] as debtor and > > [Collateral Agent] as secured party, together with all schedules and > > exhibits to such financing statements, to be filed in the Office of the > > Secretary of State of the State of California (the "California Financing > > Statements");] > > > > (g) [photocopies of the UCC-1 financing statements naming [insert names of > > Loan Parties filing Delaware financing statements] as debtor and [Collateral > > Agent] as secured party, together with all schedules and exhibits to such > > financing statements, to be filed in the Office of the Secretary of State of > > the State of Delaware (the "Delaware Financing Statements");] > > > > (h) [photocopies of the UCC-1 financing statements naming [insert names of > > Loan Parties filing Pennsylvania financing statements] as debtor and > > [Collateral Agent] as secured party, together with all schedules and > > exhibits to such financing statements, to be filed in the Office of the > > Secretary of Commonwealth of the Commonwealth of Pennsylvania (the > > "Pennsylvania Financing Statements");] > > > > (i) [photocopies of the UCC-1 financing statements naming [insert names of > > Loan Parties filing Wisconsin financing statements] as debtor and > > [Collateral Agent] as secured party, together with all schedules and > > exhibits to such financing statements, to be filed in the Office of the > > Secretary of State of the State of Wisconsin (the "Wisconsin Financing > > Statements", and together with the California Financing Statements, the > > Delaware Financing Statements and the Pennsylvania Financing Statements, the > > "Financing Statements");] > > > > (j) the Certificate of Incorporation and Bylaws of Borrower (the "Borrower > > Governing Documents"); > > > > (k) the Articles of Incorporation and Bylaws of HHG (the "HHG Governing > > Documents", and together with the Borrower Governing Documents, the > > "Governing Documents"); > > > > (l) the indenture(s), note(s), loan agreement(s), mortgage(s), deed(s) of > > trust, security agreement(s), and other written agreement(s) and > > instrument(s) creating, evidencing or securing indebtedness of the Loan > > Parties for borrowed money, identified to us by an officer of Borrower as > > material to the Loan Parties and identified on Schedule B hereto > > (collectively, the "Material Agreements"); and > > > > (m) the court and administrative orders, writs, judgments and decrees > > specifically directed to the Loan Parties, identified to us by an officer of > > Borrower as material to the Loan Parties and identified on Schedule C hereto > > (the "Court Orders"). The documents described in subsections (a)-(e) above are referred to herein collectively as the "Loan Documents". As used in this opinion, the "California UCC" shall mean the Uniform Commercial Code as now in effect in the State of California. In our examination, we have assumed the genuineness of all signatures (other than those of officers of the Loan Parties on the Loan Documents), the legal capacity of all natural persons executing documents, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. In addition, we have assumed that the parties to the Loan Documents have not entered into any agreements of which we are unaware which modify the terms of the Loan Documents and have not otherwise expressly or by implication waived any requirement of, or agreed to any modification of, the Loan Documents. We have been furnished with and have relied upon certificates of officers of the Loan Parties with respect to certain factual matters. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. We are opining herein as to the effect on the subject transactions only of the federal laws of the United States, the internal laws of the State of California and the General Corporation Law of the State of Delaware (the "DGCL") except with respect to our opinions set forth in  paragraph 7 (i) as they relate to the Delaware Financing Statements and the Delaware UCC (as defined below), we are opining as to the effect of the subject transaction only of the Delaware UCC; (ii) as they relate to the Pennsylvania Financing Statements and the Pennsylvania UCC (as defined below), we are opining as to the effect of the subject transaction only of the Pennsylvania UCC; and (iii)  as they relate to the Wisconsin Financing Statements and the Wisconsin UCC (as defined below), we are opining as to the effect of the subject transaction only of the Wisconsin UCC. Except as described in the previous sentence, we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws or as to any matters of municipal law or the laws of any local agencies within any state or any federal or state laws which are applicable to the parties thereto or the subject transactions solely because of the nature or extent of their business. With your permission, we have based our opinions set forth in paragraph 7 with respect to (i) the Delaware Financing Statements solely upon our review of Sections 9-103, 9-104, 9-105, 9-106, 9110, 9203, 9302, 9303, 9304, 9306, 9401, 9402, 9403 and 9406 of the Uniform Commercial Code as in effect on the date hereof in the State of Delaware as set forth in the CCH Secured Transactions Guide, copies of which are attached hereto as Exhibit A, incorporated herein by reference and referred to herein as the "Delaware UCC"; (ii) the Pennsylvania Financing Statements solely upon our review of Sections 9-103, 9-104, 9-105, 9-106, 9110, 9203, 9302, 9303, 9304, 9306, 9401, 9402, 9403 and 9406 of the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Pennsylvania as set forth in the CCH Secured Transactions Guide, copies of which are attached hereto as Exhibit B, incorporated herein by reference and referred to herein as the "Pennsylvania UCC"; and (iii) the Wisconsin Financing Statements solely upon our review of Sections 9-103, 9-104, 9-105, 9-106, 9110, 9203, 9302, 9303, 9304, 9306, 9401, 9402, 9403 and 9406 of the Uniform Commercial Code as in effect on the date hereof in the State of Wisconsin as set forth in the CCH Secured Transactions Guide, copies of which are attached hereto as Exhibit C, incorporated herein by reference and referred to herein as the "Wisconsin UCC". We have assumed that (i) the provisions of the Delaware UCC are in effect on the date hereof in the State of Delaware and have not been modified in any respect by any other statute, regulation or decision with respect to the laws of the State of Delaware; (ii) the provisions of the Pennsylvania UCC are in effect on the date hereof in the Commonwealth of Pennsylvania and have not been modified in any respect by any other statute, regulation or decision with respect to the laws of the Commonwealth of Pennsylvania; and (iii) the provisions of the Wisconsin UCC are in effect on the date hereof in the State of Wisconsin and have not been modified in any respect by any other statute, regulation or decision with respect to the laws of the State of Wisconsin. We call to your attention that we are not licensed to practice law in any of the State of Delaware, the Commonwealth of Pennsylvania or the State of Wisconsin, nor do we profess any expertise with respect to the laws thereof (other than the DGCL). Our opinions set forth in paragraph 4 below are based upon our consideration of only those statutes, rules and regulations which, in our experience, are normally applicable to borrowers and guarantors in secured loan transactions. Whenever a statement herein is qualified by "to the best of our knowledge" or a similar phrase, such qualification is intended to indicate that those attorneys in this firm who have rendered legal services in connection with the Credit Agreement do not have current actual knowledge of the inaccuracy of such statement. However, except as otherwise expressly indicated, we have not undertaken any independent investigation to determine the accuracy of any such statement, and no inference that we have any knowledge of any matters pertaining to such statement should be drawn from our representation of the Loan Parties. Subject to the foregoing and the other matters set forth herein, and in reliance thereon, it is our opinion that, as of the date hereof: 1. Borrower has been duly incorporated and is validly existing and in good standing under the laws of the State of Delaware, with corporate power and authority to conduct its business as now conducted and to enter into the Loan Documents to which it is a party and perform its obligations thereunder. HHG has been duly incorporated and is validly existing and in good standing under the laws of the State of California, with corporate power and authority to conduct its business as now conducted and to enter into the Loan Documents to which it is a party and perform its obligations thereunder. 2. The execution, delivery and performance by Borrower of the Loan Documents to which Borrower is a party and the execution and delivery of the Financing Statements executed by Borrower have been duly authorized by all necessary corporate action of Borrower and the Loan Documents to which Borrower is a party have been duly executed and delivered by Borrower. The execution, delivery and performance by HHG of the Loan Documents to which HHG is a party and the execution and delivery of the Financing Statements executed by HHG have been duly authorized by all necessary corporate action of HHG and the Loan Documents to which HHG is a party have been duly executed and delivered by HHG. 3. Each of the Loan Documents constitutes a legally valid and binding obligation of each Loan Party that is a party to such Loan Document, enforceable against each such Loan Party in accordance with its terms. 4. The execution and delivery of the Loan Documents and the Financing Statements by the Loan Parties, the issuance and payment of the Note pursuant to the Credit Agreement, and the performance of the obligations of the Loan Parties under the Loan Documents on the date hereof do not: (a) to the best of our knowledge violate any federal or California statute, rule or regulation applicable to any Loan Parties (including, without limitation, Regulations T, U or X of the Board of Governors of the Federal Reserve System) or the DGCL; (b) violate the provisions of the Governing Documents; (c) result in the breach of or a default under any of the Material Agreements or Court Orders, or result in the creation of a Lien (other than pursuant to the Loan Documents) upon or with respect to any of the properties of the Loan Parties under any Material Agreement; or (d) require any consents, approvals, authorizations, registrations, declarations or filings by the Loan Parties under any federal or California statute, rule or regulation applicable to any Loan Party or the DGCL except the filing of the Financing Statements. No opinion is expressed in clauses (a) and (d) of this paragraph 4 as to the application of Section 548 of the federal Bankruptcy Code and comparable provisions of state law or of any antifraud, trade regulation or securities laws. 5. To the best of our knowledge, there is no action, suit, proceeding or investigation pending or threatened against or affecting any of the Loan Parties or any of their properties or assets that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge any of the Loan Documents. 6. The provisions of the Security Agreement are effective to create valid security interests in favor of Collateral Agent in that portion of the collateral described in Section 1 of the Security Agreement which is subject to Division 9 of the California UCC (the "Collateral") as security for the payment, to the extent set forth therein, of all obligations of the Loan Parties to the Lenders under the Loan Documents. 7. The California Financing Statements are in appropriate form for filing in the Office of the Secretary of State of the State of California. Upon the proper filing of the California Financing Statements in the Office of the Secretary of State of the State of California, the security interest in favor of Collateral Agent in the Collateral described in the California Financing Statements will be perfected to the extent a security interest in such Collateral can be perfected by filing a financing statement in the State of California. The Delaware Financing Statements are in appropriate form for filing in the Office of the Secretary of State of the State of Delaware. Upon the proper filing of the Delaware Financing Statements in the Office of the Secretary of State of the State of Delaware, the security interest in favor of Collateral Agent in the Collateral described in the Delaware Financing Statements will be perfected to the extent a security interest in such Collateral can be perfected by filing a financing statement in the State of Delaware. The Pennsylvania Financing Statements are in appropriate form for filing in the Office of the Secretary of the Commonwealth of Pennsylvania. Upon the proper filing of the Pennsylvania Financing Statements in the Office of the Secretary of the Commonwealth of Pennsylvania, the security interest in favor of Collateral Agent in the Collateral described in the Pennsylvania Financing Statements will be perfected to the extent a security interest in such Collateral can be perfected by filing a financing statement in the Commonwealth of Pennsylvania. The Wisconsin Financing Statements are in appropriate form for filing in the Department of Financial Institutions of the State of Wisconsin. Upon the proper filing of the Wisconsin Financing Statements in the Department of Financial Institutions of the State of Wisconsin, the security interest in favor of Collateral Agent in the Collateral described in the Wisconsin Financing Statements will be perfected to the extent a security interest in such Collateral can be perfected by filing a financing statement in the State of Wisconsin. 8. It is not necessary in connection with the execution and delivery of the Notes under the circumstances contemplated by the Credit Agreement to register the Notes under the Securities Act of 1933, as amended. 9. None of the Loan Parties is an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. The opinions expressed in paragraphs 3 and 4 do not include any opinions with respect to the creation, validity, perfection or priority of any security interest or lien. The opinions expressed in paragraph 3 and the opinions expressed in paragraphs 6 and 7 as to the creation, validity and perfection of the security interests and liens referred to therein are further subject to the following limitations, qualifications and exceptions: > > (a) such opinions are subject to the effect of bankruptcy, insolvency, > > reorganization, moratorium or other similar laws relating to or affecting > > the rights of creditors, including, without limitation, the effect of > > Section 548 of the federal Bankruptcy Code and comparable provisions of > > state law; > > > > (b) the effect of general principles of equity, including without limitation > > concepts of materiality, reasonableness, good faith and fair dealing and the > > possible unavailability of specific performance or injunctive relief > > regardless of whether considered in a proceeding in equity or at law; > > > > (c) certain rights, remedies and waivers contained in the Loan Documents may > > be limited or rendered ineffective by applicable California laws or judicial > > decisions governing such provisions, but such laws or judicial decisions do > > not render the Loan Documents invalid or unenforceable as a whole and there > > exists in the Loan Documents, or pursuant to applicable law legally adequate > > remedies for a practical realization of the principal benefits intended to > > be provided by the Loan Documents; > > > > (d) we express no opinion as to the validity or enforceability of any > > provision of the Loan Documents that permit Agent or any Lender to increase > > the rate of interest or collect a late charge or prepayment premium in the > > event of a delinquency or default; > > > > (e) the unenforceability under certain circumstances, under California or > > federal law or court decisions, of provisions expressly or by implication > > waiving broadly or vaguely stated rights, unknown future rights, defenses to > > obligations or rights granted by law, where such waivers are against public > > policy or prohibited by law; > > > > (f) the unenforceability under certain circumstances of provisions to the > > effect that rights or remedies are not exclusive, that every right or remedy > > is cumulative and may be exercised in addition to or with any other right or > > remedy, that election of a particular remedy or remedies does not preclude > > recourse to one or more other remedies, that any right or remedy may be > > exercised without notice, or that failure to exercise or delay in exercising > > rights or remedies will not operate as a waiver of any such right or remedy; > > > > (g) the unenforceability under certain circumstances of provisions > > indemnifying a party against liability for its own wrongful or negligent > > acts or where such indemnification is contrary to public policy or > > prohibited by law; > > > > (h) the effect of Section 1717 of the California Civil Code, which provides > > that, where a contract permits one party to the contract to recover > > attorneys' fees, the prevailing party in any action to enforce any provision > > of the contract shall be entitled to recover its reasonable attorneys' fees; > > > > (i) the effect of California law, which provides that a court may refuse to > > enforce, or may limit the application of, a contract or any clause thereof > > which the court finds as a matter of law to have been unconscionable at the > > time it was made or contrary to public policy; > > > > (j) we express no opinion with respect to the enforceability of any forum > > selection clause by a federal court; > > > > (k) the effect of Section 631(d) of the California Code of Civil Procedure, > > which provides that a court may, in its discretion upon just terms, allow a > > trial by jury although there may have been a waiver of trial by jury; > > > > (l) the unenforceability under certain circumstances of contractual > > provisions respecting self-help or summary remedies without notice or > > opportunity for hearing or correction; > > > > (m) the effect of the provisions of the UCC which require a secured party, > > in any disposition of personal property collateral, to act in good faith and > > in a commercially reasonable manner; > > > > (n) we have assumed that the security interests in any portion of the > > Collateral constituting "inventory of a retail merchant" (within the meaning > > of Section 9102 of the California UCC) secure a debt as to which the secured > > party has made no restriction as to use of funds, other than those which are > > commercially reasonable and made in good faith, as contemplated by Section > > 9102(5)(b) of the California UCC; > > > > (o) we express no opinion with respect to the perfection of any security > > interest in any portion of the Collateral which may be "fixtures" (as such > > term is used in the California UCC, the Delaware UCC, the Pennsylvania UCC > > or the Wisconsin UCC); > > > > (p) the effect of California law and court decisions which provide that > > certain suretyship rights and defenses are available to a party that > > encumbers its property to secure the obligations of another; and > > > > (q) we also advise you of California statutory provisions and case law to > > the effect that, in certain circumstances, a surety may be exonerated if the > > creditor materially alters the original obligation of the principal without > > the consent of the guarantor, elects remedies for default that impair the > > subrogation rights of the guarantor against the principal, or otherwise > > takes any action without notifying the guarantor that materially prejudices > > the guarantor. However, there is also authority to the effect that a > > guarantor may validly waive such rights if the waivers are expressly set > > forth in the guaranty. While we believe that a California court should hold > > that the explicit language contained in the Subsidiary Guaranty waiving such > > rights is enforceable, we express no opinion with respect to the effect of: > > (i) any modification to or amendment of the obligations of Borrower that > > materially increases such obligations; (ii) any election of remedies by > > Agent, Collateral Agent or any Lenders following the occurrence of an event > > of default under the Loan Documents; or (iii) any other action by Agent, > > Collateral Agent or any Lenders that materially prejudices the guarantor. In rendering the opinions expressed in paragraph 4 insofar as they require interpretation of the Material Agreements (i) we have assumed with your permission that all courts of competent jurisdiction would enforce such agreements as written but would apply the internal laws of the State of California without giving effect to any choice of law provisions contained therein or any choice of law principles which would result in application of the internal laws of any other state, (ii) to the extent that any questions of legality or legal construction have arisen in connection with our review, we have applied the laws of the State of California in resolving such questions and (iii) we express no opinion with respect to the effect of any action or inaction required to be taken or not taken after the date hereof by the Loan Parties under the Loan Documents or the Material Agreements which may result in a breach or default under any Material Agreement. We advise you that certain of the Material Agreements may be governed by other laws, that such laws may vary substantially from the law assumed to govern for purposes of this opinion, and that this opinion may not be relied upon as to whether or not a breach or default would occur under the law actually governing such Material Agreements. For purposes of our opinions expressed in paragraph 8, we have assumed with your permission, without independent investigation, that each Lender is a commercial lender or a financial institution which makes loans in the ordinary course of its business and that it is receiving the Notes to be received by it and will make each Loan under the Credit Agreement to be made by it for its own account in the ordinary course of its commercial banking or lending business and not with a view to or for sale in connection with any distribution of such Notes. Our opinions in paragraphs 6 and 7 are also subject to the following assumptions, exceptions, limitations and qualifications: > > (i) we express no opinion as to the creation, validity or perfection of any > > security interest that is not governed by, or that is excluded from coverage > > by, Division 9 of the California UCC, Article 9 of the Delaware UCC, Article > > 9 of the Pennsylvania UCC or Article 9 of the Wisconsin UCC and we express > > no opinion as to the priority of any security interest or lien; > > > > (ii) we have assumed that the Loan Parties have "rights" in the Collateral, > > as contemplated by Section 9203 of the California UCC, Section 9-203 of the > > Delaware UCC, Section 9-203 of the Pennsylvania UCC and Section 9-203 of the > > Wisconsin UCC; > > > > (iii) we call to your attention the fact that the perfection of a security > > interest in "proceeds" (as defined in the California UCC, Delaware UCC, the > > Pennsylvania UCC and the Wisconsin UCC) of collateral is governed and > > restricted by Section 9306 of the California UCC, Section 9-306 of the > > Delaware UCC, Section 9-306 of the Pennsylvania UCC and Section 9-306 of the > > Wisconsin UCC; > > > > (iv) we call to your attention the fact that under the California UCC, the > > Delaware UCC, the Pennsylvania UCC and the Wisconsin UCC, with certain > > limited exceptions, the effectiveness of the Financing Statements will lapse > > five years after the date of filing thereof and your security interest will > > become unperfected, unless a continuation statement is filed within six > > months prior to the end of such five-year period. We also call to your > > attention the fact that perfection of security interests under the > > California UCC, the Delaware UCC, the Pennsylvania UCC and the Wisconsin UCC > > in any of the Collateral will be terminated as to any Collateral acquired by > > any Loan Party more than four (4) months after such Loan Party changes its > > name, identity or corporate structure to such an extent as to make the > > Financing Statements seriously misleading, unless a new appropriate > > financing statement or an appropriate amendment to such Financing > > Statements, indicating the new name, identity or corporate structure of such > > Loan Party is properly filed before the expiration of four (4) months after > > such change; > > > > (v) we have assumed that none of the Collateral consists of consumer goods, > > crops growing or to be grown, timber to be cut, minerals or the like > > (including oil and gas) or accounts resulting from the sale of minerals or > > the like at the wellhead or the minehead; > > > > (vi) we note that the law is not clear with respect to the specificity of > > description necessary to create a valid security interest in personal > > property. To ensure that a sufficient description has been provided, the > > personal property intended to be subject to the security interest should be > > identified by serial, account or other identification numbers or by some > > other method of specific identification. However, the more general > > description of the personal property used in the Security Agreement and in > > the Financing Statements to be filed in connection therewith is consistent > > with that commonly used by major lenders in California and, although the > > matter is not free from doubt, in our opinion should be held by courts in > > California to be sufficient to create a security interest in the personal > > property described therein; however, we express no opinion as to whether the > > phrase "all personal property" or similarly general phrases would be held to > > describe any particular item or items of collateral; and > > > > (vii) we have assumed for purposes of this opinion that each of the Lenders > > is a national bank, a bank organized under the laws of a State of the United > > States, or a entity which is otherwise exempt from the restrictions of the > > usury laws of the State of California. To the extent that the obligations of the Loan Parties may be dependent upon such matters, we assume for purposes of this opinion that: (i) all parties to the Loan Documents other than Borrower and HHG are duly organized, validly existing and in good standing under the laws of their respective jurisdictions of organization; (ii) all parties to the Loan Documents other than Borrower and HHG have the requisite organizational power and authority to execute and deliver the Loan Documents and to perform their respective obligations under the Loan Documents to which they are a party; (iii) the Loan Documents to which such parties other than Borrower and HHG are a party have been duly authorized, executed and delivered by such parties; (iv) the Loan Documents to which parties other than the Loan Parties are a party constitute the legally valid and binding obligations of such parties, enforceable against them in accordance with their terms; and (iv) all parties to the Loan Documents other than the Loan Parties have complied with any applicable requirement to file returns and pay taxes under the Franchise Tax Law of the State of California. This opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose, or furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. At your request, we hereby consent to reliance hereon by any future participants or assigns of your interest in the Credit Agreement which are financial institutions as expressly permitted by Section 10.1 of the Credit Agreement; provided that this opinion speaks only as of the date hereof and to its addressee and that we have no responsibility or obligation to update this opinion, to consider its applicability or correctness to other than its addressee, or to take into account changes in law, facts or any other development of which we may later become aware. > > > > > > > > Very truly yours, > > > > > > > > > > > > > > > >   > > > > > > > > > > > > > > > >     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   SCHEDULE A List of Lenders Bankers Trust Company Name   Notice Address for each Subsidiary Grantor Sunrise Medical HHG Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 Sunrise Medical CCG Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 DynaVox Systems Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 Sunrise Marin Holdings Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 SunMed Finance Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE B List of Material Agreements   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE C List of Material Court Orders   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT A Delaware UCC Provisions   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT B Pennsylvania UCC Provisions   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT C Wisconsin UCC Provisions   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT X FORM OF OPINION OF O'MELVENY & MYERS LLP September 8, 2000   Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 > and The Lenders Party to the Credit Agreement Referenced Below > Re: Loans to Sunrise Medical, Inc. Ladies and Gentlemen: We have acted as counsel to Bankers Trust Company, as Agent (in such capacity, "Agent"), in connection with the preparation and delivery of a Credit Agreement dated as of September 8_____, 2000 (the "Credit Agreement") among Sunrise Medical, Inc., a Delaware corporation ("Company"), the financial institutions listed therein as lenders, and Agent and in connection with the preparation and delivery of certain related documents. We have participated in various conferences with representatives of Company and Agent and conferences and telephone calls with Latham & Watkins, counsel to Company ("Latham & Watkins"), and with your representatives, during which the Credit Agreement and related matters have been discussed, and we have also participated in the meeting held on the date hereof (the "Closing") incident to the funding of the initial loans made under the Credit Agreement. We have reviewed the forms of the Credit Agreement and the exhibits thereto, including the forms of the promissory notes annexed thereto (the "Notes"), and the opinion of Latham & Watkins (the "Opinion") and the officers' certificates and other documents delivered at the Closing. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals or copies and the due authority of all persons executing the same, and we have relied as to factual matters on the documents that we have reviewed. Although we have not independently considered all of the matters covered by the Opinion to the extent necessary to enable us to express the conclusions therein stated, we believe that the Credit Agreement and the exhibits thereto are in substantially acceptable legal form and that the Opinion and the officers' certificates and other documents delivered in connection with the execution and delivery of, and as conditions to the making of the initial loans under, the Credit Agreement and the Notes are substantially responsive to the requirements of the Credit Agreement. > > > > > > > Respectfully submitted, > > > > > > > > > > > > > >   > > > > > > > > > > > > > >   > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > > -------------------------------------------------------------------------------- > > > > > > > > > > > > > >   > > > > > > > > > > > > > >   EXHIBIT XI FORM OF ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and between the parties designated as Assignor ("Assignor") and Assignee ("Assignee") above the signatures of such parties on the Schedule of Terms attached hereto and hereby made an integral part hereof (the "Schedule of Terms") and relates to that certain Credit Agreement described in the Schedule of Terms (said Credit Agreement, as amended, supplemented or otherwise modified to the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined). IN CONSIDERATION of the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows: SECTION Assignment and Assumption. Effective upon the Settlement Date specified in Item 4 of the Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to Assignee, without recourse, representation or warranty (except as expressly set forth herein), and Assignee hereby purchases and assumes from Assignor, that percentage interest in all of Assignor's rights and obligations as a Lender arising under the Credit Agreement and the other Loan Documents with respect to Assignor's Commitments and outstanding Loans, if any, which represents, as of the Settlement Date, the percentage interest specified in Item 3 of the Schedule of Terms of all rights and obligations of Lenders arising under the Credit Agreement and the other Loan Documents with respect to the Commitments and any outstanding Loans (the "Assigned Share"). Without limiting the generality of the foregoing, the parties hereto hereby expressly acknowledge and agree that any assignment of all or any portion of Assignor's rights and obligations relating to Assignor's Revolving Loan Commitment shall include (i) in the event Assignor is an Issuing Lender with respect to any outstanding Letters of Credit (any such Letters of Credit being "Assignor Letters of Credit"), the sale to Assignee of a participation in the Assignor Letters of Credit and any drawings thereunder as contemplated by subsection 3.1C of the Credit Agreement and (ii) the sale to Assignee of a ratable portion of any participations previously purchased by Assignor pursuant to said subsection 3.1C with respect to any Letters of Credit other than the Assignor Letters of Credit. In consideration of the assignment described above, Assignee hereby agrees to pay to Assignor, on the Settlement Date, the principal amount of any outstanding Loans included within the Assigned Share, such payment to be made by wire transfer of immediately available funds in accordance with the applicable payment instructions set forth in Item 5 of the Schedule of Terms. Assignor hereby represents and warrants that Item 3 of the Schedule of Terms correctly sets forth the amount of the Commitments and the Pro Rata Share corresponding to the Assigned Share. Assignee hereby agrees that, as of the date hereof, the Company will not be obligated to make any additional payments to Assignee pursuant to the terms of subsection 2.7B(ii) of the Credit Agreement with respect to payments made to Assignee under the Credit Agreement and the other Loan Documents. Assignor and Assignee hereby agree that, upon giving effect to the assignment and assumption described above, (i) Assignee shall be a party to the Credit Agreement and shall have all of the rights and obligations under the Loan Documents, and shall be deemed to have made all of the covenants and agreements contained in the Loan Documents, arising out of or otherwise related to the Assigned Share, and (ii) Assignor shall be absolutely released from any of such obligations, covenants and agreements assumed or made by Assignee in respect of the Assigned Share. Assignee hereby acknowledges and agrees that the agreement set forth in this Section 1(e) is expressly made for the benefit of Company, Agent, Assignor and the other Lenders and their respective successors and permitted assigns. Assignor and Assignee hereby acknowledge and confirm their understanding and intent that (i) this Agreement shall effect the assignment by Assignor and the assumption by Assignee of Assignor's rights and obligations with respect to the Assigned Share, (ii) any other assignments by Assignor of a portion of its rights and obligations with respect to the Commitments and any outstanding Loans shall have no effect on the Commitments, the Pro Rata Share corresponding to the Assigned Share as set forth in Item 3 of the Schedule of Terms or on the interest of Assignee in any outstanding Revolving Loans corresponding thereto, and (iii) from and after the Settlement Date, Agent shall make all payments under the Credit Agreement in respect of the Assigned Share (including all payments of principal and accrued but unpaid interest, commitment fees and letter of credit fees with respect thereto) (A) in the case of any such interest and fees that shall have accrued prior to the Settlement Date, to Assignor, and (B) in all other cases, to Assignee; provided that Assignor and Assignee shall make payments directly to each other to the extent necessary to effect any appropriate adjustments in any amounts distributed to Assignor and/or Assignee by Agent under the Loan Documents in respect of the Assigned Share in the event that, for any reason whatsoever, the payment of consideration contemplated by Section 1(b) occurs on a date other than the Settlement Date. SECTION Certain Representations, Warranties and Agreements. Assignor represents and warrants that it is the legal and beneficial owner of the Assigned Share, free and clear of any adverse claim. Assignor shall not be responsible to Assignee for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of any of the Loan Documents or for any representations, warranties, recitals or statements made therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Assignor to Assignee or by or on behalf of Company or any of its Subsidiaries to Assignor or Assignee in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall Assignor be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Assignee represents and warrants that it is an Eligible Assignee; that it has experience and expertise in the making of loans such as the Loans; that it has acquired the Assigned Share for its own account in the ordinary course of its business and without a view to distribution of the Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of subsection 10.1 of the Credit Agreement, the disposition of the Assigned Share or any interests therein shall at all times remain within its exclusive control); and that it has received, reviewed and approved a copy of the Credit Agreement (including all Exhibits and Schedules thereto). Assignee represents and warrants that it has received from Assignor such financial information regarding Company and its Subsidiaries as is available to Assignor and as Assignee has requested, that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the assignment evidenced by this Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Assignee or to provide Assignee with any other credit or other information with respect thereto, whether coming into its possession before the making of the initial Loans or at any time or times thereafter, and Assignor shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Assignee. Each party to this Agreement represents and warrants to the other party hereto that it has full power and authority to enter into this Agreement and to perform its obligations hereunder in accordance with the provisions hereof, that this Agreement has been duly authorized, executed and delivered by such party and that this Agreement constitutes a legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity. SECTION Miscellaneous. Each of Assignor and Assignee hereby agrees from time to time, upon request of the other such party hereto, to take such additional actions and to execute and deliver such additional documents and instruments as such other party may reasonably request to effect the transactions contemplated by, and to carry out the intent of, this Agreement. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except by an instrument in writing signed by the party (including, if applicable, any party required to evidence its consent to or acceptance of this Agreement) against whom enforcement of such change, waiver, discharge or termination is sought. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed. For the purposes hereof, the notice address of each of Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to either such party, such other address as shall be designated by such party in a written notice delivered to the other such party. In addition, the notice address of Assignee set forth on the Schedule of Terms shall serve as the initial notice address of Assignee for purposes of subsection 10.8 of the Credit Agreement. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the date (the "Effective Date") upon which all of the following conditions are satisfied: (i) the execution of a counterpart hereof by each of Assignor and Assignee, (ii) the receipt by Agent of the processing and recordation fee referred to in subsection 10.1B(i) of the Credit Agreement, (iii) in the event Assignee is a Non-US Lender (as defined in subsection 2.7B(iii)(a) of the Credit Agreement), the delivery by Assignee to Agent of such forms, certificates or other evidence with respect to United States federal income tax withholding matters as Assignee may be required to deliver to Agent pursuant to said subsection 2.7B(iii)(a), (iv) the execution of a counterpart hereof by Agent as evidence of its acceptance hereof in accordance with subsection 10.1B(ii) of the Credit Agreement, (v) to the extent required by subsection 10.1B(ii) of the Credit Agreement, the execution of a counterpart hereof by Company as evidence of acceptance hereof in accordance with such subsection, (vi) the receipt by Agent of originals or telefacsimiles of the counterparts described above and authorization of delivery thereof, and (vii) the recordation by Agent in the Register of the pertinent information regarding the assignment effected hereby in accordance with subsection 10.1B(ii) of the Credit Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized, such execution being made as of the Effective Date.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE OF TERMS 1. Company: Sunrise Medical, Inc. 2. Name and Date of Credit Agreement: Credit Agreement dated as of September 8, 2000 by and among Sunrise Medical, Inc., the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent. 3. Amounts: Re: Revolving    Loans   > (a) Aggregate Commitments of all Lenders:  $58,000,000 > (b) Assigned Share/Pro Rata Share: _____% > (c) Amount of Assigned Share of Commitments:  $________ 4. Settlement Date: ____________, ____ 5. Payment Instructions: > ASSIGNOR:  ASSIGNEE:             Attention: __________________  Reference: _________________ Attention: __________________ Reference: _________________ 6. Notice Addresses: > ASSIGNOR:  ASSIGNEE:             7. Signatures:  [NAME OF ASSIGNOR],  as Assignor as Assignee By:                                               Title:   [NAME OF ASSIGNEE], as Assignor as Assignee By:                                            Title:  Accepted in accordance with subsection 10.1B(ii) of the Credit Agreement BANKERS TRUST COMPANY, as Agent By: _______________________       Title: [If Required] SUNRISE MEDICAL, INC. By: _______________________       Title:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT XII FORM OF BLOCKED ACCOUNT AGREEMENT This BLOCKED ACCOUNT AGREEMENT ("Agreement") is entered into as of _______________, _____ and entered into by and between [Guarantor Subsidiary/Company] ("Pledgor"), and BANKERS TRUST COMPANY, as agent for and representative of (in such capacity herein called "Agent") the financial institutions ("Lenders") party to the Credit Agreement (as hereinafter defined), and _______________, as the account bank ("Bank"). PRELIMINARY STATEMENTS A. Agent and certain financial institutions acting as Lenders ("Lenders") have entered into that certain Credit Agreement, dated as of September 8__, 2000 (said Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement") with [Pledgor/Sunrise Medical, Inc.], wherein Pledgor has granted the Lenders a security interest in its present and future accounts receivable, and all proceeds thereof and Pledgor has agreed that all collections and proceeds of such accounts receivable shall be remitted in kind to the Agent; B. Pledgor has granted to Agent a security interest in the Account (as defined below) and in the funds deposited in the Account; C. Pledgor has agreed to maintain deposit account number _______________ in its name (the "Account") in which Pledgor shall deposit cash, checks, drafts or other orders for payment of money; and D. Pledgor, Agent and Bank are entering into this Agreement to provide for the disposition of net proceeds of cash, checks, drafts and other orders for the payment of money deposited by Pledgor into the Account. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, Pledgor, Agent and Bank agree as follows: 1. Pledgor hereby authorizes Bank and Bank hereby agrees: (a) to charge the Account for all returned checks associated with this Agreement and to charge the Account for service charges and other fees, charges and expenses associated with this Agreement; (b) to follow its usual procedures in the event the Account or any check, draft or other order for payment of money should be or become the subject of any writ, levy, order or other similar judicial or regulatory order or process; (c) to supply any necessary endorsements and to deposit any and all monies and instruments received by Bank in the Account when received, whether in the form of checks, wire transfers or otherwise; and (d) to transfer pursuant to Agent's instructions any collected and available balances in the Account each Business Day by wire transfer to the following account: Bank Name: Location: [ABA Routing No.: ] Credit Account No.: Agent will give Bank sufficient advance written notice of any change in the instructions, subject to Pledgor's prior consent (which consent shall not be unreasonably withheld and shall not be required if a Cash Management Triggering Event or an Event of Default has occurred and is continuing), for Bank to act upon such changes. Funds are not available if, in the reasonable determination of Bank, they are subject to a hold, dispute or legal process preventing their withdrawal. "Business Day" means each Monday through Friday, excluding Bank holidays. 2. (a) If the balances in the Account are not sufficient to pay Bank for any returned check, draft or other order for the payment of money, Bank can make a demand for such deficiency upon Agent in writing, no later than 30 days after the date of the returned item and Agent, on behalf of itself and Lenders, agrees to promptly reimburse Bank for the amount of the deficiency. If Agent makes any payments pursuant to this Section 2(a), Pledgor will promptly reimburse Agent for such payment. (b) Pledgor agrees to pay Bank on demand (i) the amount for any fees or charges due Bank under this Agreement, and (ii) all expenses for the maintenance of the Account, and Bank agrees that except as provided in Section 1(a) such fees, charges or expenses under this Section 2(b) are the responsibility of Pledgor and will not deduct such amounts from funds in the Account or seek payment from Agent. (c) Bank agrees it shall not offset against the Account, except as permitted under this Agreement, until it has been advised in writing by Pledgor and Agent that all of Pledgor's obligations, which are secured by the Account and all funds deposited in the Account, are paid in full. Agent shall notify Bank promptly in writing upon payment in full of Pledgor's obligations and this Agreement shall automatically terminate upon receipt of such notice. Bank further agrees that the Account and the funds deposited in such Account shall not be subject to any banker's lien, deductions or any other right in favor of any person (including Bank) other than Agent, except as expressly provided for herein with respect to Bank. 3. Termination of this Agreement shall be as follows: (a) Bank may terminate this Agreement upon 60 days' prior written notice to Pledgor and Agent. If an Event of Default has occurred and is continuing, Agent may terminate this Agreement at any time which termination shall be effective upon receipt of written notice by the Bank and by Pledgor. Pledgor may not terminate this Agreement except with the written consent of Agent and upon 60 days' prior written notice to Bank and Agent. (b) Notwithstanding subsection 3(a), Bank may terminate this Agreement at any time by written notice to Pledgor and Agent if (i) either Pledgor or Agent breaches any of the terms of this Agreement or any other agreement with Bank; (ii) either Pledgor or Agent terminates its business, fails generally or admits in writing its inability to pay its debts as they become due; any bankruptcy, reorganization, arrangement, insolvency, dissolution or similar proceeding is instituted with respect to either Pledgor or Agent; either Pledgor or Agent makes any assignment for the benefit of creditors or enters into any composition with creditors or takes any action in furtherance of any of the foregoing; or (iii) any material adverse change occurs in either Pledgor's or Agent's financial condition, results of operations or ability to perform its obligations under this Agreement. Pledgor and Agent shall each promptly give written notice to Bank of the occurrence of any of the foregoing events as it applies to it. 4. (a) Bank will not be liable to Pledgor or Agent for any expense, claim, loss, damage or cost ("Damages") arising out of or relating to its performance under this Agreement other than those Damages which result directly from its acts or omissions constituting negligence or intentional misconduct, subject to the limits in the next succeeding sentence. Bank's liability is limited to direct money Damages actually incurred in an amount not exceeding the compensation for the service in which such acts or omissions occurred. (b) In no event will Bank be liable for any special, indirect, exemplary or consequential damages, including but not limited to lost profits. (c) Bank will be excused from failing to act or delay in acting, and no such failure or delay shall constitute a breach of this Agreement or otherwise give rise to any liability of Bank, if (i) such failure or delay is caused by circumstances beyond Bank's reasonable control, including but not limited to legal constraint, emergency conditions, action or inaction of governmental, civil or military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood, earthquake or other natural disaster, breakdown of public or private or common carrier communications or transmission facilities, equipment failure, or act, negligence or default of Pledgor or Agent or (ii) such failure or delay resulted from Bank's reasonable belief that the action would have violated any guideline, rule or regulation of any governmental authority. 5. Pledgor hereby agrees to indemnify Bank against, and hold it harmless from, any and all liabilities, claims, reasonable costs, reasonable expenses and damages of any nature (including but not limited to reasonable allocated costs of staff counsel, other reasonable attorneys' fees and any reasonable fees and expenses incurred in enforcing this Agreement) in any way arising out of or relating to disputes or legal actions concerning this Agreement or the Account. This section does not apply to any cost or damage attributable to the gross negligence or intentional misconduct of Bank. Pledgor's obligations under this section shall survive termination of this Agreement. 6. Pledgor and Agent each represent and warrant to Bank that (i) this Agreement constitutes its duly authorized, legal, valid, binding and enforceable obligation; (ii) the performance of its obligations under this Agreement and the consummation of the transactions contemplated hereunder will not (A) constitute or result in a breach of its certificate or articles of incorporation, by-laws or partnership agreement, as applicable, or the provisions of any material contract to which it is a party or by which it is bound or (B) result in the violation of any law, regulation, judgment, decree or governmental order applicable to it; and (iii) all approvals and authorizations required to permit the execution, delivery, performance and consummation of this Agreement and the transactions contemplated hereunder have been obtained. 7. Pledgor represents and warrants that it has not assigned or granted a security interest in the Account or any funds now or hereafter deposited in the Account, except to Agent. 8. Pledgor agrees that: (a) Subject to the terms of this Agreement, Agent shall have exclusive interest in and control of the Account, and, if a Cash Management Triggering Event or an Event of Default has occurred and is continuing, all items and funds received by and held in the Account shall be the sole and exclusive property of Agent for the benefit of itself and the Lenders; (b) Except for transfer in accordance with Section 1(1) it cannot, and will not, withdraw any monies from the Account until such time as Agent advises Bank in writing that Agent no longer claims any interest in the Account and the monies deposited and to be deposited in the Account; and (c) Except to the extent permitted under the Credit Agreement, it will not permit the Account to become subject to any other pledge, assignment, lien, charge or encumbrance of any kind, nature or description, other than Agent's security interest referred to herein. 9. Agent acknowledges and agrees that Bank has the right to charge the Account from time to time, as set forth in this Agreement and the Account agreement, as said agreements are amended from time to time, and that Agent has no right to the sums so withdrawn by Bank. 10. In addition to the original statement which will be provided to Pledgor, Bank will provide Agent with a duplicate statement and such other account information reasonably requested by Agent. Pledgor authorizes Bank to provide any account information reasonably requested by Agent. 11. Pledgor agrees to pay to Bank, upon receipt of Bank's invoice, all reasonable costs, reasonable expenses and reasonable attorneys' fees (including reasonable allocated costs for in-house legal services) incurred by Bank in connection with the preparation of this Agreement, the administration (including any amendments), and enforcement of this Agreement and any instrument or agreement required hereunder, including but not limited to any such reasonable costs, expenses and fees arising out of the resolution of any conflict, dispute, motion regarding entitlement to rights or rights of action, or other action to enforce Bank's rights hereunder in a case arising under Title 11, United States Code. 12. Notwithstanding any of the other provisions in this Agreement, in the event of the commencement of a case pursuant to Title 11, United States Code filed by or against Pledgor, or in the event of the commencement of any similar case under then applicable federal or state law providing for the relief of debtors or the protection of creditors by or against Pledgor, Bank may act as Bank deems necessary to comply with all applicable provisions of governing statutes and neither Pledgor nor Agent shall assert any claim against Bank for so doing. 13. This Agreement may be amended only by a writing signed by Pledgor, Agent and Bank; except that Bank's charges are subject to change by Bank upon 30 days' prior written notice to Pledgor and Agent. 14. This Agreement may be executed in counterparts; all such counterparts shall constitute but one and the same agreement. 15. Any written notice or other written communication to be given to each party under this Agreement shall be addressed to the person at the address set forth on the signature page of this Agreement or to such other person or address as a party may specify in writing. Except as otherwise expressly provided herein, any such notice shall be effective upon receipt. 16. This Agreement supersedes all prior understandings, writings, proposals, representations and communications, oral or written, of any party relating to the subject matter hereof. 17. Neither Pledgor nor Agent may assign any of its rights under this Agreement without the prior written consent of Bank. 18. This Agreement shall be interpreted in accordance with the laws of _______________, without giving effect to the conflicts of law principles thereof.   IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the day and year first above written. SUNRISE MEDICAL, INC. By:_________________________________ Name: Title: Address for notices: _________________________________ _________________________________ _________________________________ Attention:__________________________ BANKERS TRUST COMPANY , as Agent By:_________________________________ Name: Title: Address for notices: _________________________________ _________________________________ _________________________________ Attention:__________________________ [BANK] By:_________________________________ Name: Title: By:_________________________________ Name: Title: Address for notices: _________________________________ _________________________________ _________________________________ Attention:__________________________   EXHIBIT XIII FORM OF COLLATERAL ACCESS AGREEMENT RECORDING REQUESTED BY: O'Melveny & Myers LLP AND WHEN RECORDED MAIL TO: O'Melveny & Myers LLP 400 South Hope St., 15th Floor Los Angeles, CA 90071 Attn: Brian T. May, Esq. Re: Sunrise Medical, Inc.   Space above this line for recorder's use only REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT This REAL PROPERTY HOLDER'S WAIVER AND CONSENT AGREEMENT (this "Agreement") is dated as of _______________, 2000 and entered into by _________________________, a ____________________ ("Real Property Holder"), to and for the benefit of BANKERS TRUST COMPANY, located at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 ("Agent"), as agent for the financial institutions ("Lenders") which are or may hereafter become parties to the Credit Agreement (as hereinafter defined). R E C I T A L S A. [Name of Subsidiary] ("Company"), has possession of and occupies all or a portion of the property described on Exhibit A annexed hereto (the "Premises"). B. Company's interest in the Premises arises under the lease agreement (the "Lease") more particularly described on Exhibit B annexed hereto, pursuant to which Real Property Holder has rights, upon the terms and conditions set forth therein, to take possession of, and otherwise assert control over, the Premises. C. Agent and Lenders have entered into that certain Credit Agreement dated as of _____________, 2000 (said Credit Agreement, as amended, supplemented or otherwise modified from time to time, being the "Credit Agreement") with Sunrise Medical, Inc., a Delaware corporation ("Borrower"). In connection with the Credit Agreement, Company and other subsidiaries of Borrower (together with Company, the "Subsidiary Guarantors") have executed that certain Subsidiary Guaranty dated as of ______________, 2000 (said Subsidiary Guaranty, as amended, supplemented or otherwise modified from time to time, being the "Subsidiary Guaranty"), and Borrower and the Subsidiary Guarantors have executed a security agreement and other collateral documents in relation to the Credit Agreement and the Subsidiary Guaranty. D. The extensions of credit made by Lenders to Company under the Credit Agreement will be secured, in part, by all raw materials, work-in-process and finished goods inventory of Borrower and the Subsidiary Guarantors (including all inventory of Company now or hereafter located on the Premises (the "Inventory" or the "Collateral")). E. Agent has requested that Real Property Holder execute this Agreement as a condition to the extension of credit to Borrower under the Credit Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Real Property Holder hereby represents and warrants to, and covenants and agrees with, Agent as follows: 1. Real Property Holder hereby (a) waives and releases unto Agent and its successors and assigns any and all rights granted by or under any present or future laws to levy or distraint for rent or any other charges which may be due to Real Property Holder against the Collateral, and any and all other claims, liens and demands of every kind which it now has or may hereafter have against the Collateral, and (b) agrees that any rights it may have in or to the Collateral, no matter how arising (to the extent not effectively waived pursuant to clause (a) of this paragraph 1), shall be second and subordinate to the rights of Agent in respect thereof. Real Property Holder acknowledges that the Collateral is and will remain personal property and not fixtures even though it may be affixed to or placed on the Premises. 2. Real Property Holder certifies that (a) Real Property Holder is the landlord under the Lease, (b) the Lease is in full force and effect and has not been amended, modified, or supplemented except as set forth on Exhibit B annexed hereto, (c) there is no defense, offset, claim or counterclaim by or in favor of Real Property Holder against Company under the Lease or against the obligations of Real Property Holder under the Lease, (d) no notice of default has been given under or in connection with the Lease which has not been cured, and Real Property Holder has no knowledge of the occurrence of any other default under or in connection with the Lease, and (e) except as disclosed to Agent, no portion of the Premises is encumbered in any way by any deed of trust or mortgage lien or ground or superior lease. 3. Real Property Holder consents to the installation or placement of the Collateral on the Premises, and Real Property Holder grants to Agent a license to enter upon and into the Premises to do any or all of the following with respect to the Collateral: assemble, have appraised, display, remove, maintain, prepare for sale or lease, repair, transfer, or sell (at public or private sale). In entering upon or into the Premises, Agent hereby agrees to indemnify, defend and hold Real Property Holder harmless from and against any and all claims, judgments, liabilities, costs and expenses incurred by Real Property Holder caused solely by Agent's entering upon or into the Premises and taking any of the foregoing actions with respect to the Collateral. Such costs shall include any damage to the Premises made by Agent in severing and/or removing the Collateral therefrom. 4. Real Property Holder agrees that it will not prevent Agent or its designee from entering upon the Premises at all reasonable times to inspect or remove the Collateral. In the event that Real Property Holder has the right to, and desires to, obtain possession of the Premises (either through expiration of the Lease or termination thereof due to the default of Company thereunder), Real Property Holder will deliver notice (the "Real Property Holder's Notice") to Agent to that effect. Within the 45 day period after Agent receives the Real Property Holder's Notice, Agent shall have the right, but not the obligation, to cause the Collateral to be removed from the Premises. During such 45 day period, Real Property Holder will not remove the Collateral from the Premises nor interfere with Agent's actions in removing the Collateral from the Premises or Agent's actions in otherwise enforcing its security interest in the Collateral. Notwithstanding anything to the contrary in this paragraph, Agent shall at no time have any obligation to remove the Collateral from the Premises. 5. Real Property Holder shall send to Agent a copy of any notice of default under the Lease sent by Real Property Holder to Company. In addition, Real Property Holder shall send to Agent a copy of any notice received by Real Property Holder of a breach or default under any other lease, mortgage, deed of trust, security agreement or other instrument to which Real Property Holder is a party which may affect Company's rights in, or possession of, the Premises. 6. All notices to Agent under this Agreement shall be in writing and sent to Agent at its address set forth on the signature page hereof by telefacsimile, by United States mail, or by overnight delivery service. 7. The provisions of this Agreement shall continue in effect until Real Property Holder shall have received Agent's written certification that all amounts advanced under the Credit Agreement have been paid in full. 8. This Agreement and the rights and obligations of the parties hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of ___________, without regard to conflicts of laws principles.     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the day and year first set forth above. > > > > > [NAME OF REAL PROPERTY HOLDER] > > > > > > > > > >   > > > > > > > > > > By: ________________________________ > > > > > Name: > > > > > Title:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     By its acceptance hereof, as of the day and year first set forth above, Agent agrees to be bound by the provisions hereof. > > > > > > BANKERS TRUST COMPANY, > > > > > > as Agent > > > > > > > > > > > > By: ______________________________ > > > > > > Name: > > > > > > Title: -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       EXHIBIT A LEGAL DESCRIPTION OF PREMISES   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       EXHIBIT B DESCRIPTION OF LEASE   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     EXHIBIT XIV FORM OF LOCK BOX AGREEMENT This LOCK BOX AGREEMENT (this "Agreement"), dated as of _______________, 2000, is entered into by and among [Subsidiary Guarantor/Company] ("Company"), BANKERS TRUST COMPANY, as agent ("Agent"), and ______________ ("Bank"). PRELIMINARY STATEMENTS A. Agent and certain financial institutions acting as Lenders ("Lenders") have entered into that certain Credit Agreement, dated as of September 8_, 2000 (said Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement") with [Company/Sunrise Medical, Inc.], wherein the Company has granted the Lenders a security interest in its present and future accounts receivable, and all proceeds thereof and Company has agreed that all collections and proceeds of such accounts receivable shall be remitted in kind to the Agent; B. In order to provide for a more efficient and faster collection and deposit of said collection and proceeds the Agent and Company desire to use the lock box service of Bank; and C. Bank is willing to provide said service for Company and the Agent commencing as of September 8_, 2000. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Post Office Box. The Bank will rent P.O. Box                        (the "Lock Box") of the post office located at                                             in the name of Company. Customers of Company have been, or will be, instructed to mail their remittances to the Lock Box. 2. Access to Mail. The Bank will have exclusive and unrestricted access to the Lock Box and will have complete and exclusive authority to receive, pick up and open all regular, registered, certified or insured mail addressed to the Lock Box. If an Event of Default has occurred and is continuing, on written demand of the Agent, Bank shall cease its processing of said mail, and shall release same, in kind, to the Agent, without the prior consent of Company, and the Agent shall thereafter process said mail promptly in accordance with this Agreement. Bank shall not inquire into the Agent's right to make such a demand under any agreement among the Agent, the Lenders and Company, and shall be forever released of all obligations with respect to said remittances upon release to the Agent. If an Event of Default has occurred and is continuing, Company shall have no control whatsoever over any mail, checks, money orders, collections or other forms of remittances received in the Lock Box. Appropriate instructions have been, or will be, given by the Bank to the post office where the Lock Box is maintained, and such instructions shall not be revoked without the prior written consent of the Agent. Any instruction given to the Bank by Company without the prior or concurrent written agreement of the Agent shall be void and of no force or effect. All mail addressed to the Lock Box will be picked up by the Bank according to its regular collection schedule. 3. Remittance Collection. On the day received the Bank will open all mail addressed to the Lock Box and remove and inspect the enclosures. All checks, money orders and other forms or orders for the payment of money and other collection remittances (hereinafter collectively referred to as "checks") shall be processed by the Bank as follows: (1) Missing Date. All undated checks will be dated by the Bank as of the postmark date and processed as hereafter provided. (2) Postdated. Checks postdated up to three days from the date of receipt shall be processed on the date indicated on the check. Bank shall not deposit checks postdated more than three days, but shall notify the Agent by telephone of such checks and follow the Agent's instructions for disposition of such checks. (3) Stale Date. Checks dated six months or more prior to the date of collection will not be deposited and shall be sent to Company, with a copy to the Agent. (4) Different Amount. Where written and numeric amounts differ, a check will be processed by the Bank only if the correct amount can be determined from the accompanying documents, otherwise the check will not be deposited and shall be sent to Company, with a copy to the Agent. (5) Signature Missing. Checks which do not bear the drawer's signature and do not indicate the drawer's identity will not be deposited but shall be sent to Company, with a copy to the Agent. If, as determined by the Bank, the drawer can be identified from the face of the check, the Bank will deposit and process the check by affixing a stamped impression requesting the drawer bank to contact the drawer for authority to pay. (6) Alterations and Restrictions. Checks with alterations and checks bearing restrictive notations such as "Payment in Full" will not be deposited, and the Bank shall notify the Agent of such checks by telephone on the day of receipt and will deposit, hold or forward such checks to Company, with a copy to the Agent, with accompanying written matter, if any, as requested by the Agent. (7) Foreign Banks and Currency. Checks drawn in foreign currency will be processed in accordance with the Bank's normal procedure for such checks and the Agent will be notified by advice of any such checks on the date received by the Bank. (8) Other Items. Any items which the Agent has specifically instructed the Bank in writing not to process will not be deposited and shall be sent to the Company, with a copy to the Agent. Notwithstanding anything to the contrary contained in this Agreement, Bank shall have no obligation to perform services on a basis any different than it performs lockbox services in the normal course of business, except with respect to receiving instructions from the Agent rather than Company if an Event of Default has occurred and is continuing. 4. Processing Acceptable Checks. All checks, except those not acceptable for deposit under the terms of this Agreement, shall be deposited on the day of receipt by the Bank to Account No.                      (the "Lender Account"), which if an Event of Default has occurred and is continuing is an account owned and controlled exclusively by the Agent, and all such checks shall be endorsed as follows: > > > credited to account number                 ; absence of endorsement hereby > > > supplied and guarantied by [insert name of Bank]; Until a Notice of Redirection substantially in the form of Exhibit A hereto (a "Notice") is delivered by Agent to Bank, all available balances in the Lender Account will be transferred on a daily basis via the automated clearing house system or wire transfer with the following instructions: ________________ _______________ [ABA No. ______________] Account No. _____________ Account Name: ____________ as Agent for ___________ Ref.: _____________ Attn: ________________ Upon the delivery of a Notice by Agent to Bank, Bank shall transfer such funds only as provided in such Notice. All remittance advices, envelopes, and written matter (except as expressly provided herein) received in the Lock Box together with photocopies of all checks shall be sent to Company and, if requested by the Agent, copies of same shall be sent to the Agent. Bank shall mail both a deposit advice for all deposits to the Lender Account, on a daily basis, and a statement of account, on a monthly basis, to both the Agent and Company and, if no deposit is made on a bank business day, a deposit advice, correctly dated, will be sent to the Agent and Company with the notation "No Deposit' appearing thereon. In addition, Bank shall indicate by telephone to the Agent on each Bank business day by 2:30 P.M. New York City time the amount of each day's deposit total. 5. Returned Checks. Checks deposited in the Lender Account which are returned unpaid because of "Insufficient Funds," "Uncollected Funds," etc. will be redeposited by the Bank only once, except that if a returned check exceeds $1,000, the Bank shall not redeposit such check but shall telephone the Agent for further instructions on the day such check is received. If redeposit is not warranted for reasons such as "account closed" or "payment stopped" or if a check is returned a second time, the Bank will charge the Lender Account and send a debit advice with the item to Company with copies of same to Agent. 6. Remittance Received by Company. Remittances which are sent directly to or received by Company shall be forwarded to the Lock Box on the day received. 7. Record Maintenance. All deposit checks will be microfilmed (on front and back) by the Bank and retained for three years by the Bank prior to destruction. Photocopies of filmed items will be provided to the Agent or Company on request, within the five-year period. 8. Bank Charges. All charges of Bank for services rendered pursuant to this Agreement shall be billed to and paid directly by Company. Said charges shall not be charged against remittances nor shall they be debited to the Lender Account. 9. No Offset. Bank hereby agrees that it will treat all remittances received in the Lock Box in accordance with the terms of this Agreement and it will not offset or assert any claim against the Lock Box or the Lender Account or divert such remittances on account of any obligations owed to the Bank by Company or by the party making the remittance, except as provided in paragraph 5 hereof. 10. Bank Liability. In acting under this Agreement Bank shall not be liable to the Agent, the Lenders or Company for any error of judgment, or for any act done or step taken or omitted by it in good faith, except for gross negligence or willful misconduct. 11. Term. This Agreement shall continue in full force and effect until termination by the Bank on 60 days' prior written notice to all other parties. If an Event of Default has occurred and is continuing, the Agent may terminate this Agreement, which termination shall be effective on receipt of written notice by Bank and in the event of such termination, the Agent shall at its option, have the sole right to remove mail from the Lock Box. Company shall have no right to terminate this Agreement without the prior written consent of Agent. 12. Modification. This Agreement may only be modified by a writing signed by all of the parties hereto. 13. Addresses. (1) All notices, including phone notice, daily deposit advices, monthly statements of account and copies of all checks and the documents which are to be given or sent to the Agent shall be sent to the following address, and, where applicable, given at the following phone number: Bankers Trust Company ________________________________________ ________________________________________ ________________________________________ Attn: ____________________________________ Fax: ____________________________________ (2) All notices to Bank shall be sent to: ________________________________________ ________________________________________ ________________________________________ Attn: ____________________________________ Fax: ____________________________________ (3) All notices and items which are to be sent to Company shall be sent to: Sunrise Medical, Inc. ________________________________________ ________________________________________ Attn: ____________________________________ Fax: ____________________________________ 14. Agent Agreement. The Agent agrees that it will indemnify and hold Bank harmless from any and all loss, liability, reasonable expense or damage that Bank may incur in processing lockbox items in accordance with this Agreement, including, without limitation, any loss that Bank experiences as a result of returned items to the extent the balances in the Lender Account referenced in paragraph 5 are insufficient to cover such losses or in the event the balances in such Lender Account are insufficient to cover Bank charges referenced in paragraph 8. 15. Limitation on Liability. The Agent and Company acknowledge that the Bank undertakes to perform only such duties as are expressly set forth in this Agreement and those which are normally undertaken by Bank in connection with lockbox processing. Notwithstanding any other provision of this Agreement, it is agreed by the parties that Bank shall not be liable for any action taken by Bank or any of its directors, officers, agents or employees in accordance with this Agreement, except for Bank's or such natural person's gross negligence or willful misconduct. In no event shall Bank be liable for losses or delays resulting from force majeure, computer malfunction, interruption of communication facilities, labor difficulties or other causes beyond its reasonable control or for any indirect, special or consequential damages. 16. Governing Law. This Agreement shall be governed in accordance with the laws of California, without giving effect to the conflict of law principles thereof. 17. Effectiveness. This Agreement shall become effective upon its receipt by the Agent, properly executed by all of the parties hereto.   IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the day and year first above written. > > > > > > BANKERS TRUST COMPANY,  > > > > > > as Agent > > > > > > > > > > > >   > > > > > > > > > > > > By:_______________________________ > > > > > > Name: > > > > > > Title: > > > > > > > > > > > > [NAME OF BANK] > > > > > > > > > > > >   > > > > > > > > > > > > By:_______________________________ > > > > > > Name: > > > > > > Title: > > > > > > > > > > > > SUNRISE MEDICAL, INC., as Company > > > > > > > > > > > >   > > > > > > > > > > > > By:_______________________________ > > > > > > Name: > > > > > > Title: > > > > > > > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   EXHIBIT A [Form of] Notice of Redirection   [Bank] ______________________________________ ______________________________________ ______________________________________ Attn: > > > > > Re: _________________ Account for                              > > > > > Account No. Ladies and Gentlemen: Reference is made to that certain Lock Box Agreement, dated as of _______________, 2000 (the "Agreement") among you, us, as Agent, and Sunrise Medical, Inc. pursuant to which we, for our benefit and for the benefit of the Lenders (as defined in the Agreement), were after the occurrence of an Event of Default given exclusive interest and control of the Account. This notice is given in accordance with the terms of the Agreement. We hereby certify that an Event of Default has occurred and, effective immediately and continuing until we shall authorize you in writing to do otherwise, we hereby direct you to transfer on a daily basis all funds deposited into the Account with the instructions attached hereto. > > > > > Very truly yours, > > > > > > > > > > BANKERS TRUST COMPANY, as Agent > > > > > > > > > > > > > > > By:____________________________________ > > > > > Name: _____________________________ > > > > > Title: ______________________________     [attach instructions] > > > > > > > > > > > >   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       EXHIBIT XV FORM OF SECURITY AGREEMENT This SECURITY AGREEMENT (this "Agreement") is dated as of September 8__, 2000 and entered into by and among SUNRISE MEDICAL, INC., a Delaware corporation ("Company"), each of THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of Company (each of such undersigned Subsidiaries being a "Subsidiary Grantor" and collectively "Subsidiary Grantors") and each ADDITIONAL GRANTOR that may become a party hereto after the date hereof in accordance with Section 18 hereof (each of the Company, each Subsidiary Grantor, and each Additional Grantor being a "Grantor" and collectively the "Grantors") and BANKERS TRUST COMPANY, as agent for and representative of (in such capacity herein called "Secured Party") the financial institutions ("Lenders") party to the Credit Agreement referred to below and any Exchangers (as hereinafter defined). PRELIMINARY STATEMENTS A.  Pursuant to the Credit Agreement dated as of September 8__, 2000 (said Credit Agreement, as amended, to the date hereof, and as it may hereafter be further amended, restated, supplemented or otherwise modified from time to time, being the "Credit Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Company, the financial institutions listed therein as Lenders, and Bankers Trust Company, as Agent (in such capacity, "Agent"), Lenders have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to Company. B.  Company may from time to time enter, or may from time to time have entered, into one or more Interest Rate Agreements and/or one or more Currency Agreements (collectively, the "Hedge Agreements") with one or more Persons that are Lenders or Affiliates of Lenders at the time such Hedge Agreements are entered into (in such capacity, collectively, "Exchangers") in accordance with the terms of the Credit Agreement, and it is desired that the obligations of Company under the Hedge Agreements, including without limitation any obligation of Company to make payments thereunder in the event of early termination thereof, together with all obligations of Company under the Credit Agreement and the other Loan Documents, be secured hereunder. C.  Subsidiary Grantors have executed and delivered that certain Subsidiary Guaranty dated the date hereof (said Subsidiary Guaranty, as amended, to the date hereof, and as it may hereafter be further amended, restated, supplemented or otherwise modified from time to time, being the "Subsidiary Guaranty") in favor of Secured Party for the benefit of Lenders and any Exchangers, pursuant to which each Subsidiary Grantor has guarantied the prompt payment and performance when due of all obligations of Company under the Credit Agreement and all obligations of Company under the Hedge Agreements, including without limitation the obligation of Company to make payments thereunder in the event of early termination thereof. D.  It is a condition precedent to the initial extensions of credit by Lenders under the Credit Agreement that Grantors listed on the signature pages hereof shall have granted the security interests and undertaken the obligations contemplated by this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce Lenders to make Loans and other extensions of credit under the Credit Agreement and to induce Exchangers to enter into the Hedge Agreements, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Grantor hereby agrees with Secured Party as follows: Section 1. Grant of Security. Each Grantor hereby assigns to Secured Party, and hereby grants to Secured Party a security interest in, all of such Grantor's right, title and interest in and to the following, in each case whether now or hereafter existing, whether tangible or intangible, or in which such Grantor now has or hereafter acquires an interest and wherever the same may be located (the "Collateral"): (a) all inventory in all of its forms, including but not limited to (i) all goods held by such Grantor for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in such Grantor's business, (iii) all goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind, and (iv) all goods which are returned to or repossessed by such Grantor and all accessions thereto and products thereof (collectively the "Inventory") and all negotiable and non-negotiable documents of title (including without limitation warehouse receipts, dock receipts and bills of lading) issued by any Person covering any Inventory (any such negotiable document of title being a "Negotiable Document of Title"); (b) all accounts, contract rights, chattel paper, documents, instruments, general intangibles and other rights and obligations of any kind owned by or owing to such Grantor and all rights in, to and under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, documents, instruments, general intangibles or other obligations (any and all such accounts, contract rights, chattel paper, documents, instruments, general intangibles and other obligations being the "Accounts", and any and all such security agreements, leases and other contracts being the "Related Contracts"); (c) all deposit accounts ("Deposit Accounts") including the restricted deposit account established and maintained by Secured Party pursuant to Section 9(a) (the "Collateral Account"), the account established and maintained by Secured Party pursuant to Section 9(b) (the "Overadvance Deposit Account") and the accounts described on Schedule 1(c), together with (i) all amounts on deposit from time to time in such deposit accounts and (ii) all interest, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; (d) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and (e) all proceeds, products, rents and profits of or from any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Secured Party is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. Section 2. Security for Obligations. This Agreement secures, and the Collateral assigned by each Grantor is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including without limitation the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured Obligations of such Grantor. "Secured Obligations" means: (a) with respect to Company, all obligations and liabilities of every nature of Company now or hereafter existing under or arising out of or in connection with the Credit Agreement and the other Loan Documents and any Hedge Agreement, and (b) with respect to each Subsidiary Grantor and Additional Grantor, all obligations and liabilities of every nature of such Grantors now or hereafter existing under or arising out of or in connection with the Guaranty; in each case together with all extensions or renewals thereof, whether for principal, interest (including without limitation interest that, but for the filing of a petition in bankruptcy with respect to Company or any other Grantor, would accrue on such obligations, whether or not a claim is allowed against Company or such Grantor for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit, payments for early termination of Hedge Agreements, fees, expenses, indemnities or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Secured Party or any Lender or Exchanger as a preference, fraudulent transfer or otherwise, and all obligations of every nature of Grantors now or hereafter existing under this Agreement. Section 3. Grantors Remain Liable. Anything contained herein to the contrary notwithstanding, (a) each Grantor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Secured Party of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) Secured Party shall not have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Section 4. Representations and Warranties. Each Grantor represents and warrants as follows: (a) Ownership of Collateral. Except as expressly permitted by the Credit Agreement and for the security interest created by this Agreement, such Grantor owns the Collateral owned by such Grantor free and clear of any Lien. Except as expressly permitted by the Credit Agreement and such as may have been filed in favor of Secured Party relating to this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (b) Locations of Equipment and Inventory. All of the Inventory is, as of the date hereof, or in the case of each Additional Grantor, the date of the applicable counterpart entered into pursuant to Section 18 (each, a "Counterpart"), located at the places specified in Schedule 4(b), except for Inventory which, in the ordinary course of business, is in transit either (i) from a supplier to a Grantor, (ii) between the locations specified in Schedule 4(b), or (ii) to customers of a Grantor. (c) Negotiable Documents of Title. No Negotiable Documents of Title are outstanding with respect to any of the Inventory. (d) Office Locations. The chief place of business, the chief executive office and the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts are, as of the date hereof, and, except as set forth on Schedule 4(d), have been for the four month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, located at the locations set forth on Schedule 4(d); (e) Names. No Grantor (or predecessor by merger or otherwise of such Grantor) has, within the four month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, had a different name from the name of such Grantor listed or the signature pages hereof, except the names listed in Schedule 4(e) annexed hereto. (f) Delivery of Certain Collateral. All certificates or instruments (excluding checks) evidencing, comprising or representing the Collateral have been delivered to Secured Party duly endorsed or accompanied by duly executed instruments of transfer or assignment in blank. (g) Perfection. The security interests in the Collateral granted to Secured Party for the ratable benefit of the Lenders and Exchangers hereunder constitute valid security interests in the Collateral, securing the payment of the Secured Obligations. Upon the filing of UCC financing statements naming each Grantor as "debtor", naming Secured Party as "secured party" and describing the Collateral in the filing offices with respect to such Grantor set forth on Schedule 4(g), the security interests in the Collateral granted to Secured Party for the ratable benefit of the Lenders and Exchangers will, to the extent a security interest in the Collateral may be perfected by filing UCC financing statements, constitute perfected security interests therein prior to all other Liens (except for Permitted Encumbrances), and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly made or taken. Section 5. Further Assurances. (a) Generally. Each Grantor agrees that from time to time, at the expense of Grantors, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Secured Party may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor will: (i) at the request of Secured Party, mark conspicuously each item of chattel paper included in the Accounts, each Related Contract and, at the request of Secured Party, each of its records pertaining to the Collateral, with a legend, in form and substance satisfactory to Secured Party, indicating that such Collateral is subject to the security interest granted hereby, (ii) at the request of Secured Party, deliver and pledge to Secured Party hereunder all promissory notes and other instruments (including checks) and all original counterparts of chattel paper constituting Collateral, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Secured Party, (iii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Secured Party may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail, (v) at any reasonable time, upon request by Secured Party, exhibit the Collateral to and allow inspection of the Collateral by Secured Party, or persons designated by Secured Party, (vi) at Secured Party's reasonable request, appear in and defend any action or proceeding that may affect such Grantor's title to or Secured Party's security interest in all or any part of the Collateral, and (vii) use commercially reasonable efforts to obtain any necessary consents of third parties to the assignment and perfection of a security interest to Secured Party with respect to any Collateral. Each Grantor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of any Grantor. Each Grantor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement signed by such Grantor shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions. Section 6. Certain Covenants of Grantors. Each Grantor shall: (a) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (b) notify Secured Party of any change in such Grantor's name, identity or corporate structure within 15 days of such change; (c) give Secured Party 30 days' prior written notice of any change in such Grantor's chief place of business, chief executive office or residence or the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts; (d) if Secured Party gives value to enable such Grantor to acquire rights in or the use of any Collateral, use such value for such purposes; and (e) except as expressly permitted by the Credit Agreement, pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all material claims (including claims for labor, services, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided that such Grantor shall in any event pay such taxes, assessments, charges, levies or claims not later than five days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against such Grantor or any of the Collateral as a result of the failure to make such payment. Section 7. Special Covenants With Respect to Inventory. Each Grantor shall: (a) keep the Inventory owned by such Grantor at the places therefor specified on Schedule 4(b) or, upon 30 days' prior written notice to Secuz, at its own expense, maintain insurance with respect to the Inventory in accordance with the terms of the Credit Agreement. Section 8. Special Covenants with respect to Accounts and Related Contracts. (a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts and Related Contracts, and all originals of all chattel paper that evidence Accounts, at the locations therefor set forth on Schedule 4(d) or, upon 30 days' prior written notice to Secured Party, at such other location in a jurisdiction where all action that may be necessary or desirable, or that Secured Party may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Secured Party to exercise and enforce its rights and remedies hereunder, with respect to such Accounts and Related Contracts shall have been taken. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of Secured Party at any time during normal business hours to inspect and make abstracts from such records and chattel paper, and each Grantor agrees to render to Secured Party, at Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the request of Secured Party, each Grantor shall deliver to Secured Party complete and correct copies of each Related Contract. (b) Each Grantor shall, for not less than three (3) years from the date on which each Account of such Grantor arose, maintain (i) complete records of such Account, including records of all payments received, credits granted and merchandise returned, and (ii) all documentation relating thereto. (c) Except as otherwise provided in this subsection (c), each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Accounts and Related Contracts. In connection with such collections, each Grantor may take (and, upon the occurrence and during the continuance of an Event of Default at Secured Party's direction, shall take) such action as such Grantor or Secured Party may deem necessary or advisable to enforce collection of amounts due or to become due under the Accounts; provided however, that Secured Party shall have the right at any time, upon the occurrence and during the continuation of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to Secured Party and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to Secured Party, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Accounts have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to Secured Party and, upon such notification and at the expense of Grantors, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice from Secured Party referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Accounts and the Related Contracts shall be received in trust for the benefit of Secured Party hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to Secured Party in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 14, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. Section 9. Collateral and Overadvance Deposit Accounts. (a) Collateral Account. Secured Party is hereby authorized to establish and maintain at its office at 130 Liberty Street, New York, New York 10006 as a blocked account in the name of Company and under the sole dominion and control of Secured Party, a restricted deposit account designated as "Sunrise Medical, Inc. Collateral Account". All amounts at any time held in the Collateral Account shall be beneficially owned by Grantors but shall be held in the name of Secured Party hereunder, for the benefit of Lenders, as collateral security for the Secured Obligations upon the terms and conditions set forth herein. Grantors shall have no right to withdraw, transfer or, except as expressly set forth herein, otherwise receive any funds deposited into the Collateral Account. Anything contained herein to the contrary notwithstanding, the Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. All deposits of funds in the Collateral Account shall be made by wire transfer (or, if applicable, by intra-bank transfer from another account of a Grantor) of immediately available funds, in each case addressed in accordance with instructions of Secured Party. Each Grantor shall, promptly after initiating a transfer of funds to the Collateral Account, give notice to Secured Party by telefacsimile of the date, amount and method of delivery of such deposit. Cash held by Secured Party in the Collateral Account shall not be invested by Secured Party but instead shall be maintained as a cash deposit in the Collateral Account pending application thereof as elsewhere provided in this Agreement. To the extent permitted under Regulation Q of the Board of Governors of the Federal Reserve System, any cash held in the Collateral Account shall bear interest at the standard rate paid by Secured Party to its customers for deposits of like amounts and terms. Subject to Secured Party's rights hereunder, any interest earned on deposits of cash in the Collateral Account shall be deposited directly in, and held in the Collateral Account. (b) Overadvance Deposit Account. Secured Party is hereby authorized to establish and maintain at its office at 130 Liberty Street, New York, New York 10006 as a blocked account in the name of Company and under the sole dominion and control of Secured Party, a restricted deposit account designated as "Sunrise Medical, Inc. Overadvance Deposit Account". All amounts at any time held in the Overadvance Deposit Account shall be beneficially owned by Grantors but shall be held in the name of Secured Party hereunder, for the benefit of Lenders, as collateral security for the Secured Obligations upon the terms and conditions set forth herein. Grantors shall have no right to withdraw, transfer or, except as expressly set forth herein, otherwise receive any funds deposited into the Overadvance Deposit Account. Anything contained herein to the contrary notwithstanding, the Overadvance Deposit Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. All deposits of funds in the Overadvance Deposit Account shall be made by wire transfer (or, if applicable, by intra-bank transfer from another account of a Grantor) of immediately available funds, in each case addressed in accordance with instructions of Secured Party. Each Grantor shall, promptly after initiating a transfer of funds to the Overadvance Deposit Account, give notice to Secured Party by telefacsimile of the date, amount and method of delivery of such deposit. Cash held by Secured Party in the Overadvance Deposit Account shall not be invested by Secured Party but instead shall be maintained as a cash deposit in the Overadvance Deposit Account pending application thereof as elsewhere provided in this Agreement. To the extent permitted under Regulation Q of the Board of Governors of the Federal Reserve System, any cash held in the Overadvance Deposit Account shall bear interest at the standard rate paid by Secured Party to its customers for deposits of like amounts and terms. Subject to Secured Party's rights hereunder, any interest earned on deposits of cash in the Overadvance Deposit Account shall be deposited directly in, and held in the Overadvance Deposit Account. Section 10. Secured Party Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints Secured Party as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, Secured Party or otherwise, from time to time in Secured Party's discretion to take any action and to execute any instrument that Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation: (a) upon the occurrence and during the continuance of an Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to Secured Party pursuant to Section 7; (b) upon the occurrence and during the continuance of an Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (c) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clauses (a) and (b) above; (d) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Secured Party with respect to any of the Collateral; (e) to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or the Credit Agreement) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Secured Party in its sole discretion, any such payments made by Secured Party to become obligations of such Grantor to Secured Party, due and payable immediately without demand; provided, however, that Secured Party shall not pay or discharge any tax or Lien if such tax or Lien is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (1) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (2) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim; (f) upon the occurrence and during the continuance of an Event of Default, to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts and other documents relating to the Collateral; and (g) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and to do, at Secured Party's option and Grantors' expense, at any time or from time to time, all acts and things that Secured Party reasonably deems necessary to protect, preserve or realize upon the Collateral and Secured Party's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Section 11. Secured Party May Perform. If any Grantor fails to perform any agreement contained herein, Secured Party may itself perform, or cause performance of, such agreement, and the expenses of Secured Party incurred in connection therewith shall be payable by Grantors under Section 15(b). Section 12. Standard of Care. The powers conferred on Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Secured Party accords its own property. Section 13. Remedies. (a) Generally. If any Event of Default (as defined in the Credit Agreement) or the occurrence of an Early Termination Date (as defined in a Master Agreement in the form prepared by the International Swap and Derivatives Association, Inc. or a similar event under any similar swap agreement) under any Hedge Agreement (either such occurrence being an "Event of Default" for purposes of this Agreement) shall have occurred and be continuing, Secured Party may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of Secured Party forthwith, assemble all or part of the Collateral as directed by Secured Party and make it available to Secured Party at a place to be designated by Secured Party that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Secured Party deems appropriate, (iv) take possession of any Grantor's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Grantor's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Secured Party may deem commercially reasonable and (vi) exercise dominion and control over and refuse to permit further withdrawals from any Deposit Account maintained with Secured Party or any Lender constituting a part of the Collateral. Secured Party or any Lender or Exchanger may be the purchaser of any or all of the Collateral at any such sale and Secured Party, as agent for and representative of Lenders and Exchangers (but not any Lender or Exchanger in its individual capacity unless Requisite Obligees (as defined in Section 17(a)) shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Secured Party at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree; provided that such sale was conducted in a commercially reasonable manner. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be jointly and severally liable for the deficiency and the fees of any attorneys employed by Secured Party to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Secured Party, that Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and each Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. (b) Collateral Account. If an Event of Default has occurred and is continuing and, in accordance with Section 8 of the Credit Agreement, Company is required to pay to Secured Party an amount (the "Aggregate Available Amount") equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding under the Credit Agreement, Company shall deliver funds in such an amount for deposit in the Collateral Account. If for any reason the aggregate amount delivered by Company for deposit in the Collateral Account as aforesaid is less than the Aggregate Available Amount, the aggregate amount so delivered by Company shall be apportioned among all outstanding Letters of Credit for purposes of this Section in accordance with the ratio of the maximum amount available for drawing under each such Letter of Credit (as to such Letter of Credit, the "Maximum Available Amount") to the Aggregate Available Amount. Upon any drawing under any outstanding Letter of Credit in respect of which Company has deposited in the Collateral Account any amounts described above, Secured Party shall apply such amounts to reimburse the Issuing Lender for the amount of such drawing. In the event of cancellation or expiration of any Letter of Credit in respect of which Company has deposited in the Collateral Account any amounts described above, or in the event of any reduction in the Maximum Available Amount under such Letter of Credit, Secured Party shall apply the amount then on deposit in the Collateral Account in respect of such Letter of Credit (less, in the case of such a reduction, the Maximum Available Amount under such Letter of Credit immediately after such reduction) first, to the payment of any amounts payable to Secured Party pursuant to Section 14 hereof, second, to the extent of any excess, to the cash collateralization pursuant to the terms of this Agreement of any outstanding Letters of Credit in respect of which Company has failed to pay all or a portion of the amounts described above (such cash collateralization to be apportioned among all such Letters of Credit in the manner described above), third, to the extent of any further excess, to the payment of any other outstanding Secured Obligations in such order as Secured Party shall elect, and fourth, to the extent of any further excess, to the payment to whomsoever shall be lawfully entitled to receive such funds. Section 14. Application of Proceeds. Except as expressly provided elsewhere in this Agreement, all proceeds received by Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied as provided in subsection 2.4C of the Credit Agreement. Section 15. Indemnity and Expenses. (a) Grantors jointly and severally agree to indemnify Secured Party, each Lender and each Exchanger from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including without limitation enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Secured Party's or such Lender's or Exchanger's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. (b) Grantors jointly and severally agree to pay to Secured Party upon demand the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Secured Party hereunder, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof. (c) The obligations of Grantors in this Section 15 shall survive the termination of this Agreement and the discharge of Grantors' other obligations under this Agreement, the Hedge Agreements, the Credit Agreement and the other Loan Documents. Section 16. Continuing Security Interest; Transfer of Loans; Termination and Release. (a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the payment in full of the Secured Obligations (other than Secured Obligations which, after the occurrence of all of the foregoing actions, are contingent and unliquidated and not due and owing on such date and which pursuant to the provisions of the Credit Agreement, Hedge Agreements, Letters of Credit or the Loan Documents survive the termination of the Credit Agreement, the repayment of the Secured Obligations, the termination of the Commitments, the expiration or cancellation of all Letters of Credit and the termination, expiration or cancellation of all Hedge Agreements), the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, (ii) be binding upon Grantors and their respective successors and assigns, and (iii) inure, together with the rights and remedies of Secured Party hereunder, to the benefit of Secured Party and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), (A) but subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lenders herein or otherwise, and (B) any Exchanger may assign or otherwise transfer any Hedge Agreement to which it is a party to any other Person in accordance with the terms of such Hedge Agreement, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Exchangers herein or otherwise. (b) Upon the payment in full of all Secured Obligations (other than Secured Obligations which, after the occurrence of all of the foregoing actions, are contingent and unliquidated and not due and owing on such date and which pursuant to the provisions of the Credit Agreement, Hedge Agreements, Letters of Credit or the Loan Documents survive the termination of the Credit Agreement, the repayment of the Secured Obligations, the termination of the Commitments, the expiration or cancellation of all Letters of Credit and the termination, expiration or cancellation of all Hedge Agreements), the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantors. Upon any such termination Secured Party will, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. In addition, upon any sale, transfer or other disposition of any Collateral by a Grantor in accordance with the Credit Agreement, the security interest herein with respect to the Collateral so sold, transferred or otherwise disposed of shall automatically, without any further action by any Grantor or Secured Party, be released. In addition, if such Grantor desires to obtain evidence of such release from Secured Party, such Grantor shall deliver an Officers' Certificate (x) stating that the Collateral subject to such disposition is being or has been sold, transferred or otherwise disposed of in compliance with the terms of the Credit Agreement and (y) specifying the Collateral that is being or has been sold, transferred or otherwise disposed of in the proposed transaction. Upon the receipt of such Officers' Certificate, Secured Party shall, at such Grantor's expense, so long as Secured Party has no reason to believe that the Officers' Certificate delivered by such Grantor with respect to such sale is not true and correct, execute and deliver such evidence of releases of its security interest in such Collateral which is to be or has been so sold, transferred or disposed of, as may be reasonably requested by such Grantor. Section 17. Secured Party as Agent. (a) Secured Party has been appointed to act as Secured Party hereunder by Lenders and, by their acceptance of the benefits hereof, Exchangers. Secured Party shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including without limitation the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided that Secured Party shall exercise, or refrain from exercising, any remedies provided for in Section 13 in accordance with the instructions of (i) Requisite Lenders, or (ii) after payment in full of all Obligations under the Credit Agreement and the other Loan Documents, the cancellation or expiration of all Letters of Credit and the termination of the Commitments, (A) the holders of a majority of the aggregate notional amount under all Hedge Agreements (including Hedge Agreements that have been terminated) or (B) if all Hedge Agreements have been terminated in accordance with their terms, the aggregate amount then due and payable (exclusive of expenses and similar payments but including any early termination payments then due) under such Hedge Agreements (Requisite Lenders or, if applicable, such holders being referred to herein as "Requisite Obligees"). In furtherance of the foregoing provisions of this Section 17(a), each Exchanger, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Exchanger that all rights and remedies hereunder may be exercised solely by Secured Party for the benefit of Lenders and Exchangers in accordance with the terms of this Section 17(a). (b) Secured Party shall at all times be the same Person that is Agent under the Credit Agreement. Written notice of resignation by Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute notice of resignation as Secured Party under this Agreement; and appointment of a successor Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute appointment of a successor Secured Party under this Agreement. Upon the acceptance of any appointment as Agent under subsection 9.5 of the Credit Agreement by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Secured Party under this Agreement, and the retiring Secured Party under this Agreement shall promptly (i) transfer to such successor Secured Party all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Secured Party under this Agreement, and (ii) execute and deliver to such successor Secured Party such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Secured Party of the security interests created hereunder, whereupon such retiring Secured Party shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Secured Party, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Secured Party hereunder. (c) Secured Party shall not be deemed to have any duty whatsoever with respect to any Exchanger until it shall have received written notice in form and substance satisfactory to Secured Party from a Grantor or the Exchanger as to the existence and terms of the applicable Hedge Agreement. Section 18. Additional Grantors. The initial Subsidiary Grantors hereunder shall be such of the Subsidiaries of Company as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, additional Subsidiaries of Company may become parties hereto as additional Grantors (each an "Additional Grantor"), by executing a Counterpart substantially in the form of Exhibit I annexed hereto. Upon delivery of any such Counterpart to Secured Party, notice of which is hereby waived by Grantors, each such Additional Grantor shall be a Grantor and shall be as fully a party hereto as if such Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Administrative Agent not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder. Section 19. Amendments; Etc. No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Secured Party and, in the case of any such amendment or modification, by Grantors; provided that this Agreement may be modified by the execution of a Counterpart by an Additional Grantor in accordance with Section 18 and Grantors hereby waive any requirement of notice of or consent to any such amendment. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. Section 20. Notices. Any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Secured Party shall not be effective until received; provided further that, if Secured Party changes its address to be used for purposes of this Section 20, and if Company does not have any actual knowledge of such address change, then, so long as Company continues to not have actual knowledge of such address change, the preceding proviso shall not be applicable and the effectiveness of notices to Secured Party shall be determined in accordance with the first sentence of this Section 20 without regard to the preceding proviso. For the purposes hereof, the address of each party hereto shall be as provided in subsection 10.8 of the Credit Agreement or as set forth under such party's name on the signature pages hereof or such other address as shall be designated by such party in a written notice delivered to the other parties hereto. Section 21. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of Secured Party in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. Section 22. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 23. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Section 24. Governing Law; Terms; Rules of Construction. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. Unless otherwise defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of California are used herein as therein defined. The rules of construction set forth in subsection 1.3 of the Credit Agreement shall be applicable to this Agreement mutatis mutandis. Section 25. Consent to Jurisdiction and Service of Process. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 20; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 25 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER CALIFORNIA LAW. Section 26. Waiver of Jury Trial. GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each Grantor and Secured Party acknowledge that this waiver is a material inducement for Grantors and Secured Party to enter into a business relationship, that Grantors and Secured Party have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Each Grantor and Secured Party further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 26 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. Section 27. Counterparts. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.   IN WITNESS WHEREOF, Grantors and Secured Party have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. SUNRISE MEDICAL, INC. By:_____________________________ Name: Title: Each of the entities listed on Schedule A annexed hereto By: _________________________________ on behalf of each of the entities listed on Schedule A annexed hereto Name: Title:   BANKERS TRUST COMPANY, as Secured Party By: ______________________________ Name: Title:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Schedule A Name   Notice Address for each Subsidiary Grantor Sunrise Medical HHG Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 Sunrise Medical CCG Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 DynaVox Systems Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 Sunrise Marin Holdings Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 SunMed Finance Inc. Attn Treasurer 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Name of Grantor Locations of Inventory Sunrise Medical HHG Inc. (Continued) 2060 Luna Rd., Suite 300, Carrollton, TX 75006   1550 Distribution Dr., Lithia Springs, GA 30057   1140 Windham Parkway, Romeoville, IL 60446   3371 E. Central Avenue, Fresno, CA 93725     Sunrise Medical CCG Inc. 5001 Joerns Drive, Stevens Point, WI 54481     DynaVox Systems Inc. 2100 Wharton Street, Suite 400, Pittsburgh, PA 15203     Sunrise Marin Holdings Inc. 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008     SunMed Finance Inc. 7477 E. Dry Creek Pkwy, Longmont, CO 80503   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------         SCHEDULE 1(c) TO SECURITY AGREEMENT Deposit Accounts Division Bank Name Department Address City-State Account Mngr. Account Name Account Number Account Type CCG Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, CCG, Inc. 1235106555 Payroll Account CCG Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, CCG, Inc. 7765-3-60344 Accounts Payable CCG Royal Bank of Canada 200 Bay Street Toronto, ON M5J 2J5 Canada Sunrise Medical, CCG, Inc. 101-065-1 Deposit Account Corporate Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, Inc. - Payroll Account 1455 3 02232 Payroll Account Corporate Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical,, Inc. 77 654-60339 Controlled Disbursement Account (Main Account) Corporate Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, Inc. Money Market Account 12571-53582 COR Account Corporate Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, PS/Savings Plan 12336-27071 PS/Savings Plan Corporate Salomon, Smith Barney 333 South Grand Avenue, Ste. 5200 Los Angeles, CA 90071 Harlan Spinner Sunrise Medical, Inc. 2041821618106 Money Market - Mutual Funds Corporate Salomon, Smith Barney 334 South Grand Avenue, Ste. 5200 Los Angeles, CA  90072 Harlan Spinner Sunrise Medical, Inc. Market Securities Account 2041821519274 Securities Account DynaVox PNC Bank Norwin Hills Office 8735 Norwin Avenue North Huntingdon, PA 15642-2744 Debra Lakatosh DynaVox Systems Inc. 10-0469-6679 Deposit Account DynaVox PNC Bank Norwin Hills Office 8735 Norwin Avenue North Huntingdon, PA 15642-2744 Debra Lakatosh DynaVox Systems Inc. 0001818330 DynaVox PNC Bank Norwin Hills Office 8735 Norwin Avenue North Huntingdon, PA 15642-2744 Debra Lakatosh DynaVox Systems Inc. - Payroll Account 1009268067 Payroll Account HHG Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc. 1233-1-30656 Payroll Account HHG Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc. 8765-4-63172 A/P HHG/Mobility Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc-Quickie - British Pounds account 10140003 SafeWire Funds Transfer Service HHG/Mobility Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc-Mobility Products 81884-04764 Wires, VA ACH's - rqst'd VA to use another acct - need to verify before closing HHG/PC Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc-PCP Division 8188204765 Business Deposit Account HHG/Respiratory Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc-Respiratory Products Development 12335-26492 P/R HHG/Respiratory Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez Sunrise Medical, HHG, Inc-Respiratory Products Development 8188-0-04766 A/P SunMed Finance Bank of America Global Client Services 333 South Beaudry Avenue, Unit 5583 Los Angeles, CA 90017-1466 Yolanda Hernandez SunMed Finance Inc. 7765-5-60348 SunMed Finance Wells Fargo Bank 6800 Van Nuys Blvd Van Nuys, CA 91405 Cecilia Alvarado SunMed Finance Inc. 0288-751019   Imprest (i.e. petty cash) accounts CCG Point Plus Credit Union 3101 Hoover Road, Stevens Point, WI 54481-0660 Sunrise Medical Corp 12257 Petty Cash HHG/Mobility First Merit 105 Court Street Elria, OH 44035 Sunrise Medical, HHG, Inc-Mobility Products (Formerly Quickie) 0001-14045-0 General-Checking wires HHG/Mobility Union Bank of California Fashion Fair Office 565 East Shaw Avenue Fresno, CA 93710 Sunrise Medical, HHG, Inc-Sunrise Mobility Petty Cash Account 12919705 Analyzed Business Checking Summary-Petty Cash HHG First Security Bank Belgrade, MT Sunrise Medical, HHG, Inc. 164905       -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 4(b) TO SECURITY AGREEMENT Locations of Inventory Name of Grantor Locations of Inventory Sunrise Medical HHG Inc. 7477 E. Dry Creek Pkwy, Longmont, CO 80503   2842 Business Park Ave., Fresno, CA 93727   100 DeVilbiss Drive, Somerset, PA. 15501   1032 N. 4th St., Baldwyn, Mississippi 38824   732 Cruiser Lane, Belgrade, MT 59714   33554 Pin Oak Parkway, Avon Lake, OH 44012   2815 Oregon St. Oshkosh, WI 54902   1401 Slate Hill Rd., Camp Hill, PA 17011   665 Independence Ave, Suite A Mechanicsburg, PA 17055 2060 Luna Rd., Suite 300, Carrollton, TX 75006   1550 Distribution Dr., Lithia Springs, GA 30057   1140 Windham Parkway, Romeoville, IL 60446   3371 E. Central Avenue, Fresno, CA 93725 Sunrise Medical CCG Inc. 5001 Joerns Drive, Stevens Point, WI 54481 DynaVox Systems Inc. 2100 Wharton Street, Suite 400, Pittsburgh, PA 15203 Sunrise Marin Holdings Inc. 2382 Faraday Avenue, Suite 200 Carlsbad, CA 92008 SunMed Finance Inc. 7477 E. Dry Creek Pkwy, Longmont, CO 80503     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 4(d) TO SECURITY AGREEMENT Office Locations Name of Grantor Office Locations Sunrise Medical HHG Inc. 7477 E. Dry Creek Pky, Longmont, CO 80503 Sunrise Medical CCG Inc. 5001 Joerns Drive, Stevens Point, WI 54481 DynaVox Systems Inc. 2100 Wharton Street, Suite 400, Pittsburgh, PA 15203 Sunrise Marin Holdings Inc. 2382 Faraday Avenue, Suite 200, Carlsbad, CA 92008 SunMed Finance Inc. 7477 E. Dry Creek Pkwy, Longmont, CO 80503     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 4(e) TO SECURITY AGREEMENT Other Names Other Names (Within the past 5 years only)   Name of Grantor Other Names Sunrise Medical HHG Inc. Quickie Designs Inc. Jay Medical Ltd. Guardian Products Inc. DeVilbiss Healthcare Inc. Mechanical Application Designs, Inc. HHE Healthcare Consulting, LLC Sunrise Medical CCG Inc. Sunrise Habitat Inc. Joerns Healthcare Inc. DynaVox Systems Inc. Sentient Systems Technology, Inc. Sunrise Marin Holdings Inc.   SunMed Finance Inc.       -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 4(g) TO SECURITY AGREEMENT Filing Offices Grantor   Filing Offices  Sunrise Medical, Inc. California Secretary of State Delaware Secretary of State Sunrise Medical HHG Inc. California Secretary of State Colorado Secretary of State Georgia Superior Court Clerks' Cooperative Authority Illinois Secretary of State Mississippi Secretary of State Office of the Chancery Clerk in Lee County Office of the Chancery Clerk in Prentiss County Montana Secretary of State Ohio Secretary of State Office of the County Recorder in Lorain County Pennsylvania * Department of State South Carolina Secretary of State Texas Secretary of State Wisconsin Department of Financial Institutions Sunrise Medical, CCG Inc.  California Secretary of State Wisconsin Department of Financial Institutions DynaVox Systems Inc. California Secretary of State Pennsylvania Department of State Office of the Prothonotary in Allegheny County Sunrise Marin Holdings Inc. California Secretary of State SunMed Finance Inc. California Secretary of State Colorado Secretary of State Delaware Secretary of State PA is a dual filing state, but a county filing is required only when the debtor has a place of business in only one county.   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   EXHIBIT I TO SECURITY AGREEMENT FORM OF COUNTERPART This COUNTERPART (this "Counterpart"), dated _______, is delivered pursuant to Section 18 of the Security Agreement referred to below. The undersigned hereby agrees that this Counterpart may be attached to the Security Agreement, dated as of _______________, _____ (as it may be from time to time amended, modified or supplemented, the "Security Agreement"; capitalized terms used herein not otherwise defined herein shall have the meanings ascribed therein), among ____________________, the other Grantors named therein, and Bankers Trust Company, as Secured Party. The undersigned by executing and delivering this Counterpart hereby becomes a Grantor under the Security Agreement in accordance with Section 18 thereof and agrees to be bound by all of the terms thereof. Without limiting the generality of the foregoing, the undersigned hereby: (i)  authorizes the Secured Party to add the information set forth on the Schedules to this Agreement to the correlative Schedules attached to the Security Agreement; (ii)  agrees that all Collateral of the undersigned, including the items of property described on the Schedules hereto, shall become part of the Collateral and shall secure all Secured Obligations; and (iii)  makes the representations and warranties set forth in the Security Agreement, as amended hereby, to the extent relating to the undersigned. [NAME OF ADDITIONAL GRANTOR] By: ___________________________ Name: Title:   ____________________ 1The Schedules to the Counterpart should include copies of all Schedules that identify collateral to be granted by the Additional Grantor.     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCHEDULE 1.1 RESTRUCTURING CHARGES   Restructuring Charges     Planned P&L Expenses Cumulative P&L Expenses Fiscal 2001 $22,443,000 $22,443,000 Fiscal 2002 14,246,000 36,689,000 Fiscal 2003 19,699,000 56,388,000 Fiscal 2004 1,389,000 57,777,000 Total $57,777,000       Restructuring Capital Expenditures     Planned Capex Cumulative Capex Fiscal 2001 $4,500,000 $4,500,000 Fiscal 2002 9,300,000 13,800,000 Fiscal 2003 3,600,000 17,400,000 Fiscal 2004 0 17,400,000 Total $17,400,000     All the above Restructuring Charges and Restructuring Capital Expenditures are consistent with the detailed plans provided to the Agent.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       SCHEDULE 4.1C CORPORATE, CAPITAL AND OWNERSHIP STRUCTURE   Capital Structure unaudited June 2, 2000   % of total Total debt, per GAAP $156,136,000 37% Preferred stock 0 0% Shareholders equity, per GAAP 261,655,000 63% Total Capitalization $417,791,000 100%   Corporate and ownership structure The corporate ownership structure is annotated on the subsidiary organizational charts in Schedule 5.1   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 5.1 SUBSIDIARIES OF COMPANY Domestic     International     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 5.5 REAL PROPERTY ASSETS Owned Properties Address Country     1032 N. 4th St., Baldwyn, Mississippi 38824 USA 100 DeVilbiss Drive, Somerset, PA. 15501 USA 732 Cruiser Lane, Belgrade, MT 59714 USA D-69254 Malsch/HD Germany Queensway, Stem Lane, New Milton, Hampshire England Sunrise Business Park, High Street, Wollaston, West Midlands, DY8 4PS England Z.I. La Planche 37210 Rochecorbon France Poligono Bakiola, 41, 48498 Arrankudiaga, Vizcaya (Main Address) Spain   Leased Properties Address Country 5001 Joerns Drive, Stevens Point, WI 54481 USA 2842 Business Park Ave., Fresno, CA 93727 USA 2382 Faraday Ave, Suite 200 Carlsbad, CA 92008 USA 4175 Guardian St., Simi Valley, CA 93062 USA 33554 Pin Oak Parkway, Avon Lake, OH 44012 USA 2815 Oregon St. Oshkosh, WI 54902 USA 7477 E Drycreek Pky, Longmont, CO 80503 USA 3833 Redwood Hwy, San Rafael, CA 94912 USA 1401 Slate Hill Rd., Camp Hill, PA 17011 USA 665 Independence Ave, Suite A Mechanicsburg, PA 17055 USA 2060 Luna Rd., Suite 300, Carrollton, TX 75006 USA 1550 Distribution Dr., Lithia Springs, GA 30057 USA 1140 Windham Parkway,  Romeoville, IL 60446 USA 2100 Wharton St., Ste 400,  Pittsburgh, PA USA 400 Arbor Lake Dr., Suite B850, Columbia, SC USA 3371 E. Central Avenue, Fresno, CA 93725 USA 2233 Faraday Ave, Suite H&I, Carlsbad, CA 92008 USA 65 W. Easy St, #106, Simi Valley CA 93065 USA 811 S. Sherman St., Longmont, CO 80501 USA 350 Merrydale Ave., San Rafael, CA 94912 USA 237 Romina Dr., Unit 3, Concord, Ontario L4K 4V3 Canada 9633 Clement St, LaSalle, Quebec H8R 4B4 Canada Calle 1 Poniente, #20, Ciudad Industrial Nueva, Tijuana Mexico Privada Misiones #110 Parque Industrial Misiones, Tijuana, 22575 Mexico Unit 7, 15 Carrington Rd, Castle Hill NSW 2154 Australia Zone industrielle, Route de Meslay, 37210 Parcay-Meslay France 14-16 rue du Parc, 91330 Yerres France Via Riva 20, Montale, 29100 Piacenza Italy Luckhalde 14, CH03074 Muri b., Bern Switzerland Pascalbaan 3, 3439 MO, Nieuwegein The Netherlands Rehabsenteret, 1450 Nesoddtangen Norway Datavagen 65, S-436 32 Askim Sweden Jarfella, Kavlinge (small sales offices) Sweden Various storage/warehouse facilities used by Sunrise UK. UK Unit 7B, Westlands Indsustrial Estates, Blackburn Road UK Poligono Bakiola 48498 Arrankudiaga , Vizcaya (6 units) Main address Spain     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 5.6 LITIGATION   None.       -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 5.11 CERTAIN EMPLOYEE BENEFIT PLANS   > 1. The Company has paid pension benefits to former employees in the past. The > Company is no longer providing these benefits to former or retired > employees and all such pension plans have been annuitized as of the > Closing Date. > 2. The Company is currently providing a medical plan for less than 75 retired > employees. > >   > >   > > -------------------------------------------------------------------------------- > > -------------------------------------------------------------------------------- > >   > >   SCHEDULE 5.13 ENVIRONMENTAL MATTERS   The property that we own in Somerset, Pennsylvania (see schedule 5.5) was put on an EPA clean-up list in 1999. We are working closely with the EPA to get off the list by the end of calendar year 2000. All testing that has been conducted indicates that the site is below the actionable levels established by the EPA.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 7.1 CERTAIN EXISTING INDEBTEDNESS     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 7.2 CERTAIN EXISTING LIENS   Debt secured by liens Collateral pledged     Barclays ECSC Loan All real property of Sunrise Medical Ltd. located in Stourbridge, West Midlands, England.     German mortgage All real property of Sunrise Medical Germany located in Malsch, Germany.     Various Capital Leases Various assets being financed by such Capital Leases including vehicles, photocopiers and other fixed assets.   Note that a lien exists against domestic receivables to secure the $40 million term loan. This loan will be repaid and these liens terminated using the proceeds of the Obligations.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 7.3 CERTAIN EXISTING INVESTMENTS Type of Investment Borrower/Issuer Amount       Installment loans Various customers of the Company Less than $15 million Installment notes Bentley Forbes Group $4,245,750 Deferred consideration Fleet Business Credit Corporation $922,000*   * Represents the net present value as of the date of the investment     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     SCHEDULE 7.4 CERTAIN CONTINGENT OBLIGATIONS   Type of Investment Borrower/Issuer Amount       Shared loss agreement Copelco Capital, Inc. Less than $2,000,000* Shared loss agreement VGM Financial Services Less than $1,000,000* Shared loss agreement DLL Financial Services Less than $1,000,000*         * The amount of contingent liabilities under shared loss agreements fluctuates with new fundings in the ordinary course of business.  

QuickLinks -- Click here to rapidly navigate through this document EXECUTION COPY FOURTH AMENDMENT TO CREDIT AGREEMENT     This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), made and entered into as of May 31, 2000, is by and between MARTEN TRANSPORT, LTD., a Delaware corporation (the "Borrower"), the banks which are signatories hereto (individually, a "Bank" and, collectively, the "Banks"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as agent for the Banks (in such capacity, the "Agent"). RECITALS     1.  The Borrower and U.S. Bank National Association, in its capacity as a Bank and the Agent, entered into a Credit Agreement dated as of October 30, 1998, as amended by that certain First Amendment to Credit Agreement dated as of January 3, 2000, and as amended by that certain Second Amendment to Credit Agreement dated as of January 19, 2000, and as amended by that certain Third Amendment to Credit Agreement dated as of April 5, 2000 (as amended, the "Credit Agreement"); and     2.  U.S. Bank National Association, in its capacity as a Bank, has extended to the Borrower, pursuant to the terms of the Credit Agreement, a revolving loan in the amount of $40,000,000. The Northern Trust Company has extended to the Borrower, pursuant to the terms of the Credit Agreement, a revolving loan in the amount of $10,000,000. The Borrower has requested, among other things, that the Revolving Commitment Amount under the Credit Agreement be increased to $60,000,000, and U.S. Bank National Association is willing to increase its revolving loan amount to $45,000,000, and The Northern Trust Company is willing to increase its revolving loan amount to $15,000,000; and     3.  The Borrower desires to amend certain other provisions of the Credit Agreement, and the Banks and Agent have agreed to make such amendments, subject to the terms and conditions set forth in this Amendment. AGREEMENT     NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:     Section 1.  Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, unless the context shall otherwise require.     Section 2.  Amendments.  The Credit Agreement is hereby amended as follows:     2.1  Definitions.  Section 1.1 of the Credit Agreement is further amended by adding the following definition of "Second Fee Letter":     "Second Fee Letter": The confidential letter, dated as of May 31, 2000, from the Agent to the Borrower.     2.2  Indebtedness.  Section 6.13(d) of the Credit Agreement is amended to read in its entirety as follows:     6.13(d) Without duplication of Indebtedness under Section 6.13(c), Indebtedness secured by Liens permitted by Section 6.14(c) hereof.     2.3  Liens.  Section 6.14(c) of the Credit Agreement is amended in its entirety to read as follows:     6.14(c) Liens securing Indebtedness which, at the time of determination, does not exceed an amount equal to (i) 15% of consolidated net worth of the Borrower and its Subsidiaries, less -------------------------------------------------------------------------------- (ii) the sum of (1) the Indebtedness of the Borrower which is secured by a Lien and (2) the Indebtedness of any Subsidiary, excluding Indebtedness of any Subsidiary owed to the Borrower or any wholly-owned Subsidiary of the Borrower.     Section 3.  Schedule I.  The Credit Agreement is hereby amended to include Schedule I in the form attached hereto.     Section 4.  Effectiveness of Amendments.  The amendments contained in this Amendment shall become effective upon delivery by the Borrower of, and compliance by the Borrower with, the following:     4.1 This Amendment and two new Revolving Notes payable to U.S. Bank National Association, in its capacity as a Bank, and The Northern Trust Company, each in the principal amount of $5,000,000 in the form of Exhibit 4.1 hereto (the "Revolving Notes") duly executed by the Borrower.     4.2 A copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Amendment and the Revolving Notes certified as true and accurate by its Secretary or Assistant Secretary, along with a certification by such Secretary or Assistant Secretary (i) certifying that there has been no amendment to the Certificate of Incorporation or Bylaws of the Borrower since true and accurate copies of the same were delivered to the Lender with a certificate of the Secretary of the Borrower dated October 30, 1998, and (ii) identifying each officer of the Borrower authorized to execute this Amendment, the Revolving Notes, and any other instrument or agreement executed by the Borrower in connection with this Amendment (collectively, the "Amendment Documents"), and certifying as to specimens of such officer's signature and such officer's incumbency in such offices as such officer holds.     4.3 A certificate of an officer of the Borrower certifying that, as of the date hereof, no Lien granted by or Indebtedness owing by the Borrower exceeds that permitted under the related financial covenants in the Senior Unsecured Loan Documents.     4.4 Certified copies of all documents evidencing any necessary corporate action, consent or governmental or regulatory approval (if any) with respect to this Amendment.     4.5 An opinion of counsel to the Borrower in the form of Exhibit 4.4 attached to this Amendment, duly executed by said counsel.     4.6 A copy of the Second Fee Letter, dated as of the date hereof, duly executed by the Borrower.     4.7 A good standing certificate for the Borrower from the States of Delaware, Wisconsin, California, Oregon, and Georgia issued not more than 30 days prior to the date of this Amendment.     4.8 All fees, costs and expenses due and payable pursuant to the Second Fee Letter, payable in Immediately Available Funds on the date hereof.     4.9 The Borrower shall have satisfied such other conditions as specified by the Agent and the Banks, including payment of all unpaid legal fees and expenses incurred by the Agent through the date of this Amendment in connection with the Credit Agreement and the Amendment Documents.     Section 5.  Representations, Warranties, Authority, No Adverse Claim.       5.1  Reassertion of Representations and Warranties, No Default.  The Borrower hereby represents that on and as of the date hereof and after giving effect to this Amendment (a) all of the representations and warranties contained in the Credit Agreement are true, correct and complete in all respects as of the date hereof as though made on and as of such date, except for changes permitted by the terms of the Credit Agreement, and (b) there will exist no Default or Event of Default under the Credit Agreement as amended by this Amendment on such date which has not been waived by the Agent and the Banks. 2 --------------------------------------------------------------------------------     5.2  Authority, No Conflict, No Consent Required.  The Borrower represents and warrants that the Borrower has the power and legal right and authority to enter into the Amendment Documents and has duly authorized as appropriate the execution and delivery of the Amendment Documents and other agreements and documents executed and delivered by the Borrower in connection herewith or therewith by proper corporate, and none of the Amendment Documents nor the agreements contained herein or therein contravenes or constitutes a default under any agreement, instrument or indenture to which the Borrower is a party or a signatory or a provision of the Borrower's Certificate of Incorporation, Bylaws or any other agreement or requirement of law in which the consequences of such default or violation could have a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, or result in the imposition of any Lien on any of its property under any agreement binding on or applicable to the Borrower or any of its property except, if any, in favor of the Agent on behalf of the Banks. The Borrower represents and warrants that no consent, approval or authorization of or registration or declaration with any Person, including but not limited to any governmental authority, is required in connection with the execution and delivery by the Borrower of the Amendment Documents or other agreements and documents executed and delivered by the Borrower in connection therewith or the performance of obligations of the Borrower therein described, except for those which the Borrower has obtained or provided and as to which the Borrower has delivered certified copies of documents evidencing each such action to the Agent.     5.3  No Adverse Claim.  The Borrower warrants, acknowledges and agrees that no events have taken place and no circumstances exist at the date hereof which would give the Borrower a basis to assert a defense, offset or counterclaim to any claim of the Agent or the Banks with respect to the Obligations or the Borrower's obligations under the Credit Agreement as amended by this Amendment.     Section 6.  Affirmation of Credit Agreement, Further References.  The Agent, the Banks, and the Borrower each acknowledge and affirm that the Credit Agreement, as hereby amended, is hereby ratified and confirmed in all respects and all terms, conditions and provisions of the Credit Agreement, except as amended by this Amendment, shall remain unmodified and in full force and effect. All references in any document or instrument to the Credit Agreement are hereby amended and shall refer to the Credit Agreement as amended by this Amendment. All of the terms, conditions, provisions, agreements, requirements, promises, obligations, duties, covenants and representations of the Borrower under such documents and any and all other documents and agreements entered into with respect to the obligations under the Credit Agreement are incorporated herein by reference and are hereby ratified and affirmed in all respects by the Borrower.     Section 7.  Merger and Integration, Superseding Effect.  This Amendment, from and after the date hereof, embodies the entire agreement and understanding between the parties hereto and supersedes and has merged into this Amendment all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment, shall control with respect to the specific subjects hereof and thereof.     Section 8.  Severability.  Whenever possible, each provision of this Amendment and the other Amendment Documents and any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be interpreted in such manner as to be effective, valid and enforceable under the applicable law of any jurisdiction, but, if any provision of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be held to be prohibited, invalid or unenforceable under the applicable law, such provision shall be ineffective in such jurisdiction only to the extent of such prohibition, invalidity or unenforceability, without invalidating or rendering unenforceable the remainder of such provision or the remaining provisions of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or 3 -------------------------------------------------------------------------------- relating hereto or thereto in such jurisdiction, or affecting the effectiveness, validity or enforceability of such provision in any other jurisdiction.     Section 9.  Successors.  The Amendment Documents shall be binding upon the Borrower, the Banks, and the Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Banks, and the Agent and the successors and assigns of the Banks and the Agent.     Section 10.  Legal Expenses.  As provided in Section 9.2 of the Credit Agreement, the Borrower agrees to reimburse the Agent, upon execution of this Amendment, for all reasonable out-of-pocket expenses (including attorney' fees and legal expenses of Dorsey & Whitney LLP, counsel for the Agent) incurred in connection with the Credit Agreement, including in connection with the negotiation, preparation and execution of the Amendment Documents and all other documents negotiated, prepared and executed in connection with the Amendment Documents, and in enforcing the obligations of the Borrower under the Amendment Documents, and to pay and save the Agent and the Banks harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of the Amendment Documents, which obligations of the Borrower shall survive any termination of the Credit Agreement.     Section 11.  Headings.  The headings of various sections of this Amendment have been inserted for reference only and shall not be deemed to be a part of this Amendment.     Section 12.  Counterparts.  The Amendment Documents may be executed in several counterparts as deemed necessary or convenient, each of which, when so executed, shall be deemed an original, provided that all such counterparts shall be regarded as one and the same document, and either party to the Amendment Documents may execute any such agreement by executing a counterpart of such agreement.     Section 13.  Governing Law.  THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES. 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first above written.     MARTEN TRANSPORT, LTD.           By:                 --------------------------------------------------------------------------------           Title:                 --------------------------------------------------------------------------------           Address:       129 Marten Street Mondovi, Wisconsin 54755   Revolving Commitment Amount:       U.S. BANK NATIONAL ASSOCIATION     In its individual corporate capacity and as Agent $45,000,000                   By:                 --------------------------------------------------------------------------------           Title:                 --------------------------------------------------------------------------------           Address:       601 Second Avenue South, MPFP0602 Minneapolis, MN 55402-4302 ATTN: Michael J. Reymann   Revolving Commitment Amount:       THE NORTHERN TRUST COMPANY   $15,000,000       By:                 --------------------------------------------------------------------------------           Title:                 --------------------------------------------------------------------------------           Address:       50 South LaSalle Street Chicago, IL 60675 ATTN: Daniel Hintzen 5 -------------------------------------------------------------------------------- SCHEDULE I TO THE CREDIT AGREEMENT NAME AND NOTICE ADDRESS OF BANK --------------------------------------------------------------------------------   REVOLVING COMMITMENT AMOUNT --------------------------------------------------------------------------------   U.S. Bank National Association 601 Second Avenue South, MPFP0602 Minneapolis, MN 55402-4302 ATTN: Michael J. Reymann       $45,000,000   The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 ATTN: Daniel Hintzen       $15,000,000 Sch. I-Page 1 -------------------------------------------------------------------------------- QUICKLINKS FOURTH AMENDMENT TO CREDIT AGREEMENT RECITALS AGREEMENT SCHEDULE I TO THE CREDIT AGREEMENT

EXHIBIT 10.39 E*TRADE GROUP, INC. MANAGEMENT CONTINUITY AGREEMENT June 9, 1999 Mitchell H. Caplan Dear Mitchell:         We are pleased to offer you the position of President and Chief Executive Officer. This letter, if accepted, sets forth the terms of your employment with E*TRADE Group, Inc. (hereafter “ E*TRADE” or the “Company”), following the Closing. As used in this agreement, “E*TRADE” and “Company” refer to E*TRADE Group, Inc. and each of its subsidiaries including, after the Closing, Telebanc Financial Corporation. As a full-time employee, you would receive an annual base salary of $ 250,000, paid biweekly, less all applicable deductions. All Telebanc Financial Corporation (“TFC”) and its subsidiaries’ employee benefits will continue uninterrupted until E*TRADE transitions your benefits coverage from TFC benefits to E*TRADE benefits. The transition to E*TRADE benefits is expected to occur during the first few months after the Closing. The Company wants to make this transition as smooth as possible . Following the transition, you will be eligible to participate in Company-sponsored benefits on the same basis as other full-time E*TRADE employees.         This offer is contingent on the occurrence of the Closing of E*TRADE’s acquisition (the “Acquisition”) of TFC and, if you accept this offer, it would take effect as of that Closing Date. The remaining terms of your employment would be as follows: Bonus Participation         You will be eligible to receive a Closing Period Bonus within thirty (30) days of the Closing Date equal to a pro-rata portion of the TFC bonus you received for the 1998 calendar year (or the annualized equivalent if you were employed for less than one (1) full year by TFC during 1998) which is $ 250,000 (the “1998 Bonus Amount”). The amount of the Closing Period Bonus for which you will be eligible will be equal to the 1998 Bonus Amount times a fraction, the numerator of which will be the number of days in 1999 up until the Closing and the denominator of which will be 365. You will earn this Closing Period Bonus if TFC meets its performance objectives, as previously agreed to by TFC and E*TRADE, for the period January 1, 1999 through the Closing Date. The determination as to whether you have met the performance objectives sufficient to receive the Closing Period Bonus will be made by the President of TFC, Mitch Caplan. The C losing Period Bonus will be paid no later than thirty (30) days after the Closing Date.         You will be eligible to receive a bonus not less than the 1998 Bonus upon your completion of twelve (12) months of continuous service to E*TRADE following the Closing (the “Term”), but only if E*TRADE pays a Team Quality Incentive (“TQI”) bonus either the period running from October 1, 1999 through March 31, 2000 or April 1, 2000 through September 30, 2000 (the “Term Bonus”). If you voluntarily resign your employment, except for “Good Reason,” you will not earn or be paid any Term Bonus. If your employment is terminated by E*TRADE during the Term without “Cause,” or in the event you resign for “Good Reason,” then you will be paid a pro-rata share of the Term Bonus for the period measured from the Closing until the date of the termination of your employment. This payment will be made on the date of termination. If your employment is terminated by E*TRADE during the Te rm for “Cause,” then you will not earn or be paid any Term Bonus.         If your employment continues beyond the Term, you would then be eligible to participate in the E*TRADE TQI Bonus Program subject to the same terms and conditions applicable to other E*TRADE employees. Stock Options         E*TRADE will recommend to the Company’s Board of Directors (the “Board”) that at the next meeting in which the Board grants stock options you be granted an option to purchase 50,000 shares of the Company’s common stock at an exercise price per share equal to the fair market value of the Company’s common stock on the effective date of the grant. This stock option grant would be contingent on you executing E*TRADE’ s standard stock option -------------------------------------------------------------------------------- agreement, and will be subject to the E*TRADE 1996 Stock Incentive Plan. Your stock option would be subject to a one year cliff vesting date, and will vest at 25% per year over a four (4) year period, pursuant to the E*TRADE Plan and your stock option agreement. Term of Employment         You commit to remaining employed by E*TRADE for a period of twelve (12) months following the Closing Date (the “Term”). However, you will be permitted to resign your employment with “Good Reason” without being deemed to have breached this Agreement. A resignation for “Good Reason” will occur if you resign your employment within thirty (30) days after the occurrence of either of the following events: (i) a requirement by E*TRADE that you relocate to an office more than thirty-five (35) miles from your current office; or (ii) a substantial reduction in your base salary, title, compensation, duties or benefits, as described herein. In any event, E*TRADE may terminate your employment at any time for any reason during this period, with or without cause, by giving written notice of such termination.         If E*TRADE terminates your employment “Without Cause” or if you resign for Good Reason during the Term, then E*TRADE will continue to pay your base salary, less applicable deductions, through the earlier of: (i) six (6) months; or (ii) upon the date you commence employment elsewhere (the “Severance Period”). If you commence employment elsewhere during the Severance Period, E*TRADE will pay the difference between your base salary effective on the date your employment with E*TRADE terminates, and your new base salary. Such severance payment would be in lieu of any entitlement you may have to notice of termination, pay in lieu of notice of termination, or severance pay under any Company policy or practice. If you are eligible to receive a greater amount of severance from any other source or based on any written commitment, then you will have the option of selecting that severance payment or this one, but not both. All benefits and future stock and option vesting would terminate as of the date of termination of your employment. You would, of course, be paid your salary through your date of termination and for the value of all unused vacation earned through that date, and be allowed to continue your medical coverage to the extent provided for by COBRA, but you would not be entitled to any additional payments or benefits except as set forth herein. You would be allowed to exercise your vested options during the time period set forth in and in accordance with your option agreement and Stock Option Assumption Agreement.         If the Company were to terminate your employment for “Cause” within twelve (12) months after the Closing Date, then you would be paid all salary and benefits, as well as the value of your accrued but unused vacation, through the date of termination of your employment, but nothing else. A termination for “Cause” shall mean a termination for any of the following reasons: (i) your material failure to perform the duties of your position after receipt of a written warning specifying the performance problem, provided that you are given a thirty (30) day opportunity to cure; (ii) engaging in misconduct as set out in the E*TRADE Code of Conduct published on the Company’s internal web site; (iii) being convicted of a felony; (iv) committing an act of fraud against, or the misappropriation of property belonging to, the Company or any of its employees; or (v) a material breach of this agreement or of any c onfidentiality or proprietary information agreement between you and the Company. E*TRADE will provide written notice of the reason for termination in the case of any termination for Cause. A termination for any other reason shall be a termination “ Without Cause.”         If your employment were to continue after twelve (12) months beyond the Closing Date, then your employment would be on an “at-will” basis. This means that either you or E*TRADE could terminate your employment at any time for any reason with or without cause and without the obligation to pay you, or your right to, any severance payment except as may be provided at such time under E*TRADE’s employee benefit plans for which you are eligible. Your Position         You will initially have the title of President and Chief Executive Officer. You will have whatever reasonable duties are assigned to you consistent with your title and position. E*TRADE may change your title, duties, compensation, and benefits as it reasonably sees fit. Non-Competition         You understand and agree that this agreement is entered into in connection with the acquisition by E*TRADE of all of the outstanding stock of TFC. You further understand and agree that you were a substantial shareholder or optionholder of TFC; a key and significant member of the management of TFC; and that E*TRADE -------------------------------------------------------------------------------- paid substantial consideration in order to purchase your stock and/or option interest in TFC. In addition, the parties agree that, prior to acquisition by E*TRADE of the stock of TFC, TFC had customers in each of the fifty states of the United States. E*TRADE represents and you understand that, following the acquisition by E*TRADE of the stock of TFC, E*TRADE will continue conducting such business in all parts of the United States.         You agree that during your employment with E*TRADE you will not engage in any other employment, business, or business-related activity unless you receive E*TRADE’s prior written approval to hold such outside employment or engage in such business or activity. Such written approval will not be unreasonably withheld if such outside employment, business or activity would not in any way be competitive with the business or proposed business of E*TRADE or otherwise conflict with or adversely affect in any way your performance of your employment obligations to E*TRADE.         You acknowledge and agree that as part of performing your job duties during your employment with TFC, you had access to highly sensitive Proprietary Information (as defined in the attached Proprietary Information and Inventions Agreement), including confidential information and trade secrets related to the development of TFC’s business model, pricing strategy, product positioning, competitive analysis, marketing strategy, and other information that would be highly injurious if divulged to or used by a competitor. You also acknowledge and agree that in your capacity as President and Chief Executive Officer you were involved in top-level decisions related to the design, development, marketing and sale of each of TFC’s online, telephonic, and ATM banking products and services and online securities brokerage products and services (hereafter referred to as the “the Business”). You further acknowledge and agree that as President an d Chief Executive Officer you will continue to have access, and be involved in decisions regarding, Proprietary Information of E*TRADE including the Company’s business model, pricing strategy, product positioning, competitive analysis, marketing strategy and other highly sensitive and confidential information. You agree that as pioneers in the field of online banking, TFC and E*TRADE have made substantial investments in creating unique business approaches to banking, which other banks and businesses will have incentive to replicate; hence, TFC had and now E*TRADE has a substantial interest in ensuring that its competitors do not gain access to the proprietary knowledge that you acquired during your employment with TFC or E*TRADE.         Therefore, commencing on the Closing Date and continuing for one (1) year from the date of termination of your employment with E*TRADE, except as provided below, you will not, as an employee, agent, consultant, advisor, independent contractor, general partner, officer, director, stockholder, investor, lender or guarantor of any corporation, partnership or other entity, or in any other capacity directly or indirectly:         1.  engage in any activity in which you participate, supervise or advise in the design, development, marketing, sale or servicing of any online, telephonic or ATM banking product or service, or any online securities brokerage product or service, in the United States. Notwithstanding the foregoing, nothing in this paragraph would prevent you from working within the banking industry for an organization in which online banking products or services, or online securities brokerage products or services do not constitute a substantial portion of its business, so long as you do not engage in any activity in which you participate, supervise or advise in the design, development, marketing, sale or servicing of any online or telephonic banking product or service, or any online securities brokerage product or service.         2.  induce, solicit or encourage any individual who was employed with the Company within six (6) months of the termination date of your employment with the Company to leave the Company for any reason, or to employ, interview or arrange to have business opportunities offered to any such individual;         3.  permit your name to be used in connection with a business which is competitive with or substantially similar to the Business; or         4.  communicate with any individual or entity that is a customer of the Company for the purpose of soliciting or offering services substantially similar to the Business, or request, suggest, encourage or advise in any manner, any individual or entity who is presently a customer served to withdraw, curtail, limit, cancel, terminate or not renew their existing or future business with the Company or its affiliates.         Notwithstanding the foregoing, you may own, directly or indirectly, solely as an investment, up to one percent (1%) of any class of “publicly traded securities” of any person or entity which owns a business that is competitive or substantially similar to the Business. The term “publicly traded securities” shall mean securities that -------------------------------------------------------------------------------- are traded on a national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System. Enforcement of Non-Competition         You acknowledge that the services that you provided to TFC, and that you will provide to E*TRADE under this Agreement, are unique and that irreparable harm will be suffered by E*TRADE in the event of a material breach by you of any of your obligations under this agreement, and that E*TRADE will be entitled, in addition to its other rights, to enforce by an injunction or decree of specific performance the obligations set forth in this agreement.         If any restriction set forth in the Non-Competition provision section is found by a court to be unreasonable, then the parties agree, and hereby submit, to the reduction and limitation of such prohibition to such area or period as shall be deemed reasonable. In addition, the parties agree that if any provision of the Non-Competition section is found to be unenforceable, it shall not affect the enforceability of the remaining provisions and the court shall enforce all remaining provisions to the extent permitted by law.         You agree that if the Company establishes that you, or those acting in concert with you or on your behalf, materially violate the Non-Competition provision in any way, the Company shall be entitled to recover the reasonable attorneys’ fees and litigation expenses incurred, arising out of or relating to the Company’s efforts to prevent the breach, to establish that a breach has occurred, to enforce the Non-Competition provisions or to seek to redress a breach, including any appeals if necessary. If the Company fails to establish that you, or those acting in concert with you or on your behalf, have materially violated any of the Non-Competition provisions in any way, you shall be entitled to reimbursement of reasonable attorneys’ fees and litigation expenses incurred in your defense. Arbitration         The parties agree that any and all disputes between us which arise out of your employment, the termination of your employment, or under the terms of this Agreement, except as expressly noted below, shall be resolved through final and binding arbitration. This shall include, without limitation, disputes relating to this Agreement, any disputes regarding your employment by E*TRADE or the termination thereof, claims for breach of contract or breach of the covenant of good faith and fair dealing, and any claims of discrimination or other claims under any federal, state or local law or regulation now in existence or hereinafter enacted and as amended from time to time concerning in any way the subject of your employment with E*TRADE or its termination. The only claims not covered by this section are the following: (i) claims arising out of your violation or alleged violation of the Non-Competition provisions in this agreement; (ii)  claims for benefits under the unemployment insurance or workers’ compensation laws (or claims which by law must be adjudicated in a court of law); and (iii) claims concerning the validity, infringement or enforceability of any trade secret, patent right, copyright, trademark or any other intellectual property held or sought by E*TRADE, or which E*TRADE could otherwise seek; in each of these instances such disputes or claims shall not be subject to arbitration but, rather, will be resolved pursuant to applicable law. Binding arbitration will be conducted in the Arlington, Virginia area in accordance with the rules and regulations of the American Arbitration Association. If, however, you do not reside within one hundred (100) miles of Arlington at the time the dispute arose, then the arbitration may take place in the largest metropolitan area within fifty (50) miles of your place of residence when the dispute arose. The parties will split the cost of the arbitration filing and hearing fees and the cost of t he arbitrator; each side will bear its own attorneys’ fees, unless otherwise decided by the arbitrator. You understand and agree that arbitration shall be instead of any civil litigation, that each side waives its right to a jury trial, and that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. Miscellaneous Provisions         This agreement and the accompanying Proprietary Information and Inventions Agreement will be the entire agreement between you and E*TRADE relating to your employment and the additional matters provided for herein. This agreement supersedes and replaces (i) any prior verbal or written agreements between the parties except as provided for herein, and (ii) any prior verbal or written agreements between the undersigned employee and TFC relating to the subject matter hereof. This Agreement may be amended or altered only in a writing signed by you and the Vice President, Associates and Work Environment of E*TRADE. --------------------------------------------------------------------------------         This Agreement shall be construed and interpreted in accordance with the laws of the State of California. Each provision of this Agreement is severable from the others, and if any provision hereof shall be to any extent unenforceable it and the other provisions shall continue to be enforceable to the full extent allowable, as if such offending provision had not been a part of this Agreement. This offer is also contingent on you executing the E*TRADE Proprietary Information and Invention Agreement, a copy of which is attached hereto.         If you have any questions about this offer, please contact me at (650) 842-8797. Please sign and date this letter below and return it to me.                                                                                                                       Sincerely,      E*TRADE GROUP, INC.      /s/ Jerry A. Dark --------------------------------------------------------------------------------      Jerry A. Dark  Vice President, Associates and Work Environment I agree to the terms and conditions in this offer. Dated: May 31, 1999      /s/ Mitchell H. Caplan --------------------------------------------------------------------------------      Signature     

SEVENTH AMENDMENT TO THE CONNECTICUT NATURAL GAS CORPORATION OFFICERS RETIREMENT PLAN TRUST AGREEMENT This Agreement made as of the 25th day of April, 2000, by and between the Connecticut Natural Gas Corporation, a Connecticut corporation with its principal place of office in Hartford, Connecticut (hereinafter referred to as the "Company"), and Fleet National Bank, a bank with trust powers having a principal place of business in Hartford, Connecticut (hereinafter referred to as the "Trustee"), W I T N E S S E T H WHEREAS, by Agreement dated January 9, 1989 (the "Agreement"), the Company and The Connecticut Bank & Trust Company, N.A. entered into an Agreement entitled "The Connecticut Natural Gas Corporation Officers Retirement Plan Trust Agreement"; and WHEREAS, Fleet National Bank has succeeded to the trust business of the Connecticut Bank & Trust Company, N.A., and is currently serving as trustee; and WHEREAS, the parties reserve the right to amend the Agreement in Article X, Section 10.1 thereof, subject to the conditions set forth therein; and WHEREAS, the Agreement has previously been amended six times; and WHEREAS, the Company wishes to amend the Agreement in the particulars set forth below; NOW, THEREFORE, the Company and the Trustee agree as follows; 1. By deleting Section 5.2(n) of the Agreement, as heretofore amended, and inserting in lieu thereof the following: "(n) Notwithstanding the foregoing, in no event shall the Trustee invest in shares of stock of the Company or any affiliate thereof." IN WITNESS WHEREOF, the parties have caused this Seventh Amendment to be duly executed and their respective corporate seals to be hereunto affixed as of the date first shown above written. ATTEST CONNECTICUT NATURAL GAS CORPORATION S/ Jeffrey A. Hall                        By S/ Jean S. McCarthy                                             Its Vice President Human Resources ATTEST FLEET NATIONAL BANK S/ Helen M. Atwood                  By S/ William B. Parent                                             Its Vice President STATE OF CONNECTICUT             )                                                              ) ss HARTFORD COUNTY OF HARTFORD               ) Personally appeared Jean McCarthy of Connecticut Natural Gas Corporation, signer of the foregoing instrument and acknowledge the same to be his/her free act and deed as such ___________________ and the free act and deed of said corporation before me.   S/ Daisy Q. Mendez                               Notary Public                                     My commission expires: June 30, 2004 STATE OF CONNECTICUT           )                                                            ) ss HARTFORD COUNTY OF HARTFORD             ) Personally appeared William B. Parent of Fleet National Bank, signer of the foregoing instrument and acknowledge the same to be his/her free act and deed as such Vice President and the free act and deed of said corporation before me. Frances A. Maslona                               Notary Public                                     My commission expires: April 30, 2004  

TERMINATION AGREEMENT         THIS TERMINATION AGREEMENT is effective as of the 7th day of November, 2000, and is by and among PEASE OIL AND GAS COMPANY, a Nevada corporation (“Pease”), its to-be-formed wholly-owned Delaware subsidiary CPI ACQUISITION CORP. (“Acquisition Corp.”), CARPATSKY PETROLEUM INC., a corporation organized under the laws of the Province of Alberta, Canada (“Carpatsky”) and BELLWETHER EXPLORATION COMPANY, a Delaware corporation (“Bellwether”), and is made with reference to the following agreed facts:         1. Pease, Acquisition Corp. and Carpatsky entered into an Agreement and Plan of Merger, dated August 31, 1999 ("Merger Agreement");         2. Pease, Acquisition Corp. and Carpatsky entered into the First Amendment to Merger Agreement, dated January 3, 2000 ("First Amendment");         3. Pease, Acquisition Corp. and Carpatsky negotiated but did not finalize an Amended and Restated Agreement and Plan of Merger, to be dated as of August 11, 2000 ("Amended Merger Agreement"); and         4. Pease, Acquisition Corp., Carpatsky and Bellwether have decided to terminate the Merger Agreement and the First Amendment and to abandon and not finalize the Amended Merger Agreement, to terminate and release the obligations of the parties under the Merger Agreement, the First Amendment and the Amended Merger Agreement (all of which are collectively referred to as the “Merger Agreements”), including any obligations or liabilities of ay party hereto which may be deemed to have arisen under the Merger Agreements, in accordance with the terms and agreements set forth below.         NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confirmed, the parties hereto agree as follows:         1. Termination of Agreements. The Merger Agreement, the First Amendment and the Amended Merger Agreement shall each be terminated, and such terminations shall be deemed to be terminations by mutual consent of the parties. Subject to the signature and completion of this agreement, no party shall have any right against any of the other parties to the Merger Agreements or Bellwether as a result of the termination of the Merger Agreements, including any obligations or liabilities of any party which may be deemed to have arisen under the Merger Agreements. Each party shall bear its own costs incurred through the date hereof.         2. Release. Pease, Acquisition Corp., Carpatsky and Bellwether, hereby release, acquit and forever discharge each other, including their officers, directors, employees, agents, successors, predecessors, assigns, parents, subsidiaries, affiliates, servants, shareholders, partners, attorneys, insurers, past or present, and all persons or entities, natural or corporate, in privity with them or any of them, from any and all obligations, liabilities, claims or causes of action of any kind whatsoever, at common law, statutory or otherwise, known or unknown, past or present, that Pease, Acquisition Corp., Carpatsky and Bellwether have or might have against each other arising from or relating to the Merger Agreements, including but not limited to, claims for misrepresentation, whether negligent or intentional, failure to disclose any material fact, and breach of any representation, warranty, or covenant. Pease, Acquisition Corp., Carpatsky and Bellwether hereby acknowledge and agree that Bellwether is a party to and included in this release, notwithstanding the fact that Bellwether is not a party to any of the Merger Agreements.         3. Payments and Transfers by Carpatsky to Pease. Upon acceptance and signature of this agreement by the parties, and as additional consideration to Pease for the matters described in this agreement, effective on the date that this agreement is signed by the parties, Carpatsky shall pay and deliver to Pease the following:           (1) Cash Payments. Carpatsky shall pay $80,000 to Pease in full satisfaction of the obligations of Carpatsky to Pease for bookkeeping and accounting services provided by Pease for Carpatsky through the date of this agreement. Upon receipt of such amount, that certain Agreement, dated October 1, 1999 shall be deemed to be terminated and Carpatsky and Pease shall be deemed to have each released the other from and against any and all obligations thereunder. The cash payment shall be delivered to Pease within ten days from the effective date of this agreement.           (2) Carpatsky Shares. Carpatsky shall issue, subject to (i) approval by the Canadian Venture Exchange and (ii) the revocation of the cease trading order issued by the Alberta Securities Commission which Carpatsky will use its commercially reasonable best efforts to acquire, 1.5 million shares of Carpatsky’s common stock, registered to Pease and restricted from transfer by Pease, except in compliance with applicable rules of the Canadian Venture Exchange, the Alberta Securities Commission and United States federal and applicable state securities laws. The shares issued to Pease shall have the same registration rights granted to Bellwether under the Registration Rights Agreement dated October 7, 1999, as amended on December 30, 1999. The Carpatsky common stock shall be issued and delivered to Pease no later than January 31, 2001. Should Carpatsky be unable to obtain approval from the Canadian Venture Exchange to issue the shares, or if for any reason that the shares are not issue then Pease and Carpatsky will attempt in good faith to negotiate another form of consideration of approximately equal value which shall be satisfactory to both parties.         4. Authority. This agreement has been duly authorized and approved by each of Pease, Carpatsky and Bellwether. Pease confirms that Acquisition Corp. has never been formed as a corporation.         5. Acknowledgment.Pease, Acquisition Corp., Carpatsky and Bellwether acknowledge that this agreement has been carefully read, understood and considered prior to execution. Each party hereto acknowledges that it has had opportunity to discuss this agreement with counsel of its own choosing prior to execution. Each party further acknowledges that this agreement constitutes the full and complete agreement between the parties, and that in executing this agreement, no party is relying on any representation, statement or warranty not specifically set forth herein. Pease, Acquisition Corp., Carpatsky and Bellwether further agree that the terms of this agreement bind the parties hereto, their successors and assigns.         IT WITNESS WHEREOF, this Termination Agreement was accepted and signed as of the date first above written.                                                                              PEASE OIL AND GAS COMPANY                                                                              By /s/ Patrick J. Duncan                                                                                                                                                   Patrick J. Duncan, President                                                                              CPI ACQUISITION CORP.                                                                              (a corporation to be formed)                                                                              By: Pease Oil and Gas Company                                                                              By /s/ Patrick J. Duncan                                                                                                                                                    Patrick J. Duncan, President                                                                              CARPATSKY PETROLEUM, INC.                                                                              By /s/ Cliff M. West                                                                                                                                                     Cliff M. West, Jr., Vice President                                                                              BELLWETHER EXPLORATION COMPANY                                                                              By /s/ Douglas G. Manner                                                                                                                                                    Douglas G. Manner, President and CEO

EXHIBIT 10(A) $275,000,000 CREDIT AGREEMENT dated as of July 27, 2000 among AIRBORNE FREIGHT CORPORATION, as Borrower The Lenders Listed Herein and WACHOVIA BANK, N.A., as Administrative Agent with U.S. BANK, as Documentation Agent, BANK OF AMERICA, N.A., as Syndication Agent, and WACHOVIA SECURITIES, INC., as Lead Arranger CREDIT AGREEMENT TABLE OF CONTENTS CREDIT AGREEMENT 5 ARTICLE I. DEFINITIONS 5 SECTION 1.01. DEFINITIONS. 5 SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. 18 SECTION 1.03. REFERENCES. 19 SECTION 1.04. USE OF DEFINED TERMS. 19 SECTION 1.05. TERMINOLOGY. 19 ARTICLE II. THE CREDITS 19 SECTION 2.01. COMMITMENTS TO LEND SYNDICATED LOANS. 19 SECTION 2.02. METHOD OF BORROWING SYNDICATED LOANS. 20 SECTION 2.03. MONEY MARKET LOANS. 21 SECTION 2.04. CONTINUATION AND CONVERSION ELECTIONS. 25 SECTION 2.05. NOTES. 25 SECTION 2.06. MATURITY OF LOANS. 26 SECTION 2.07. INTEREST RATES. 26 SECTION 2.08. FEES. 28 SECTION 2.09.OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. 29 SECTION 2.10. MANDATORY TERMINATION OF COMMITMENTS. 29 SECTION 2.11. OPTIONAL PREPAYMENTS. 29 SECTION 2.12. MANDATORY PREPAYMENTS. 29 SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. 30 SECTION 2.14. COMPUTATION OF INTEREST AND FEES. 31 ARTICLE III. CONDITIONS TO BORROWINGS 32 SECTION 3.01. CONDITIONS TO FIRST BORROWING. 32 SECTION 3.02. CONDITIONS TO ALL BORROWINGS. 33 ARTICLE IV. REPRESENTATIONS AND WARRANTIES 34 SECTION 4.01. CORPORATE EXISTENCE AND POWER. 34 SECTION 4.02.CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. 34 SECTION 4.03. BINDING EFFECT. 34 SECTION 4.04. FINANCIAL INFORMATION; MATERIAL ADVERSE EFFECT. 35 SECTION 4.05. NO LITIGATION. 35 SECTION 4.06. COMPLIANCE WITH ERISA. 35 SECTION 4.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. 35 SECTION 4.08. SUBSIDIARIES. 36 SECTION 4.09. INVESTMENT COMPANY ACT. 36 SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. 36 SECTION 4.11. OWNERSHIP OF PROPERTY; LIENS. 36 SECTION 4.12. NO DEFAULT. 36 SECTION 4.13. FULL DISCLOSURE. 36 SECTION 4.14. ENVIRONMENTAL MATTERS. 37 SECTION 4.15. CAPITAL STOCK. 37 SECTION 4.16. MARGIN STOCK. 37 SECTION 4.17. INSOLVENCY. 38 SECTION 4.18. INSURANCE. 38 SECTION 4.19. CITIZENSHIP. 38 SECTION 4.20. STATUS AS AN AIR CARRIER. 38 ARTICLE V. COVENANTS 39 SECTION 5.01. INFORMATION. 39 SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS. 40 SECTION 5.03. MAINTENANCE OF EXISTENCE. 40 SECTION 5.04. DISSOLUTION. 41 SECTION 5.05. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. 41 SECTION 5.06. USE OF PROCEEDS. 41 SECTION 5.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. 41 SECTION 5.08. INSURANCE. 42 SECTION 5.09. CHANGE IN FISCAL YEAR. 42 SECTION 5.10. MAINTENANCE OF PROPERTY. 42 SECTION 5.11. ENVIRONMENTAL NOTICES. 42 SECTION 5.12. ENVIRONMENTAL MATTERS. 43 SECTION 5.13. ENVIRONMENTAL RELEASE. 43 SECTION 5.14. TRANSACTIONS WITH AFFILIATES. 43 SECTION 5.15. RESTRICTED PAYMENTS. 43 SECTION 5.16. INVESTMENTS. 43 SECTION 5.17. PRIORITY DEBT. 44 SECTION 5.18.RESTRICTIONS ON ABILITY OF SUBSIDIARIES TO PAY DIVIDENDS. 45 SECTION 5.19. FIXED CHARGES COVERAGE. 45 SECTION 5.20.RATIO OF CONSOLIDATED DEBT TO CONSOLIDATED TOTAL CAPITALIZATION. 45 SECTION 5.21. LIMITATIONS ON ADDITIONAL DEBT. 45 SECTION 5.22. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. 45 SECTION 5.23. MORE RESTRICTIVE AGREEMENTS. 46 SECTION 5.24. NEW SUBSIDIARIES. 46 ARTICLE VI. DEFAULTS 46 SECTION 6.01. EVENTS OF DEFAULT. 46 SECTION 6.02. NOTICE OF DEFAULT. 49 ARTICLE VII. THE AGENT 49 SECTION 7.01. APPOINTMENT; POWERS AND IMMUNITIES. 49 SECTION 7.02. RELIANCE BY ADMINISTRATIVE AGENT. 50 SECTION 7.03. DEFAULTS. 50 SECTION 7.04.RIGHTS OF ADMINISTRATIVE AGENT AND ITS AFFILIATES AS A LENDER. 50 SECTION 7.05. INDEMNIFICATION. 51 SECTION 7.06. CONSEQUENTIAL DAMAGES. 51 SECTION 7.07. PAYEE OF NOTE TREATED AS OWNER. 51 SECTION 7.08.NONRELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. 52 SECTION 7.09. FAILURE TO ACT. 52 SECTION 7.10. RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. 52 ARTICLE VIII. CHANGE IN CIRCUMSTANCES; COMPENSATION 53 SECTION 8.01.BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. 53 SECTION 8.02. ILLEGALITY. 53 SECTION 8.03. INCREASED COST AND REDUCED RETURN. 54 SECTION 8.04.BASE RATE LOANS SUBSTITUTED FOR EURO-DOLLAR LOANS.55 SECTION 8.05. COMPENSATION. 55 SECTION 8.06. REPLACEMENT OF LENDERS. 56 ARTICLE IX. MISCELLANEOUS 57 SECTION 9.01. NOTICES. 57 SECTION 9.02. NO WAIVERS. 57 SECTION 9.03. EXPENSES; DOCUMENTARY TAXES. 57 SECTION 9.04. INDEMNIFICATION. 57 SECTION 9.05. SETOFF; SHARING OF SETOFFS. 58 SECTION 9.06. AMENDMENTS AND WAIVERS. 59 SECTION 9.07. NO MARGIN STOCK COLLATERAL. 60 SECTION 9.08. SUCCESSORS AND ASSIGNS. 60 SECTION 9.09. CONFIDENTIALITY. 63 SECTION 9.10. REPRESENTATION BY LENDERS. 64 SECTION 9.11. OBLIGATIONS SEVERAL. 64 SECTION 9.12. GEORGIA LAW. 64 SECTION 9.13. SEVERABILITY. 64 SECTION 9.14. INTEREST. 65 SECTION 9.15. INTERPRETATION. 65 SECTION 9.16. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. 66 SECTION 9.17. COUNTERPARTS. 66 SECTION 9.18. SOURCE OF FUNDS -- ERISA. 66 SECTION 9.19. NO BANKRUPTCY PROCEEDINGS. 66 EXHIBIT A-1 Form of Syndicated Loan Note EXHIBIT A-2 Form of Money Market Loan Note EXHIBIT B Form of Opinion of Counsel for the Borrower EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent EXHIBIT D Form of Assignment and Acceptance EXHIBIT E-1 Form of Notice of Borrowing EXHIBIT E-2 Form of Notice of Continuation or Conversion EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Closing Certificate EXHIBIT H Form of Officer's Certificate EXHIBIT I Form of Money Market Quote Request EXHIBIT J Form of Money Market Quote EXHIBIT K Form of Designation Agreement EXHIBIT L Form of Subsidiary Guaranty EXHIBIT M Form of Contribution Agreement EXHIBIT N Form of Joinder Agreement EXHIBIT N Form of Pledge Agreement Schedule 4.08 Subsidiaries CREDIT AGREEMENT CREDIT AGREEMENT dated as of July 27, 2000, among AIRBORNE FREIGHT CORPORATION, the LENDERS listed on the signature pages hereof and WACHOVIA BANK, N.A., as Administrative Agent. The parties hereto agree as follows: ARTICLE I. DEFINITIONS SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Administrative Agent" means Wachovia Bank, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. "AFC" means Airborne Freight Corporation, a Delaware corporation, its successors and permitted assigns. "Affiliate" of any relevant Person means (i) any Person that directly, or indirectly through one or more intermediaries, controls the relevant Person (a "Controlling Person"), (ii) any Person (other than the relevant Person or a Subsidiary of the relevant Person) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary of the relevant Person) of which the relevant Person owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Credit Agreement, together with all amendments and supplements hereto. "Amortization" means for any period the sum of all amortization charges of the Borrower and its Consolidated Subsidiaries for such period as determined in accordance with GAAP. "Applicable Margin" has the meaning set forth in Section 2.07(a). "Arranger's Letter Agreement" means that certain letter agreement, dated as of June 6, 2000 between the Borrower and Wachovia Securities, Inc., as arranger, relating to the structure of the Loans, and certain fees from time to time payable by the Borrower to Wachovia Securities, Inc., as arranger, and to the Administrative Agent, together with all amendments and supplements thereto. "Assignee" has the meaning set forth in Section 9.08(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.08(c) in the form attached hereto as Exhibit D. "Authority" has the meaning set forth in Section 8.02. "Base Rate" means for any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent above the Federal Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change. "Base Rate Loan" means a Loan which bears or is to bear interest at a rate based upon the Base Rate, and is to be made as a Base Rate Loan pursuant to the applicable Notice of Borrowing, Notice of Continuation or Conversion, Section 2.02(f), or Article VIII, as applicable. "Borrower" means (i) from the Closing Date through the date prior to the Reorganization Effective Date, AFC, and (ii) on and after the Reorganization Effective Date, the Holding Company. "Borrowing" means a borrowing hereunder consisting of Loans made to the Borrower (i) at the same time by all of the Lenders, in the case of a Syndicated Borrowing, or (ii) separately by one or more Lenders, in the case of a Money Market Borrowing, in each case pursuant to Article II. A Borrowing is a "Money Market Borrowing" if such Loans are made pursuant to Section 2.03 or a "Syndicated Borrowing" if such Loans are made pursuant to Section 2.01. A Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. "Capital Stock" means any nonredeemable capital stock of the Borrower or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. "Change of Law" shall have the meaning set forth in Section 8.02. "Citizen" has the meaning set forth in Section 4.19. "Closing Certificate" has the meaning set forth in Section 3.01(e). "Closing Date" means July 27, 2000. "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. "Commitment" means, with respect to each Lender, (i) the amount set forth opposite the name of such Lender on the signature pages hereof, and (ii) as to any Lender which enters into any Assignment and Acceptance (whether as transferor Lender or as Assignee thereunder), the amount of such Lender's Commitment after giving effect to such Assignment and Acceptance as set forth in Schedule 1 thereto, in each case as such amount may be reduced from time to time pursuant to Sections 2.09 and 2.10. "Compliance Certificate" has the meaning set forth in Section 5.01(c). "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Fixed Charges" for any period means the sum of (i) Consolidated Interest Expense for such period, and (ii) Consolidated Lease Expense. "Consolidated Interest Expense" for any period means (i) interest, whether expensed or capitalized, in respect of Debt of the Borrower or any of its Consolidated Subsidiaries outstanding during such period and (ii) all program expenses payable under a Receivables Securitization Program. "Consolidated Lease Expense" for any period of determination means the sum of the Borrower's and each of its Consolidated Subsidiary's obligations for current minimum payments for operating leases determined in accordance with GAAP on a consolidated basis. "Consolidated Net Income" means, for any period, the Net Income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis, but excluding (i) extraordinary items and (ii) any equity interests of the Borrower or any Subsidiary in the unremitted earnings of any Person that is not a Subsidiary. "Consolidated Operating Income" means, for any period, the Operating Income of the Borrower and its Consolidated Subsidiaries. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Tangible Net Worth" means, at any time, Stockholders' Equity, less the sum of the value, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP, of: (A) Any surplus resulting from any write-up of assets subsequent to December 31, 1999; (B) All assets which would be treated as intangible assets for balance sheet presentation purposes under GAAP, including without limitation goodwill (whether representing the excess of cost over book value of assets acquired, or otherwise), trademarks, tradenames, copyrights, patents and technologies, and unamortized debt discount and expense; (C) To the extent not included in (B) of this definition, any amount at which shares of Capital Stock of the Borrower appear as an asset on the balance sheet of the Borrower and its Consolidated Subsidiaries; (D) Loans or advances to stockholders, directors, officers or employees; and (E) To the extent not included in (B) of this definition, deferred expenses. "Consolidated Taxes" means, for any period of determination, the sum of the Borrower's and each of its Consolidated Subsidiaries cash and accrued federal and state income taxes, determined in accordance with GAAP on a consolidated basis. "Consolidated Total Tangible Assets" means, at any time, (x) the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP, minus (y) all intangible assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP. "Consolidated Total Capitalization" means, at any time, the sum of (i) Stockholders' Equity, and (ii) Consolidated Debt. "Consolidated Total EBITDA" means, for any period of determination, the EBITDA of Borrower and each of its Consolidated Subsidiaries. "Contributed Receivables" means Receivables which are contributed to the Receivables Subsidiary as equity Investments therein pursuant to a Receivables Securitization Program. "Contribution Agreement" means the certain Contribution Agreement substantially in the form of Exhibit M by and among the Borrower and the Borrower's Subsidiaries in existence as of the Closing Date and created or acquired thereafter from time to time, together with all amendments or supplements thereto. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to reimburse any lender or other Person in respect of amounts payable under a lender's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any lender or other Person in respect of amounts paid or to be paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (ix) all obligations of such Person with respect to interest rate protection agreements, foreign currency exchange agreements or other hedging arrangements (valued as the termination value thereof computed in accordance with a method approved by the International Swap Dealers Association and agreed to by such Person in the applicable hedging agreement, if any), (x) all principal amounts outstanding and owed to parties other than the Borrower or any Subsidiary under the items described in clause (a) of the definition of Receivables Program Obligations and (xi) all Debt of others Guaranteed by such Person. "Debt Rating" means at any time whichever is the higher of the rating of the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, its issuer credit rating for debt of such type) by Moody's and S&P (as such rating may change from time to time, either pursuant to Section 2.07 or otherwise) (provided, that in the event of a double or greater split rating, the rating immediately below the highest rating shall apply). "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (including the Applicable Margin) which may be applicable to any Loans hereunder (irrespective of whether any such type of Loans are actually outstanding hereunder). "Depreciation" means for any period the sum of all depreciation expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Designated Lender" means a special purpose corporation owned and controlled by its Designating Lender that is identified as such on the signature pages hereto next to the caption "Designated Lender" as well as each special purpose corporation owned and controlled by its Designating Lender that (i) shall have become a party to this Agreement pursuant to Section 9.08(h), and (ii) is not otherwise a Lender. "Designated Lender Note" means a Money Market Loan Note, evidencing the obligation of the Borrower to repay Money Market Loans made by a Designated Lender, and "Designated Lender Notes" means any all such Money Market Loan Notes to Designated Lenders issued hereunder. "Designating Lender" shall mean each Lender that is identified as such on the signature pages hereto next to the caption "Designating Lender" and immediately below the signature of its Designated Lender as well as each Lender that shall designate a Designated Lender pursuant to Section 9.08(h). "Designation Agreement" means a designation agreement in substantially the form of Exhibit K attached hereto, entered into by a Lender and a Designated Lender and acknowledged by the Borrower and the Administrative Agent. "Dividends" means for any period the sum of all dividends and other distributions paid or declared during such period in respect of any Capital Stock and Redeemable Preferred Stock (other than dividends paid or payable in the form of additional Capital Stock). "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial lenders in Georgia are authorized by law to close. "EBITDA" means, as to any Person calculated for each fiscal quarter then ending, and the immediately preceding 3 fiscal quarters (determined on a consolidated basis and in accordance with GAAP), the sum of (a) Consolidated Net Income, plus (b) Consolidated Interest Expense (to the extent deducted in determining Consolidated Net Income), plus (c) Amortization (to the extent deducted in determining Consolidated Net Income), plus (d) Depreciation (to the extent deducted in determining Consolidated Net Income), plus (e) consolidated Taxes (to the extent deducted in determining Consolidated Net Income). "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent, or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or order. "Environmental Liabilities" means any liabilities, whether accrued or contingent, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "Environmental Requirements" means any legal requirement relating to health, safety or the environment and applicable to the Borrower, any Subsidiary or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Euro-Dollar Business Day" means any Domestic Business Day on which dealings in Dollar deposits are carried out in the London interbank market. "Euro-Dollar Loan" means a Loan which bears or is to bear interest at a rate based upon the Adjusted London Interbank Offered Rate, and to be made as a Euro-Dollar Loan pursuant to the applicable Notice of Borrowing or Notice of Continuation or Conversion. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07(d). "Event of Default" has the meaning set forth in Section 6.01. "Excluded Receivables" means all Receivables other than Purchased Receivables and Contributed Receivables. "Excluded Receivables Assets" means (i) all goods of the Borrower and each of the Subsidiaries held for sale or lease or to be furnished under a contract of service (including raw materials, work in process, finished goods and materials used or consumed in the manufacture or production thereof), goods that are returned to or repossessed, and all accessions thereto and products thereof and documents therefor (collectively, "Inventory"), other than returned goods, if any, relating to the sale that gave rise to any Receivables which are included in the Receivables Program Related Assets ("Related Returned Goods"); (ii) Excluded Receivables; and (iii) any Receivables or other proceeds of Inventory created or arising (x) after an Event of Default specified in (g) or (h) of Section 6.01 (other than proceeds of Related Returned Goods), or (y) after termination of purchases under the Receivables Securitization Program Agreement. "Facility Fee" has the meaning set forth in Section 2.08(a). "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such transactions, as determined by the Administrative Agent. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means any fiscal year of the Borrower. "Fixed Rate Borrowing" means a Euro-Dollar Borrowing or a Money Market Borrowing, or either or both of them, as the context shall require. "Fixed Rate Loans" means Euro-Dollar Loans or Money Market Loans, or either or both of them, as the context shall require. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation and (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Holding Company" means Airborne Inc., a Delaware corporation. "Holding Subsidiary" means ABX Merger, Inc., a Delaware corporation. "Income Available for Fixed Charges" for any period means the sum of (i) Consolidated Total EBITDA, and (ii) Consolidated Lease Expense. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the first, second, third or sixth month thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (A) any Interest Period (subject to paragraph (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro- Dollar Business Day; (B) any Interest Period which begins on the last Euro- Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall, subject to paragraph (c) below, end on the last Euro-Dollar Business Day of the appropriate subsequent calendar month; and (C) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date; (2) with respect to each Money Market Borrowing, the period commencing on the date of such Borrowing and ending on the Stated Maturity Date or such other date or dates as may be specified in the applicable Money Market Quote; provided that: (A) any Interest Period (subject to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (B) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. "Investment" means any investment in any Person, whether by means of (i) purchase or acquisition of all or substantially all of the assets of such Person (or of a division or line of business of such Person), (ii) purchase or acquisition of obligations or securities of such Person, (iii) capital contribution to such Person, (iv) loan or advance to such Person, (v) making of a time deposit with such Person, (vi) Guarantee or assumption of any obligation of such Person or (vii) by any other means. "Lender" means each lender listed on the signature pages hereof as having a Commitment, and its successors and assigns and the Designated Lenders, if any; provided, however, that the term "Lender" shall exclude each Designated Lender when used in reference to a Syndicated Loan, the Commitments or terms relating to the Syndicated Loans (except as noted above) and the Commitments. "Lending Office" means, as to each Lender, (i) its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) and (ii) as to any Lender which enters into any Assignment and Acceptance (whether as transferor Lender or as Assignee thereunder), as set forth in Schedule 1 thereto, or in each case such other office as such Lender may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Liquidity Lender" means for any Designated Lender, at any date of determination, the collective reference to the financial institutions which at such date are providing liquidity or credit support facilities to or for the account of such Designated Lender to fund such Designated Lender's obligations hereunder or to support the securities, if any, issued by such Designated Lender to fund such obligations. "Loan" means a Base Rate Loan, Euro-Dollar Loan, Syndicated Loan, or Money Market Loan, and "Loans" means Base Rate Loans, Euro-Dollar Loans, Syndicated Loans, Money Market Loans, or any or all of them, as the context shall require. "Loan Documents" means this Agreement, the Notes, the Subsidiary Guaranties, the Contribution Agreement, any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes, the Subsidiary Guaranties, the Contribution Agreement or the Loans, as such documents and instruments may be amended or supplemented from time to time. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(d). "Long Term Debt" means at any date any Consolidated Debt which matures (or the maturity of which may at the option of the Borrower or any Consolidated Subsidiary be extended such that it matures) more than one year after such date. "Margin Stock" means "margin stock" as defined in Regulations T, U or X. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents, or the ability of the Borrower or any Subsidiary to perform its obligations under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or enforceability of any Loan Document. "Material Subsidiary" means any Subsidiary, organized and existing under the laws of any state of the United States, of the Borrower which, at any time (a) has assets which constitute more than 5% of the Consolidated Total Tangible Assets, (b) contributed more than 5% of Consolidated Operating Income for the most recent Fiscal Quarter, or (c) Guarantees the Debt of the Borrower or another Subsidiary. "Money Market Borrowing Date" has the meaning specified in Section 2.03. "Money Market Loan" means a Loan made pursuant to the terms and conditions set forth in Section 2.03. "Money Market Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-2, evidencing the obligation of the Borrower to repay the Money Market Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Money Market Quote" has the meaning specified in Section 2.03. "Money Market Quote Request" has the meaning specified in Section 2.03(b). "Money Market Rate" has the meaning specified in Section 2.03(c)(ii)(C). "Moody's" means Moody's Investor Service, Inc. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Income" means, as applied to any Person for any period, the aggregate amount of net income of such Person, after taxes, for such period, as determined in accordance with GAAP. "Non-Material Subsidiary" means any Subsidiary which is not a Material Subsidiary. "Net Proceeds of Capital Stock" means any proceeds received by the Borrower or a Consolidated Subsidiary in respect of the issuance of Capital Stock, after deducting therefrom all reasonable and customary costs and expenses incurred by the Borrower or such Consolidated Subsidiary directly in connection with the issuance of such Capital Stock. "Notes" means each of the Syndicated Loan Notes or Money Market Loan Notes, or any or all of them, as the context shall require. "Notice of Borrowing" has the meaning set forth in Section 2.02(a). "Notice of Continuation or Conversion" has the meaning set forth in Section 2.04. "Notice Lender" has the meaning set forth in Section 8.06. "Officer's Certificate" has the meaning set forth in Section 3.01(f). "Operating Income" means for any Person for any period the operating income of such Person as determined in accordance with GAAP. "Participant" has the meaning set forth in Section 9.08(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Performance Pricing Determination Date" has the meaning set forth in Section 2.07(a). "Permitted Acquisition" means the acquisition by the Borrower of 100% of the issued and outstanding capital stock or other ownership interests of, or all or substantially all of the assets of, a Permitted Target so long as (i) such acquisition is made on a negotiated basis with the approval of the Board of Directors of the Person to be acquired, (ii) with respect to an acquisition in which the cash consideration to be paid exceeds 10% of Consolidated Tangible Net Worth, prior written notice thereof has been delivered to the Administrative Agent and the Lenders, and, upon the written request of the Required Lenders or the Administrative Agent, within 15 Business Days prior to such acquisition the Borrower has delivered to the Administrative Agent and the Lenders a written certification, satisfactory to the Administrative Agent and Required Lenders in all respects, demonstrating the compliance of the Borrower with all of the terms and conditions of this Agreement after giving effect to such acquisition and assuming that such Permitted Target had been a Subsidiary of the Borrower for the immediately preceding 12 months, and (iii) such Permitted Target complies with Section 5.24. "Permitted Target" means a corporation, limited liability company or partnership engaged in a related line of business of the Borrower or its Wholly-Owned Subsidiaries. "Person" means an individual, a corporation, a partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "Pledge Agreement" means that certain Pledge Agreement from Holding Company substantially in the form of Exhibit O, together with all amendments or supplements thereto. "Pledged Note" means that certain Pledged Note from AFC, substantially in the form of Annex A attached to Exhibit O, together with all amendments or supplements thereto. "Prime Rate" refers to that interest rate so denominated and set by Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Properties" means all real property owned, leased or otherwise used or occupied by the Borrower or any Subsidiary, wherever located. "Purchase Money Note" means a promissory note evidencing the obligation of the Receivables Subsidiary to pay to the Borrower or any of its Subsidiaries the purchase price for Purchased Receivables in connection with the Receivables Securitization Program, which note shall be repaid from cash available to the Receivables Subsidiary, other than cash required to be held as reserves pursuant to Receivables Program Documents, amounts paid in respect of interest, principal and other amounts owing under Receivables Program Documents and amounts paid in connection with the purchase of additional Receivables. "Purchased Receivables" means Receivables which are actually purchased pursuant to the Receivables Program Documents, for a purchase price determined pursuant thereto. "Quarterly Payment Date means each March 31, June 30, September 30 and December 31, or, if any such day is not a Domestic Business Day, the next succeeding Domestic Business Day. "Receivables" means all rights of the Borrower or its Subsidiaries to payment, whether constituting an account, chattel paper, instrument, general intangible or otherwise, arising from the sale of goods or services (including rights under bill and hold arrangements) by the Borrower or its Subsidiary (and including the right to payment of any interest or finance charges and other obligations with respect thereto). "Receivables Program Assets" means (a) all Purchase Receivables and Contributed Receivables transferred by the Borrower or its Subsidiaries (including the Receivables Subsidiary) pursuant to the Receivables Program Documents; provided, however, that the term "Receivables Program Assets" shall not include any Excluded Receivables Assets, (b) all Receivables Program Related Assets, and (c) all collections (including recoveries) and other proceeds of the assets described in the foregoing clauses (a) and (b). "Receivables Program Documents" means (x) a receivables purchase agreement, pooling and servicing agreement, credit agreement, agreements to acquire undivided interests or other agreement to transfer, or create a security interest in, Receivables Program Assets, in each case as amended, modified, supplemented or restated and in effect from time to time entered into by the Borrower and/or its Subsidiaries (including the Receivables Subsidiary), and (y) each other instrument, agreement and other document entered into by the Borrower or its Subsidiaries (including the Receivables Subsidiary) relating to the transactions contemplated by the items referred to in clause (x) above, in each case as amended, modified, supplemented or restated and in effect from time to time. "Receivables Program Obligations" means (a) notes, trust certificates, undivided interests, partnership interests or other interests representing the right to be paid a specified principal amount from the Receivables Program Assets, and (b) related obligations of the Borrower and/or its Subsidiaries (including, without limitation, rights in respect of interest or yield, breach of warranty claims and expense reimbursement and indemnity provisions) and other Standard Securitization Undertakings. "Receivables Program Related Assets" means, with respect to Purchased Receivables and Contributed Receivables (but not Excluded Receivables), (i) rights of the seller or contributor thereof under the documentation governing or relating to such Receivables, including all contracts pursuant to which any account party or other party is obligated to make payment on any such Receivable, and all related purchase orders, invoices and other agreements, documents, books, records and other media for the storage of information (including tapes, disks, punch cards, computer programs and databases and related property), (ii) all of the right, title and interest of the seller or contributor thereof in the goods, if any, relating to the sale that gave rise to such Receivable, all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the contract described in clause (i) or otherwise, and all letters of credit, guarantees and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable, whether pursuant to the contract described in clause (i) or otherwise and (iii) all proceeds of all of the foregoing, including all funds received by any Person in payment of any amounts owed (including invoice prices, finance charges, interest and all other charges, if any) in respect thereof or otherwise applied to repay or discharge any such Receivable (including insurance payments applied in the ordinary course of business to amounts owed in respect of such Receivable and net proceeds of any sale or other disposition of repossessed goods that were the subject of any such Receivable) or other collateral or property of the account party or other party directly or indirectly liable for payment of such Receivables, and any lockboxes or accounts in which such proceeds are deposited, (iv) all spread accounts and other similar accounts (and any amount on deposit therein) established in connection with the Receivables Securitization Program and (v) any warranty, indemnity, dilution and other intercompany claim arising out of Receivables Program Documents. "Receivables Securitization Program" means any transaction or series of transactions that may be entered into by the Borrower and its Subsidiaries pursuant to which the Borrower and/or its Subsidiaries may sell, convey or otherwise transfer to the Receivables Subsidiary and (in the case of a transfer by the Receivables Subsidiary) any other Person, or may grant a security interest in, any Receivables Program Assets (whether now existing or arising in the future); provided that: (A) no portion of the indebtedness or any other obligations (contingent or otherwise) of a Receivables Subsidiary or Special Purpose Vehicle (i) is guaranteed by the Borrower or its Subsidiaries (other than the Receivables Subsidiary and excluding guarantees of obligations pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Borrower or its Subsidiaries (other than the Receivables Subsidiary) for payment other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Borrower or its Subsidiaries (other than the Receivables Subsidiary), directly or indirectly, contingently or otherwise, to the satisfaction of obligations incurred in such transactions, other than pursuant to Standard Securitization Undertakings, (B) the Borrower and its Subsidiaries (other than the Receivables Subsidiary) do not have any obligation to maintain or preserve the financial condition of a Receivables Subsidiary or a Special Purpose Vehicle or cause such entity to achieve certain levels of operating results; and (C) the scheduled maturity of any Receivables Program Obligations of the type described in clause (a) of the definition of "Receivables Program Obligations" is no earlier than the Termination Date. "Receivables Subsidiary" means a special purpose corporation that is a wholly owned subsidiary of the Borrower, created for the sole purpose of, and whose only business shall be, acquisition of the Receivables Program Assets pursuant to the Receivables Securitization Program and those activities incidental to the Receivables Securitization Program. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Termination Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Refunding Loan" means a new Syndicated Loan made on the day on which an outstanding Syndicated Loan is maturing or a Base Rate Borrowing is being converted to a Fixed Rate Borrowing, if and to the extent that the proceeds thereof are used for the purpose of paying such maturing Loan or Loan being converted, excluding any difference between the amount of such maturing Loan or Loan being converted and any greater amount being borrowed on such day and actually either being made available to the Borrower pursuant to Section 2.02(c) or remitted to the Administrative Agent as provided in Section 2.13, in each case as contemplated in Section 2.02(d). "Register" has the meaning set forth in Section 9.08(c). "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Related Fund" means, with respect to any Lender that is a fund that invests in lender loans, any other fund that invests in lender loans and is advised or managed by the same investment advisor as such Lender. "Reorganization" means a corporate restructuring of AFC as follows: (i) the merger of Holding Subsidiary into AFC, with AFC being the surviving entity; and (ii) effective at the time of such merger, the conversion of each common share of the AFC into one common share of Holding Company. "Reorganization Effective Date" means the date on which the following conditions have been satisfied: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the Reorganization shall have become effective on or before January 15, 2001, time being of the essence; (iii) AFC, the Holding Company and the Administrative Agent shall have executed and delivered the Joinder Agreement in the form attached to this Agreement as Exhibit N, and the Holding Company shall have executed and delivered Notes replacing the Notes issued by AFC on the Closing Date, whereby the Holding Company assumes and becomes liable for and obligated with respect to the Loans, all interest thereon, all fees owing under the terms of this Agreement, and all other obligations owed by the Borrower to the Administrative Agent and the Lenders under this Agreement, the Pledge Agreement accompanied by the Pledged Note and the other Loan Documents from time to time, and whereby the Holding Company obtains the rights of AFC as the Borrower under this Agreement and the other Loan Documents; (iv) AFC shall have executed and delivered to the Administrative Agent a Subsidiary Guaranty and become a party to the Contribution Agreement as a guarantor thereunder; and (v) AFC shall have executed and delivered to the Holding Company the Pledged Note; (vi) counsel to AFC and the Holding Company shall have delivered a favorable opinion in favor of the Administrative Agent and the Lenders opining (A) that the Reorganization shall have become effective, (B) that the Holding Company's Notes, the Pledge Agreement, the Joinder Agreement, and AFC's Subsidiary Guaranty and the Pledged Note have been duly authorized, executed and delivered, and are the valid, binding and enforceable obligations, respectively, of the Holding Company and AFC, and (C) as to such other matters set forth in the form of opinion set forth on Exhibit B to this Agreement with respect to the foregoing and any other matters reasonably requested by the Administrative Agent with respect thereto. "Replacement Lender" has the meaning set forth in Section 8.06. "Reported Net Income" means, for any period, the Net Income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis. "Required Lenders" means at any time Lenders having at least 51% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Lenders holding at least 51% of the aggregate outstanding principal amount of the sum of the (i) Syndicated Loans and (ii) Money Market Loans. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's Capital Stock (except dividends payable solely in shares of its Capital Stock) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Borrower's Capital Stock (except shares acquired upon the conversion thereof into other shares of its Capital Stock) or (b) any option, warrant or other right to acquire shares of the Borrower's Capital Stock. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "Share Repurchase Adjustments" means amounts not exceeding $40,000,000 in the aggregate charged against Stockholders' Equity solely during the period from March 31, 2000, through and including December 31, 2000, as a result of actual repurchases by the Borrower of its capital stock. "Special Purpose Vehicle" means a trust, partnership or other special purpose Person established by the Borrower to implement the Receivables Securitization Program. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Borrower or its Subsidiaries (other than the Receivables Subsidiary) that are reasonably customary in accounts receivable securitization transactions, as reasonably determined in good faith by the Administrative Agent. "Stated Maturity Date" has the meaning set forth in Section 2.03(b)(ii). "Stockholders' Equity" means, at any time, the shareholders' equity of the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable Preferred Stock of the Borrower or any of its Consolidated Subsidiaries. Shareholders' equity generally would include, but not be limited to (i) the par or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various deductions such as (A) purchases of treasury stock, (B) valuation allowances, (C) receivables due from an employee stock ownership plan, (D) employee stock ownership plan debt guarantees, and (E) translation adjustments for foreign currency transactions. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions who are at the time directly or indirectly owned by the Borrower. "Subsidiary Guaranties" means any one or more or all, as the context shall require or permit, of those certain Subsidiary Guaranties, substantially in the form of Exhibit L, executed and delivered by AFC and AFC's other Subsidiaries in existence on the Closing Date and created or acquired thereafter from time to time in favor of the Administrative Agent, for the ratable benefit of the Lenders, together with all amendments and supplements thereto. "Syndicated Loans" means Base Rate Loans or Euro-Dollar Loans made pursuant to the terms and conditions set forth in Section 2.01. "Syndicated Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-1, evidencing the obligation of the Borrower to repay Syndicated Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Taxes" has the meaning set forth in Section 2.13(c). "Termination Date" means whichever is applicable of (i) June 30, 2005, (ii) the date the Commitments are terminated pursuant to Section 6.01 following the occurrence of an Event of Default, or (iii) the date the Borrower terminates the Commitments entirely pursuant to Section 2.09. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business and on a temporary basis. "Transferee" has the meaning set forth in Section 9.08(d). "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "U.S.C." means the United States Code as is in effect from time to time. "Unused Commitment" means at any date, with respect to any Lender, an amount equal to its Commitment less the aggregate outstanding principal amount of its Syndicated Loans and its Money Market Loans. "Wachovia" means Wachovia Bank, N.A., a national banking association, and its successors. "Wholly Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders unless with respect to any such change concurred in by the Borrower's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Lenders shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04). SECTION 1.03. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections " and other Subdivisions are references to articles, exhibits, schedules, Sections and other subdivisions hereof. SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.05. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. ARTICLE II. THE CREDITS SECTION 2.01. Commitments to Lend Syndicated Loans. Each Lender severally agrees, on the terms and conditions set forth herein, to make Syndicated Loans to the Borrower from time to time before the Termination Date; provided that, (i) immediately after each such Syndicated Loan is made, the aggregate outstanding principal amount of Syndicated Loans by such Lender shall not exceed the amount of its Commitment, and (ii) the aggregate outstanding principal amount of all Syndicated Loans and Money Market Loans shall not exceed the aggregate amount of the Commitments. Each Syndicated Borrowing under this Section shall be in an aggregate principal amount of (i) as to Base Rate Loans, $1,000,000 or any larger integral multiple of $500,000, and (ii) as to Euro-Dollar Loans, $5,000,000 or any larger integral multiple of $1,000,000 (except that in either case any such Syndicated Borrowing may be in the aggregate amount of the Unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.09, prepay Syndicated Loans and reborrow under this Section at any time before the Termination Date. SECTION 2.02. Method of Borrowing Syndicated Loans. (a) The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing"), which shall be substantially in the form of Exhibit E-1, prior to (i) 12:00 noon (Atlanta, Georgia time) on the same Domestic Business Day of each Base Rate Borrowing, and (ii) 12:00 noon (Atlanta, Georgia time) at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Syndicated Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, and (iv) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such Syndicated Borrowing and such Notice of Borrowing, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. (c) Not later than 2:00 P.M. (Atlanta, Georgia time) on the date of each Syndicated Borrowing, each Lender shall (except as provided in paragraph (d) of this Section) make available its ratable share of such Syndicated Borrowing, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address determined pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. Unless the Administrative Agent receives notice from a Lender, at the Administrative Agent's address referred to in or specified pursuant to Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Syndicated Borrowing stating that such Lender will not make a Syndicated Loan in connection with such Syndicated Borrowing, the Administrative Agent shall be entitled to assume that such Lender will make a Syndicated Loan in connection with such Syndicated Borrowing and, in reliance on such assumption, the Administrative Agent may (but shall not be obligated to) make available such Lender's ratable share of such Syndicated Borrowing to the Borrower for the account of such Lender. If the Administrative Agent makes such Lender's ratable share available to the Borrower and such Lender does not in fact make its ratable share of such Syndicated Borrowing available on such date, the Administrative Agent shall be entitled to recover such Lender's ratable share from either (but not both) (x) such Lender, together with interest thereon for each day during the period from the date of such Syndicated Borrowing until such sum shall be paid in full at a rate per annum equal to the overnight Federal funds to cover such amount for each such day during such period, or (y) the Borrower (and for such purpose shall be entitled, after notice to the Borrower, to charge such amount to any account of the Borrower maintained with the Administrative Agent), together with interest thereon for each day during the period from the date of such Syndicated Borrowing until such sum shall be paid in full at a rate per annum equal to the Base Rate or Adjusted LIBO Rate, whichever is in effect for such Loan, plus the Applicable Margin; provided that (i) any such payment by the Borrower of such Lender's ratable share and interest thereon shall be without prejudice to any rights that the Borrower may have against such Lender and (ii) until such Lender has paid its ratable share of such Syndicated Borrowing, together with interest pursuant to the foregoing, it will have no interest in or rights with respect to such Syndicated Borrowing for any purpose hereunder. If the Administrative Agent does not exercise its option to advance funds for the account of such Lender, it shall forthwith notify the Borrower of such decision. (d) If any Lender makes a new Syndicated Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Syndicated Loan from such Lender, such Lender shall apply the proceeds of its new Syndicated Loan to make such repayment as a Refunding Loan and only an amount equal to the difference (if any) between the amount being borrowed and the amount of such Refunding Loan shall be made available by such Lender to the Administrative Agent as provided in paragraph (c) of this Section, or remitted by the Borrower to the Administrative Agent as provided in Section 2.13, as the case may be. (e) Notwithstanding anything to the contrary contained in this Agreement, no Fixed Rate Borrowing may be made if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived, and all Refunding Loans shall be made as Base Rate Loans (but shall bear interest at the Default Rate, if applicable). (f) In the event that a Notice of Borrowing fails to specify whether the Syndicated Loans comprising such Syndicated Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such Syndicated Loans shall be made as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement to repay any Syndicated Loans maturing at the end of an Interest Period applicable thereto with the proceeds of a new Borrowing, and the Borrower fails to repay such Syndicated Loans using its own moneys and fails to give a Notice of Borrowing in connection with such new Syndicated Borrowing, a new Syndicated Borrowing shall be deemed to be made on the date such Syndicated Loans mature in an amount equal to the principal amount of the Syndicated Loans so maturing, and the Syndicated Loans comprising such new Syndicated Borrowing shall be Base Rate Loans. (g) Notwithstanding anything to the contrary contained herein, there shall not be more than 12 Interest Periods outstanding at any given time. SECTION 2.03. Money Market Loans. (a) In addition to making Syndicated Borrowings, the Borrower may, as set forth in this Section 2.03, at any time the Borrower's Debt Rating is greater than or equal to BBB or Baa2, request the Lenders to make offers to make Money Market Borrowings available to the Borrower. The Lenders may, but shall have no obligation to, make such offers, and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.03, provided that: (i) the number of interest rates applicable to Money Market Loans which may be outstanding at any given time is subject to the provisions of Section 2.02(g); (ii) the aggregate principal amount of all Money Market Loans, together with the aggregate principal amount of all Syndicated Loans, at any one time outstanding shall not exceed the aggregate amount of the Commitments of all of the Lenders at such time, and the aggregate principal amount of all Money Market Loans at any one time outstanding shall not exceed 50% of the aggregate amount of the Commitments of all of the Lenders at such time; and (iii) the Money Market Loans of any Lender will be deemed to be usage of the Commitments for the purpose of calculating availability pursuant to Section 2.01(ii) and 2.03(a)(ii) and fees pursuant to Section 2.08, but will not reduce such Lender's obligation to lend its pro rata share of the remaining Unused Commitment. (b) When the Borrower wishes to request offers to make Money Market Loans, it shall give the Administrative Agent (which shall promptly notify the Lenders) notice substantially in the form of Exhibit I hereto (a "Money Market Quote Request") so as to be received no later than 12:00 noon (Atlanta, Georgia time) at least 1 Domestic Business Day prior to the date of the Money Market Borrowing proposed therein (or such other time and date as the Borrower and the Administrative Agent, with the consent of the Required Lenders, may agree), specifying: (i) the proposed date of such Money Market Borrowing, which shall be a Euro-Dollar Business Day (the "Money Market Borrowing Date"); (ii) the maturity date (or dates) (each a "Stated Maturity Date") for repayment of each Money Market Loan to be made as part of such Money Market Borrowing (which Stated Maturity Date shall be that date occurring not less than 7 days but not more than 180 days from the date of such Money Market Borrowing); provided that the Stated Maturity Date for any Money Market Loan may not extend beyond the Termination Date (as in effect on the date of such Money Market Quote Request); and (iii) the aggregate amount of principal to be requested by the Borrower as a result of such Money Market Borrowing, which shall be at least $5,000,000 (and in larger integral multiples of $1,000,000) but shall not cause the limits specified in Section 2.03(a) to be violated. The Borrower may request offers to make Money Market Loans having up to 3 different Stated Maturity Dates in a single Money Market Quote Request. Except as otherwise provided in the immediately preceding sentence, after the first Money Market Quote Request has been given hereunder, no additional Money Market Quote Request may be given until at least 4 Domestic Business Days after all prior Money Market Quote Requests have been fully processed by the Administrative Agent, the Lenders and the Borrower pursuant to this Section 2.03. (c) (i) Each Lender may, but shall have no obligation to, submit a response containing an offer to make a Money Market Loan substantially in the form of Exhibit J hereto (a "Money Market Quote") in response to any Money Market Quote Request; provided that, if the Borrower's request under Section 2.03(b) specified more than 1 Stated Maturity Date, such Lender may, but shall have no obligation to, make a single submission containing a separate offer for each such Stated Maturity Date and each such separate offer shall be deemed to be a separate Money Market Quote. Each Money Market Quote must be submitted to the Administrative Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date; provided that any Money Market Quote submitted by Wachovia may be submitted, and may only be submitted, if Wachovia notifies the Borrower of the terms of the offer contained therein not later than 9:45 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date (or 15 minutes prior to the time that the other Lenders are required to have submitted their respective Money Market Quotes). Subject to Section 6.01, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall specify: (A) the proposed Money Market Borrowing Date and the Stated Maturity Date therefor; (B) the principal amounts of the Money Market Loan which the quoting Lender is willing to make for the applicable Money Market Quote, which principal amounts (x) may be greater than or less than the Commitment of the quoting Lender, (y) shall be at least $5,000,000 or a larger integral multiple of $1,000,000, and (z) may not exceed the principal amount of the Money Market Borrowing for which offers were requested; (C) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) offered for each such Money Market Loan (such amounts being hereinafter referred to as the "Money Market Rate"); and (D) the identity of the quoting Lender. Unless otherwise agreed by the Administrative Agent and the Borrower, no Money Market Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Money Market Quote Request (other than setting forth the principal amounts of the Money Market Loan which the quoting Lender is willing to make for the applicable Interest Period) and, in particular, no Money Market Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Money Market Loan for which such Money Market Quote is being made. (d) The Administrative Agent shall as promptly as practicable after the Money Market Quote is submitted (but in any event not later than 10:30 A.M. (Atlanta, Georgia time)) on the Money Market Borrowing Date, notify the Borrower of the terms (i) of any Money Market Quote submitted by a Lender that is in accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Lender with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the principal amounts of the Money Market Borrowing for which offers have been received and (B) the respective principal amounts and Money Market Rates so offered by each Lender (identifying the Lender that made each Money Market Quote). (e) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, the Borrower shall notify the Administrative Agent of its acceptance or nonacceptance of the offers so notified to it pursuant to Section 2.03(d) and the Administrative Agent shall promptly notify each Lender which submitted an offer. In the case of acceptance, such notice shall specify the aggregate principal amount of offers (for each Stated Maturity Date) that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the aggregate principal amount of each Money Market Loan comprising a Money Market Borrowing shall be at least $5,000,000 (and in larger integral multiples of $1,000,000) but shall not cause the limits specified in Section 2.03(a) to be violated; (iii) acceptance of offers may only be made in ascending order of Money Market Rates; and (iv) the Borrower may not accept any offer where the Administrative Agent has advised the Borrower that such offer fails to comply with Section 2.03(c)(ii) or otherwise fails to comply with the requirements of this Agreement (including without limitation, Section 2.03(a)). If offers are made by 2 or more Lenders with the same Money Market Rates for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Stated Maturity Date, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Lenders as nearly as possible in proportion to the aggregate principal amount of such offers, rounded to the nearest $1,000,000. Determinations by the Borrower of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. (f) Any Lender whose offer to make any Money Market Loan has been accepted shall, not later than 12:00 noon (Atlanta, Georgia time) on the Money Market Borrowing Date, make the amount of such Money Market Loan allocated to it available to the Administrative Agent at its address referred to in Section 9.01 in immediately available funds. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower on such date by depositing the same, in immediately available funds, not later than 4:00 P.M. (Atlanta, Georgia time), in an account of such Borrower maintained with Wachovia. (g) After any Money Market Loan has been funded, the Administrative Agent shall notify the Lenders of the aggregate principal amount of the Money Market Quotes received and the highest and lowest rates included in such Money Market Quotes. (h) Money Market Loans by Designated Lenders. For any Lender which is a Designating Lender, any Money Market Loan to be made by such Lender may from time to time be made by its Designated Lender in such Designated Lender's sole discretion, and nothing herein shall constitute a commitment to make Money Market Loans by such Designated Lender; provided, that if any Designated Lender elects not to, or fails to, make any such Money Market Loan that has been accepted by the Borrower in accordance with the foregoing, its Designating Lender hereby agrees that it shall make such Money Market Loan pursuant to the terms hereof. SECTION 2.04. Continuation and Conversion Elections. By delivering a notice (a "Notice of Continuation or Conversion"), which shall be substantially in the form of Exhibit E-2, to the Administrative Agent on or before 12:00 noon, Atlanta, Georgia time, on a Domestic Business Day (or Euro-Dollar Business Day, in the case of Euro-Dollar Loans outstanding), the Borrower may from time to time irrevocably elect, by notice on the same Domestic Business Day, in the case of Base Rate Loans, or 3 Euro-Dollar Business Days, in the case of Euro-Dollar Loans, that all, or any portion in an aggregate principal amount of $5,000,000 or any larger integral multiple of $1,000,000 be, (i) in the case of Base Rate Loans, converted into Euro-Dollar Loans or, (ii) in the case of Euro-Dollar Loans, converted into Base Rate Loans or continued as Euro-Dollar Loans (in the absence of delivery of a Notice of Continuation or Conversion with respect to any Euro-Dollar Loan at least 3 Euro-Dollar Business Days before the last day of the then current Interest Period with respect thereto, such Euro-Dollar Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders that have made such Loans, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into Euro-Dollar Loans when any Event of Default has occurred and is continuing. SECTION 2.05. Notes. (a) The Syndicated Loans of each Lender shall be evidenced by a single Syndicated Loan Note payable to the order of such Lender for the account of its Lending Office in an amount equal to the original principal amount of such Lender's Commitment. (b) The Money Market Loans made by any Lender to the Borrower shall be evidenced by a single Money Market Loan Note payable to the order of such Lender for the account of its Lending Office in an amount equal to the original principal amount of the aggregate Commitments. (c) Upon receipt of each Lender's Notes pursuant to Section 3.01, the Administrative Agent shall deliver such Notes to such Lender. Each Lender shall record, and prior to any transfer of its Notes shall endorse on the schedules forming a part thereof appropriate notations to evidence the date, amount and maturity of, and effective interest rate for, each Loan made by it, the date and amount of each payment of principal made by the Borrower with respect thereto, and such schedules of each such Lender's Notes shall constitute rebuttable presumptive evidence of the respective principal amounts owing and unpaid on such Lender's Notes; provided that the failure of any Lender to make, or any error in making, any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Notes or the ability of any Lender to assign its Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) Each Fixed Rate Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. (b) Notwithstanding the foregoing, the outstanding principal amount of the Loans, if any, together with all accrued but unpaid interest thereon, if any, shall be due and payable on the Termination Date. SECTION 2.07. Interest Rates. (a) "Applicable Margin" means either (i) 0.00% for Base Rate Loans, or (ii) the Euro-Dollar percentage determined on each Performance Pricing Determination Date by reference to the table set forth below; provided, that if there is no Debt Rating or if the Borrower's senior unsecured, unenhanced debt rating by S&P is BB or lower or by Moody is Ba2 or lower, the Euro-Dollar percentage shall be based upon Level V of the table below. Level I Level Level Level Level V II III IV Debt Rating A- BBB + BBB BBB - BBB - or or or or or A3 Baa1 Baa2 Baa3 Baa3 Euro-Dollar 0.500% 0.600% 0.700% 0.875% 1.000% In determining the amounts to be paid by the Borrower pursuant to Sections 2.07(a), and 2.08(a), the Borrower and the Lenders shall refer to the Borrower's Debt Rating from time to time. For purposes hereof, "Performance Pricing Determination Date" shall mean each date on which the Debt Rating changes. Each change in interest and fees as a result of a change in Debt Rating shall be effective only for Loans (including Refunding Loans) which are made on or after the relevant Performance Pricing Determination Date. All determinations hereunder shall be made by the Administrative Agent unless the Required Lenders shall object to any such determination. The Borrower shall promptly notify the Administrative Agent of any change in the Debt Rating. (b) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day plus the Applicable Margin. Such interest shall be payable on each Quarterly Payment Date while such Base Rate Loan is outstanding and on the date such Base Rate Loan is converted to a Euro-Dollar Loan. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable Adjusted London Interbank Offered Rate for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, at intervals of 3 months after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rates appear on Telerate Page 3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, provided that if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2 major lenders in New York City, selected by the Administrative Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, for deposits in Dollars offered by leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Euro-Dollar Loan. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member lender of the Federal Reserve System in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Each Money Market Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Money Market Loan is made until it becomes due, at a rate per annum equal to the applicable Money Market Rate set forth in the relevant Money Market Quote. Such interest shall be payable on the Stated Maturity Date thereof, and, if the Stated Maturity Date occurs more than 90 days after the date of the relevant Money Market Loan, at intervals of 90 days after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Lenders by telecopier of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) After the occurrence and during the continuance of an Event of Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) may, at the election of the Required Lenders, bear interest at the Default Rate. SECTION 2.08. Fees. (a) The Borrower shall pay to the Administrative Agent for the ratable account of each Lender a facility fee (the "Facility Fee") on the maximum amount of the aggregate Commitments in effect for any relevant period, irrespective of usage, calculated at a rate per annum equal to the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below and the Debt Rating for the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that if there is no Debt Rating or if the Borrower's senior unsecured, unenhanced debt rating by S&P is BB or lower or by Moody is Ba2 or lower, the Facility Fee shall be based upon Level V of the table below. The Facility Fee shall accrue at all times from and including the Closing Date to but excluding the Termination Date and shall be payable, in arrears, on each Quarterly Payment Date and on the Termination Date. Level I Level Level Level Level V II III IV A - BBB + BBB BBB - BBB - Debt Rating or or or or or A3 Baa1 Baa2 Baa3 Baa3 Facility Fee 0.125% 0.150% 0.175% 0.250% 0.375% (b) On the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of each Lender, a fully- paid, non-refundable upfront fee as agreed upon among the Borrower, the Administrative Agent and the Lenders prior to the Closing Date. (c) The Borrower shall pay to the Administrative Agent, for the account and sole benefit of the Administrative Agent, such fees and other amounts at such times as set forth in the Arranger's Letter Agreement. SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least 3 Domestic Business Days' notice to the Administrative Agent, terminate at any time, or proportionately reduce the Unused Commitments from time to time by an aggregate amount of at least $5,000,000 or any larger integral multiple of $1,000,000. If the Commitments are terminated in their entirety, all accrued fees (as provided under Section 2.08) shall be due and payable on the effective date of such termination. SECTION 2.10. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least 1 Domestic Business Days' notice to the Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $1,000,000 with additional increments of $500,000 (or any lesser amount equal to the outstanding balance of such Borrowing), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Lenders included in such Base Rate Borrowing. (b) Subject to any payments required pursuant to the terms of Article VIII for such Fixed Rate Loan, upon 3 Domestic Business Day's prior written notice, the Borrower may prepay in minimum amounts of $1,000,000 with additional increments of $1,000,000 (or any lesser amount equal to the outstanding balance of such Loan) all or any portion of the principal amount of any Fixed Rate Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section 2.11, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such prepayment and such notice, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. SECTION 2.12. Mandatory Prepayments. On each date on which the conditions set forth in clauses (i) or (ii) of Section 2.01 are not satisfied (including, without limitation, by reason of the reduction of the Commitments pursuant to Section 2.09), the Borrower shall repay or prepay such principal amount of the outstanding Loans, if any (together with interest accrued thereon and any amount due under Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the aggregate amount of the Commitments as then reduced. Each such payment or prepayment shall be applied ratably to the Loans of the Lenders outstanding on the date of payment or prepayment in the following order of priority:(i) first, to Base Rate Loans; (ii) secondly, to Euro-Dollar Loans; and (iii) lastly, to Money Market Loans. SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, without any setoff, counterclaim or any deduction whatsoever, not later than 11:00 A.M. (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. (b) Whenever any payment of principal of, or interest on, the Base Rate Loans, Money Market Loans or of fees hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. (c) All payments of principal, interest and fees and all other amounts to be made by the Borrower pursuant to this Agreement with respect to any Loan or fee relating thereto shall be paid without deduction for, and free from, any tax, imposts, levies, duties, deductions, or withholdings of any nature now or at anytime hereafter imposed by any governmental authority or by any taxing authority thereof or therein excluding in the case of each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, imposts, levies, duties, deductions or withholdings of any nature being "Taxes"). In the event that the Borrower is required by applicable law to make any such withholding or deduction of Taxes with respect to any Loan or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to any Lender in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment and shall pay to such Lender additional amounts as may be necessary in order that the amount received by such Lender after the required withholding or other payment shall equal the amount such Lender would have received had no such withholding or other payment been made. If no withholding or deduction of Taxes are payable in respect to any Loan or fee relating thereto, the Borrower shall furnish any Lender, at such Lender's request, a certificate from each applicable taxing authority or an opinion of counsel acceptable to such Lender, in either case stating that such payments are exempt from or not subject to withholding or deduction of Taxes. If the Borrower fails to provide such original or certified copy of a receipt evidencing payment of Taxes or certificate(s) or opinion of counsel of exemption, the Borrower hereby agrees to compensate such Lender for, and indemnify them with respect to, the tax consequences of the Borrower's failure to provide evidence of tax payments or tax exemption. Each Lender that is organized under the laws of a jurisdiction other than the United States of America or any state thereof or the District of Columbia (each a "Non-U.S. Lender") agrees to furnish to the Borrower and the Administrative Agent on the date of this Agreement, if a signatory hereto, or within 10 Domestic Business Days after it becomes a Lender hereunder, two (2) copies of either (i) U.S. Internal Revenue Service Form 4224 or U. S. Internal Revenue Service Form 1001 for the year 2000, or (ii) thereafter, U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN, or (iii) any successor forms thereto (wherein such Non-U.S. Lender claims entitlement to complete exemption from or a reduced rate of U.S. federal withholding tax on interest paid by the Borrower hereunder) and to provide to the Borrower and the Administrative Agent a new Form 4224 or Form 1001, or U.S. Internal Revenue Service Form W- 8ECI or U.S. Internal Revenue Service Form W-8BEN, or any successor forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence of any previously delivered form; provided that if any Lender complies with the requirements of this paragraph on the Closing Date or at such time as such Lender becomes a party to this Agreement, but is unable at any time thereafter, for any reason, to establish such exemption, or to file such forms, the Borrower shall nonetheless remain obligated under the terms of the immediately preceding paragraph with respect to such Lender. Notwithstanding the foregoing, in the event the Borrower is required to pay any Lender amounts pursuant to this Section 2.13, the Borrower may give notice to such Lender (with copies to the Administrative Agent) that it wishes to seek one or more assignees (which may be one or more of the other Lenders) to assume the Commitment of such Lender and to purchase such Lender's outstanding Loans and Notes for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans and Notes, plus all other fees and amounts due to such Lender hereunder, in each case, to the date such Loans, Notes and interest are purchased. Upon such sale or prepayment, each such Lender shall have no further commitment or other obligation to the Borrower hereunder or under any Note. In the event any Lender receives a refund of any Taxes paid by the Borrower pursuant to this Section 2.13(c), it will pay to the Borrower the amount of such refund promptly upon receipt thereof; provided that if at any time thereafter it is required to return such refund, the Borrower shall promptly repay to it the amount of such refund. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and the Lenders contained in this Section 2.13(c) shall be applicable with respect to any Participant, Assignee or other Transferee, and any calculations required by such provisions (i) shall be made based upon the circumstances of such Participant, Assignee or other Transferee, and (ii) constitute a continuing agreement and shall survive the termination of this Agreement and the payment in full or cancellation of the Notes. SECTION 2.14. Computation of Interest and Fees. Interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed (including the first day but excluding the last day). Interest on Euro-Dollar Loans and Money Market Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE III. CONDITIONS TO BORROWINGS SECTION 3.01. Conditions to First Borrowing. The obligation of each Lender to make a Loan on the occasion of the first Borrowing is subject to the satisfaction of the conditions set forth in Section 3.02 and receipt by the Administrative Agent of the following (as to the documents described in paragraphs (a), (c), (d) and (e) below, in sufficient number of counterparts for delivery of a counterpart to each Lender and retention of one counterpart by the Administrative Agent): (a) from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission of such executed counterpart (with the original to be sent to the Administrative Agent by overnight courier); (b) a duly executed Syndicated Loan Note and a duly executed Money Market Loan Note for the account of each Lender complying with the provisions of Section 2.05; (c) an opinion letter (together with any opinions of local counsel relied on therein) of Riddell Williams, P.S., counsel for the Borrower, dated as of the Closing Date, substantially in the form of Exhibit B and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Lender may reasonably request; (d) an opinion of Jones, Day, Reavis & Pogue, special counsel for the Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit C and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request; (e) a certificate (the "Closing Certificate") substantially in the form of Exhibit G), dated as of the Closing Date, signed by a principal financial officer of the Borrower, to the effect that (i) no Default has occurred and is continuing on the date of the first Borrowing and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the date of the first Borrowing hereunder; (f) all documents which the Administrative Agent or any Lender may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent, including, without limitation, a certificate of the Borrower substantially in the form of Exhibit H (the "Officer's Certificate"), signed by the Secretary or an Assistant Secretary of the Borrower, certifying as to the names, true signatures and incumbency of the officer or officers of the Borrower authorized to execute and deliver the Loan Documents, and certified copies of the following items: (i) the Borrower's Certificate of Incorporation, (ii) the Borrower's Bylaws, (iii) a certificate of the Secretary of State of the State of Delaware as to the good standing of the Borrower as a Delaware corporation, and (iv) the action taken by the Board of Directors of the Borrower authorizing the Borrower's execution, delivery and performance of this Agreement, the Notes and the other Loan Documents to which the Borrower is a party; (g) duly executed Subsidiary Guaranties from each of the Borrower's Material Subsidiaries in existence on the Closing Date (as disclosed on Schedule 4.08); (h) a duly executed Contribution Agreement by the Borrower and each of the Borrower's Material Subsidiaries in existence on the Closing Date (as disclosed on Schedule 4.08); (i) a Notice of Borrowing or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; (j) execution and delivery of a written termination agreement with respect to that certain Credit Agreement dated as of November 19, 1993, between Wachovia, as agent, and AFC; and (k) receipt of the fees described in Section 2.08(b) and (c). In addition, if the Borrower desires funding of a Fixed Rate Loan on the Closing Date, the Administrative Agent shall have received, the requisite number of days prior to the Closing Date, a funding indemnification letter satisfactory to it, pursuant to which (i) the Administrative Agent and the Borrower shall have agreed upon the interest rate, amount of Borrowing and Interest Period for such Fixed Rate Loan , and (ii) the Borrower shall indemnify the Lenders from any loss or expense arising from the failure to close on the anticipated Closing Date identified in such letter or the failure to borrow such Fixed Rate Loan on such date. SECTION 3.02. Conditions to All Borrowings. The obligation of each Lender to make a Syndicated Loan on the occasion of each Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable. (b) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (c) the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement shall be true on and as of the date of such Borrowing (except to the extent any such representation or warranty is expressly made as of a prior date); and (d) the fact that, immediately after such Borrowing, the conditions set forth in clauses (i) and (ii) of Section 2.01 shall have been satisfied. Each Syndicated Borrowing, each Money Market Borrowing and each Notice of Continuation or Conversion hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in paragraphs (b), (c) and (d) of this Section; provided, that if such Borrowing is a Syndicated Borrowing which consists solely of a Refunding Loan then, (i) if such Borrowing is a Euro-Dollar Borrowing or such Notice of Continuation or Conversion is to a Euro-Dollar Loan, such Borrowing or Notice of Continuation or Conversion shall be deemed to be such a representation and warranty by the Borrower only as to the matters set forth in paragraphs (b) and (d) above, and (ii) if such Borrowing is a Base Rate borrowing, or such Notice of Continuation or Conversions is to a Base Rate Loan, such Borrowing or Notice of Continuation or Conversion shall be deemed to be a representation and warranty by the Borrower only as to the matters set forth in paragraph (d) above. ARTICLE IV. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where such failure to be so qualified or to possess such licenses, authorizations, consents or approvals could not reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. SECTION 4.04. Financial Information; Material Adverse Effect. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1999 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by Deloitte & Touche LLP, copies of which have been delivered to each of the Lenders, and the unaudited consolidated financial statements of the Borrower for the interim period ended March 31, 2000, copies of which have been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. (b) Since December 31, 1999 there has been no event, act, condition or occurrence having a Material Adverse Effect. SECTION 4.05. No Litigation. There is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have or cause a Material Adverse Effect or which in any manner draws into question the validity of or could impair the ability of the Borrower to perform its obligations under, this Agreement, the Notes or any of the other Loan Documents. SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA. (b) Neither the Borrower nor any member of the Controlled Group has incurred any withdrawal liability with respect to any Multiemployer Plan under Title IV of ERISA, and no such liability is expected to be incurred. SECTION 4.07. Compliance with Laws; Payment of Taxes. The Borrower and its Subsidiaries are in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where such compliance is being contested in good faith through appropriate proceedings or where non-compliance could not reasonably be expected to have or cause a Material Adverse Effect. There have been filed on behalf of the Borrower and its Subsidiaries all Federal, state and local income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Subsidiary have been paid except where such failure to file or pay could not reasonably be expected to have or cause a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. United States income tax returns of the Borrower and its Subsidiaries have been examined and closed through the Fiscal Year ended December 31, 1994. SECTION 4.08. Subsidiaries. Each of the Borrower's (i) Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where such failure to be so qualified or to possess such licenses, authorizations, consents or approvals could not reasonably be expected to have or cause a Material Adverse Effect, and (ii) Material Subsidiaries has executed and delivered a Subsidiary Guaranty. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation, and which Subsidiary is a Material Subsidiary. SECTION 4.09. Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. SECTION 4.11. Ownership of Property; Liens. Each of the Borrower and its Consolidated Subsidiaries has title to its properties sufficient for the conduct of its business, and none of such property is subject to any Lien except as permitted in Section 5.17. SECTION 4.12. No Default. Neither the Borrower nor any of its Consolidated Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which could have or cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 4.13. Full Disclosure. All information heretofore furnished by the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Lender will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower has disclosed to the Lenders in writing any and all facts which could reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.14. Environmental Matters. (a) Neither the Borrower nor any Subsidiary is subject to any Environmental Liability which could have or cause a Material Adverse Effect and neither the Borrower nor any Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA. To the best of the Borrower's knowledge, after due inquiry, none of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA. (b) No Hazardous Materials have been or are being used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, or, to the best of the knowledge of the Borrower, at or from any adjacent site or facility, except for Hazardous Materials used, produced, transported, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in the ordinary course of business in material compliance with all applicable Environmental Requirements. (c) The Borrower, and each of its Subsidiaries and Affiliates, has procured all Environmental Authorizations reasonably necessary for the conduct of its business, and is in material compliance with all Environmental Requirements in connection with the operation of the Properties and the Borrower's, and each of its Subsidiary's businesses. SECTION 4.15. Capital Stock. All Capital Stock, debentures, bonds, notes and all other securities of the Borrower and its Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including, but not limited to, the "Blue Sky" laws of all applicable states and the federal securities laws. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of capital stock of each of the Borrower's other Subsidiaries (other than Wholly Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse claim. SECTION 4.16. Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation T, U or X. SECTION 4.17. Insolvency. After giving effect to (A) the execution and delivery of the Loan Documents and the making of the Loans under this Agreement, and (B) upon the Reorganization Effective Date, the Reorganization: (i) the Borrower will not (x) be "insolvent," within the meaning of such term as used in O.C.G.A. 18-2-22 or as defined in 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction, whether current or contemplated, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with respect to the Loans will not be rendered avoidable under any Other Applicable Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time. SECTION 4.18. Insurance. The Borrower and each of its Subsidiaries has (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance in at least such amounts and against at least such risks (including on all its property, and public liability and worker's compensation) as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 4.19. Citizenship. The Borrower is a citizen of the United States, as defined in 49 U.S.C. Section 40102(a)(15) (a "Citizen"). Each other Subsidiary that must be a Citizen in order to conduct its business as currently conducted is a Citizen. Neither the Borrower nor any such other Subsidiary is a Person constituting a national or citizen of any foreign country as designated in any applicable law or regulation or a national or a citizen of any foreign country designated in the Foreign Assets Control Regulations or in the Cuban Assets Control Regulations of the United States Treasury Department, 31 C.F.R., Chapter V, as amended. SECTION 4.20. Status as an Air Carrier. Each Subsidiary that must be so authorized in order to conduct its business as currently conducted, (i) is authorized to engage in all cargo domestic air service under certificates issued pursuant to 49 U.S.C. Section 41103 and 49 U.S.C. Section 41102(a), respectively, and (ii) is the holder of a valid and effective operating certificate issued by the Federal Aviation Administration pursuant to Part 121 of the Federal Aviation Regulations. Such certificates are in full force and effect and are adequate for the conduct of the business of the Borrower and its Subsidiaries as now conducted. There are no actions, proceedings or investigations pending or, to the knowledge of any of its officers, threatened (or any basis therefor known to the Borrower) to amend, modify, suspend or revoke any such certificate in whole or in part), which would have any material adverse effect on any such certificate or any of the operations of the Borrower or its Subsidiaries. ARTICLE V. COVENANTS The Borrower agrees that, so long as any Lender has any Commitment hereunder or any amount payable hereunder or under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Lenders: (a) as soon as available and in any event within 90 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by Deloitte & Touche LLP or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Required Lenders; (b) as soon as available and in any event within 45 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement of income and statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate, substantially in the form of Exhibit F (a "Compliance Certificate"), of the chief financial officer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.16, 5.17, 5.19, 5.20 and 5.22, inclusive on the date of such financial statements; (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (iii) setting forth the Debt Rating as of the most recent Performance Pricing Determination Date and the Applicable Margin for Base Rate Loans and Euro-Dollar Loans in effect as a result thereof; (d) simultaneously with the delivery of each set of annual financial statements referred to in paragraph (a) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention to cause them to believe that any Default existed on the date of such financial statements; (e) within 5 Domestic Business Days after the Borrower becomes aware of the occurrence of any Default, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action, if any, which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; and (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request. SECTION 5.02. Inspection of Property, Books and Records. The Borrower will (i) keep, and cause each Subsidiary to keep, proper books of record and account in which, when consolidated, full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) upon reasonable notice to the Borrower, permit, and cause each Subsidiary to permit, representatives of any Lender at such Lender's expense prior to the occurrence of a Default and at the Borrower's expense after the occurrence of a Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. SECTION 5.03. Maintenance of Existence. The Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained. SECTION 5.04. Dissolution. Neither the Borrower nor any of its Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock or that of any Subsidiary, except (i) through corporate reorganization to the extent permitted by Section 5.05, or (ii) through payment of Restricted Payments permitted under Section 5.15. SECTION 5.05. Consolidations, Mergers and Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) the Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (b) Subsidiaries of the Borrower may merge with one another, and (c) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit (1) the sale of Receivables pursuant to the Receivables Securitization Program, or (2) the transfer from AFC to Holding Company or any Material Subsidiary of the capital stock of any Subsidiary, or (3) during any Fiscal Quarter, a transfer of assets or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding 3 Fiscal Quarters constituted more than 15% of Consolidated Total Tangible Assets at the end of the most recent Fiscal Year immediately preceding such Fiscal Quarter. SECTION 5.06. Use of Proceeds. The proceeds of the Loans shall be used by the Borrower for general corporate purposes and Permitted Acquisitions; provided, however, no portion of the proceeds of the Loans may be used by the Borrower or any Subsidiary (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, unless such tender offer or other acquisition is to be made on a negotiated basis with the approval of the Board of Directors of the Person to be acquired, and the provisions of Section 5.16 would not be violated, (ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose in violation of any applicable law or regulation. SECTION 5.07. Compliance with Laws; Payment of Taxes. (a) The Borrower will, and will cause each of its Subsidiaries and each member of the Controlled Group to, comply with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where the necessity of such compliance is being contested in good faith through appropriate proceedings diligently pursued or where the failure to so comply could not reasonably be expected to have or cause a Material Adverse Effect. The Borrower will, and will cause each of its Subsidiaries to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien against the property of the Borrower or any Subsidiary, except liabilities being contested in good faith and against which the Borrower will set up reserves in accordance with GAAP. (b) The Borrower shall not permit the aggregate complete or partial withdrawal liability under Title IV of ERISA with respect to Multiemployer Plans incurred by the Borrower and members of the Controlled Group to exceed $10,000,000 at any time. For purposes of this Section 5.07(b), the amount of withdrawal liability of the Borrower and members of the Controlled Group at any date shall be the aggregate present value of the amount claimed to have been incurred less any portion thereof which the Borrower and members of the Controlled Group have paid or as to which the Borrower reasonably believes, after appropriate consideration of possible adjustments arising under Sections 4219 and 4221 of ERISA, it and members of the Controlled Group will have no liability, provided that the Borrower shall obtain prompt written advice from independent actuarial consultants supporting such determination. The Borrower agrees to deliver, along with the financial statements delivered under Section 5.01(a), the most current statements of the withdrawal liabilities of the Borrower and members of the Controlled Group from each Multiemployer Plan, if any. SECTION 5.08. Insurance. The Borrower will maintain, and will cause each of its Subsidiaries to maintain (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its property in at least such amounts and against at least such risks (including on all its property, and public liability and worker's compensation) as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 5.09. Change in Fiscal Year. The Borrower will not change its Fiscal Year without the consent of the Required Lenders. SECTION 5.10. Maintenance of Property. The Borrower shall, and shall cause each Subsidiary to, maintain all of its properties and assets in good condition, repair and working order, ordinary wear and tear excepted. SECTION 5.11. Environmental Notices. The Borrower shall furnish to the Lenders and the Administrative Agent prompt written notice of all material Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent property, and all facts, events, or conditions that could lead to any of the foregoing. SECTION 5.12. Environmental Matters. The Borrower and its Subsidiaries will not, and will not permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials used, produced, manufactured, processed, treated, transported, recycled, generated, stored, disposed, managed, or otherwise handled in the ordinary course of business in material compliance with all applicable Environmental Requirements. SECTION 5.13. Environmental Release. The Borrower agrees that upon the occurrence of a material Environmental Release at or on any of the Properties it will act immediately to investigate the extent of, and to take appropriate remedial action to eliminate, such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority. SECTION 5.14. Transactions with Affiliates. Neither the Borrower nor any of its Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the Borrower or a Wholly Owned Subsidiary), except as permitted by law and in the ordinary course of business and pursuant to reasonable terms, and are no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate. SECTION 5.15. Restricted Payments. The Borrower may make Restricted Payments so long as after giving effect to the payment of any such Restricted Payments, no Default shall be in existence or be created thereby. SECTION 5.16. Investments. Neither the Borrower nor any of its Subsidiaries shall make Investments in any Person except (i) loans or advances to employees not exceeding $1,000,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date; (ii) Investments by the Borrower in Material Subsidiaries and in the Receivables Subsidiary; (iii) Investments by the Receivables Subsidiary in the Special Purpose Vehicle, consistent with Standard Securitization Undertakings, (iv) loans and advances to the Receivables Subsidiary evidenced by a Purchase Money Note; (v) deposits required by government agencies or public utilities, (vi) Investments in direct obligations of the United States Government maturing within one year, (vii) Investments in certificates of deposit issued by a commercial lender whose credit is satisfactory to the Administrative Agent, (viii) Investments in commercial paper rated A1 or the equivalent thereof by S&P or P1 or the equivalent thereof by Moody's and in either case maturing within 6 months after the date of acquisition, (ix) Investments in tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by S&P and Aa or the equivalent thereof by Moody's, (x) other Investments which do not at any time exceed an aggregate amount outstanding equal to 7.5% of Consolidated Tangible Net Worth, and (xi) Permitted Acquisitions; provided, however, immediately after giving effect to the making of any Investment, no Default shall have occurred and be continuing. SECTION 5.17. Priority Debt. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, and the Borrower shall not permit any Subsidiary to incur any Debt, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $20,000,000; (b) any Lien existing on any specific fixed asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any specific fixed asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien attaches to such asset concurrently with or within 18 months after the acquisition or completion of construction thereof; (d) any Lien on any specific fixed asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any specific fixed asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) Liens securing Debt owing by any Subsidiary to the Borrower; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing paragraphs of this Section, provided that (i) such Debt is not secured by any additional assets, and (ii) the amount of such Debt secured by any such Lien is not increased; (h) Liens incidental to the conduct of its business or the ownership of its assets which (i) do not secure Debt and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) any Lien on Margin Stock; (j) Debt owing to the Borrower or another Subsidiary; (k) Liens on Receivables Program Assets pursuant to a Receivables Securitization Program; (l) Receivables Program Obligations; and (m) Liens not otherwise permitted by the foregoing paragraphs of this Section securing Debt (other than indebtedness represented by the Notes), and Debt of Subsidiaries not otherwise permitted by paragraph (j), in an aggregate principal amount at any time outstanding not to exceed 12.50% of Consolidated Total Tangible Assets. SECTION 5.18. Restrictions on Ability of Subsidiaries to Pay Dividends. The Borrower shall not permit any Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (i) pay any dividends or make any other distributions on its Capital Stock or any other interest or (ii) make or repay any loans or advances to the Borrower or the parent of such Subsidiary. SECTION 5.19. Fixed Charges Coverage. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending June 30, 2000, the ratio of Income Available for Fixed Charges to Consolidated Fixed Charges for the Fiscal Quarter just ended and the immediately preceding 3 Fiscal Quarters shall at all times be greater than 2.75 to 1.0. SECTION 5.20. Ratio of Consolidated Debt to Consolidated Total Capitalization. The ratio of Consolidated Debt to Consolidated Total Capitalization shall at all times be less than 0.50 to 1.0. SECTION 5.21. Limitations on Additional Debt. In addition to the requirements set forth in Section 5.17(m) of this Agreement, neither the Borrower nor any Subsidiary shall (i) issue any Long Term Debt as a part of a single offering or transaction in an aggregate amount equal to or exceeding $275,000,000, or (ii) on and after the Reorganization Effective Date, issue or refinance any such Long Term Debt unless the Holding Company is the issuer or has assumed such Long Term Debt, or (iii) issue any Long-Term Debt rated Ba2 or BB or lower by Moody's or S&P, respectively, or rated equivalently by some other rating agency or authority. SECTION 5.22. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth will at no time be less than $715,000,000 (minus Share Repurchase Adjustments, if any) plus the sum of (i) 50% of the cumulative Reported Net Income of the Borrower and its Consolidated Subsidiaries during any period after March 31, 2000 (taken as one accounting period), calculated quarterly at the end of each Fiscal Quarter but excluding from such calculations of Reported Net Income for purposes of this clause (i), any Fiscal Quarter in which the Reported Net Income of the Borrower and its Consolidated Subsidiaries is negative, and (ii) 100% of the cumulative Net Proceeds of Capital Stock received during any period after March 31, 2000, calculated quarterly at the end of each Fiscal Quarter. SECTION 5.23. More Restrictive Agreements. The Borrower will not become a party to any other credit facility or other agreement relating to the incurrence of Debt exceeding $10,000,000 in the aggregate which provides for representations, warranties, covenants, events of default or other provisions which are more restrictive against the Borrower and its Subsidiaries than the representations, warranties, covenants, events of default and other provisions contained in this Agreement without (i) the Administrative Agent's and the Required Lenders' prior written consent, or (ii) if requested by the Administrative Agent and the Required Lenders, executing and delivering an amendment to this Agreement and, if necessary, to the other Loan Documents, in order to provide the same more restrictive representations, warranties, covenants or events of default and other provisions against the Borrowers and their Subsidiaries in favor of the Administrative Agent and the Lenders, as may be requested. SECTION 5.24. New Material Subsidiaries. The Borrower shall cause all Subsidiaries which become Material Subsidiaries (whether at the time of or after creation or acquisition of such Subsidiaries) to execute and deliver to the Administrative Agent Subsidiary Guaranties within 10 Business Days of such Subsidiaries becoming Material Subsidiaries, along with an opinion of counsel and secretaries' certificates with respect to such Subsidiary Guaranties in the forms and as described in Section 3.01(c) and (f), and a joinder agreement satisfactory to the Administrative Agent whereby such Material Subsidiaries become parties to the Contribution Agreement as Contributing Parties. If at any time the Subsidiaries that have complied with the first sentence of this Section 5.24 fail to have either (a) assets which constitute at least 85% of the Consolidated Total Tangible Assets, or (b) contributed at least 85% of Consolidated Operating Income for the most recent Fiscal Quarter, then, in the event of such failure, the Borrower shall cause any existing Non-Material Subsidiaries to comply with this Section 5.24 to the extent necessary to remedy such failure within 10 Business Days of its occurrence. ARTICLE VI. DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within 5 Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within 5 Domestic Business Days after such fee or other amount becomes due; or (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.01(e), 5.02(ii), 5.03 through 5.06, inclusive, Sections 5.15 or 5.16, or Sections 5.18 through 5.22, inclusive; or (c) the Borrower shall fail to observe or perform any covenant or agreement contained or incorporated by reference in this Agreement (other than those covered by paragraph (a) or (b) above) and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender or (ii) the Borrower otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made by the Borrower in Article IV of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Debt in an aggregate amount exceeding $5,000,000 outstanding (other than the Notes) when due or within any applicable grace period; or (f) any event or condition shall occur which results in the acceleration of the maturity of Debt outstanding of the Borrower or any Subsidiary in an aggregate amount exceeding $5,000,000 outstanding (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or any Subsidiary) or enables (or, with the giving of notice or lapse of time or both, would enable) the holders of such Debt or commitment or any Person acting on such holders' behalf to accelerate the maturity thereof or terminate any such commitment (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or any Subsidiary); or (g) the Borrower or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally, or shall admit in writing its inability, to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; or (i) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing and the same could reasonably be expected to have or cause a Material Adverse Effect; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated and the same could reasonably be expected to have or cause a Material Adverse Effect; or (j) one or more judgments or orders for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) a federal tax lien shall be filed against the Borrower or any Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower or any Subsidiary under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing; or (l) (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of the voting stock of the Borrower; or (ii) as of any date a majority of the Board of Directors of the Borrower consists of individuals who were not either (A) directors of the Borrower as of the corresponding date of the previous year, (B) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A), or (C) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A) and individuals described in clause (B); or (m) on and after the Reorganization Effective Date, the Holding Company ceases to own 100% of the outstanding capital stock of AFC; or (n) the occurrence of any event, act, occurrence, or condition which the Required Lenders determine either does or has a reasonable probability of causing a Material Adverse Effect. then, and in every such event, (i) the Administrative Agent shall, if requested by the Required Lenders, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, (ii) any Lender may terminate its obligation to fund a Money Market Loan in connection with any relevant Money Market Quote, and (iii) the Administrative Agent shall, if requested by the Required Lenders, by notice to the Borrower declare the Notes (together with accrued interest thereon), and all other amounts payable hereunder and under the other Loan Documents, to be, and the Notes (together with accrued interest thereon), and all other amounts payable hereunder and under the other Loan Documents shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default; provided that if any Event of Default specified in paragraph (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall automatically and without notice become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest thereon at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Lenders. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof. ARTICLE VII. THE AGENT SECTION 7.01. Appointment; Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Lenders, and then only on terms and conditions satisfactory to the Administrative Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Administrative Agent shall be ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender. SECTION 7.02. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Lenders, and such instructions of the Required Lenders in any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. SECTION 7.03. Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the nonpayment of principal of or interest on the Loans) unless the Administrative Agent has received notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default or an Event of Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall give each Lender prompt notice of each nonpayment of principal of or interest on the Loans whether or not it has received any notice of the occurrence of such nonpayment. The Administrative Agent shall (subject to Section 9.06) take such action hereunder with respect to such Default or Event of Default as shall be directed by the Required Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 7.04. Rights of Administrative Agent and its Affiliates as a Lender. With respect to the Loans made by the Administrative Agent and any Affiliate of the Administrative Agent, Wachovia in its capacity as a Lender hereunder and any Affiliate of the Administrative Agent or such Affiliate in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though Wachovia were not acting as the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Wachovia in its individual capacity and any Affiliate of the Administrative Agent in its individual capacity. The Administrative Agent and any Affiliate of the Administrative Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of the Borrower's Affiliates) as if Wachovia were not acting as the Administrative Agent, and the Administrative Agent and any Affiliate of the Administrative Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and the Administrative Agent) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Lenders. SECTION 7.05. Indemnification. Each Lender severally agrees to indemnify the Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Administrative Agent; and provided further that no Designated Lender shall be liable for any payment under this Section 7.05 so long as, and to the extent that, its Designating Lender makes such payments. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 7.06. Consequential Damages. THE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY LENDER, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 7.07. Payee of Note Treated as Owner. The Administrative Agent may deem and treat each Person in whose name a Loan is registered as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent and the provisions of Section 9.08(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. SECTION 7.08. Nonreliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Administrative Agent shall not be required to keep itself (or any Lender) informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Administrative Agent. SECTION 7.09. Failure to Act. Except for action expressly required of the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Administrative Agent by reason of taking, continuing to take, or failing to take any such action. SECTION 7.10. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower and the Administrative Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a lender which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. SECTION 7.11. Additional Agents. Notwithstanding the fact that US Bank and Bank of America, N.A. are listed as Documentation Agent and Syndication Agent (the "Additional Agents"), respectively, on the cover page to this Agreement, the parties to this Agreement agree that the Additional Agents shall have no duties, obligations, or liabilities under this Agreement in any capacity except as "Lenders." ARTICLE VIII. CHANGE IN CIRCUMSTANCES; COMPENSATION SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: (a) the Administrative Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (b) the Required Lenders advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make Euro-Dollar Loans, or to permit continuations or conversions into Euro-Dollar Loans, shall be suspended. Unless the Borrower notifies the Administrative Agent at least 2 Domestic Business Days before the date of any Borrowing of Euro- Dollar Loans for which a Notice of Borrowing has previously been given, or continuation or conversion into Euro-Dollar Loans for which a Notice of Continuation or Conversion has previously been given, that it elects not to borrow or so continue or convert on such date, such Borrowing shall instead be made as a Base Rate Borrowing, or such Euro-Dollar Loan shall be converted to a Base Rate Loan. SECTION 8.02. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein or any existing or future law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Lender (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Lender (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make or permit continuations or conversions of Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity, and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Lender, together with accrued interest thereon and any amount due such Lender pursuant to Section 8.05(a). Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Lender (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders), and such Lender shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, a Change of Law or compliance by any Lender (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Lending Office); or (ii) shall impose on any Lender (or its Lending Office) or on the United States market for the London interbank market any other condition affecting its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans; and the result of any of the foregoing is to increase the cost to such Lender (or its Lending Office) of making or maintaining any Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof, or compliance by any Lender (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. (d) The provisions of this Section 8.03 shall be applicable with respect to any Participant, Assignee or other Transferee, and any calculations required by such provisions shall be made based upon the circumstances of such Participant, Assignee or other Transferee. SECTION 8.04. Base Rate Loans Substituted for Euro-Dollar Loans. If (i) the obligation of any Lender to make or maintain Euro- Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Lender as, or permitted to be continued as or converted into Euro-Dollar Loans, shall be instead be made or converted into Base Rate Loans, and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. Compensation. Upon the request of any Lender, delivered to the Borrower and the Administrative Agent, the Borrower shall pay to such Lender such amount or amounts as shall compensate such Lender for any loss, cost or expense incurred by such Lender as a result of: (a) any payment or prepayment (pursuant to Section 2.11, 2.13, 6.01, 8.02 or otherwise) of a Fixed Rate Loan on a date other than the last day of an Interest Period for such Loan; or (b) any failure by the Borrower to prepay a Fixed Rate Loan on the date for such prepayment specified in the relevant notice of prepayment hereunder; or (c) any failure by the Borrower to borrow a Fixed Rate Loan on the date for the Fixed Rate Borrowing of which such Fixed Rate Loan is a part specified in the applicable Notice of Borrowing delivered pursuant to Section 2.02 or notification of acceptance of Money Market Quotes pursuant to Section 2.03(e); such compensation to include, without limitation, an amount equal to the excess, if any, of (x) the amount of interest which would have accrued on the amount so paid or prepaid or not prepaid or borrowed for the period from the date of such payment, prepayment or failure to prepay or borrow to the last day of the then current Interest Period for such Fixed Rate Loan (or, in the case of a failure to prepay or borrow, the Interest Period for such Fixed Rate Loan which would have commenced on the date of such failure to prepay or borrow) at the applicable rate of interest for such Fixed Rate Loan provided for herein over (y) the amount of interest (as reasonably determined by such Lender) such Lender would have paid on deposits in Dollars of comparable amounts having terms comparable to such period placed with it by leading lenders in the London interbank market (if such Fixed Rate Loan is a Euro-Dollar Loan). SECTION 8.06. Replacement of Lenders. If any Lender (a "Notice Lender") makes demand for amounts owed under Section 8.03 (other than due to any change in the Eurodollar Reserve Percentage), or gives notice under Section 8.02 that it can no longer participate in Euro-Dollar Loans, then in each case the Borrower shall have the right, if no Default or Event of Default exists, and subject to the terms and conditions set forth in Section 9.08(c), to designate an assignee (a "Replacement Lender") to purchase the Notice Lender's share of outstanding Syndicated Loans, Money Market Loans and all other obligations hereunder and to assume the Notice Lender's obligations to the Borrower under this Agreement; provided, that, any Replacement Lender must be reasonably acceptable to the Administrative Agent and the Required Lenders (and, in any event, may not be an Affiliate of the Borrower). Subject to the foregoing, the Notice Lender agrees to assign without recourse to the Replacement Lender its share of outstanding Syndicated Loans and Money Market Loans and its Commitment, and to delegate to the Replacement Lender its obligations to the Borrower under this Agreement and its future obligations to the Administrative Agent under this Agreement. Upon such sale and delegation by the Notice Lender and the purchase and assumption by the Replacement Lender, and compliance with the provisions of Section 9.08(c), the Notice Lender shall cease to be a "Lender" hereunder and the Replacement Lender shall become a "Lender" under this Agreement; provided, however, that any Notice Lender shall continue to be entitled to the indemnification provisions contained elsewhere herein. ARTICLE IX. MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature pages hereof or such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and the confirmation is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent, including fees and disbursements of special counsel for the Lenders and the Administrative Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by the Administrative Agent and the Lenders, including fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents. The Borrower shall indemnify the Administrative Agent and each Lender against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. SECTION 9.04. Indemnification. The Borrower shall indemnify the Administrative Agent, the Lenders and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Lender hereunder or breach by the Borrower of this Agreement or any other Loan Document or from any investigation, litigation (including, without limitation, any actions taken by the Administrative Agent or any of the Lenders to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Administrative Agent and each Lender, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including, without limitation, legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. SECTION 9.05. Setoff; Sharing of Setoffs. (a) The Borrower hereby grants to the Administrative Agent and each Lender a lien for all indebtedness and obligations owing to them from the Borrower upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned to the Administrative Agent or any such Lender or otherwise in the possession or control of the Administrative Agent or any such Lender for any purpose for the account or benefit of the Borrower and including any balance of any deposit account or of any credit of the Borrower with the Administrative Agent or any such Lender, whether now existing or hereafter established hereby authorizing the Administrative Agent and each Lender at any time or times with or without prior notice to apply such balances or any part thereof to such of the indebtedness and obligations owing by the Borrower to the Lenders and/or the Administrative Agent then past due and in such amounts as they may elect, and whether or not the collateral, if any, or the responsibility of other Persons primarily, secondarily or otherwise liable may be deemed adequate. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Administrative Agent or any such Lender as soon as the same may be put in transit to it by mail or carrier or by other bailee. (b) Each Lender agrees that if it shall, by exercising any right of setoff or counterclaim or resort to collateral security or otherwise, receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Note held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of all principal and interest owing with respect to the Note held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Lenders owing to such other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Lenders owing to such other Lenders shall be shared by the Lenders pro rata; provided that (i) nothing in this Section shall impair the right of any Lender to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes, and (ii) if all or any portion of such payment received by the purchasing Lender is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such other Lender shall repay to the purchasing Lender the purchase price of such participation to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (x) the amount of such other Lender's required repayment to (y) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.06. Amendments and Waivers. (a) Any provision of this Agreement, the Notes or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that, no such amendment or waiver shall, unless signed by all Lenders, (i) change the Commitment of any Lender or subject any Lender to any additional obligation, (ii) reduce the principal of or the rate of interest on any Loan or any fees (other than fees payable to the Administrative Agent) hereunder, (iii) change the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) reduce the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) release or substitute all or any substantial part of the collateral (if any) held as security for the Loans, or (viii) release any Guarantee given to support payment of the Loans. (b) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement unless each Lender shall be informed thereof by the Borrower and shall be afforded an opportunity of considering the same and shall be supplied by the Borrower with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to each Lender forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Lenders. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Lender (in its capacity as such) as consideration for or as an inducement to the entering into by such Lender of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Lenders. (c) The Designated Lender hereby appoints Designating Lender as Designated Lender's agent and attorney in fact and grants to the Designating Lender an irrevocable power of attorney, coupled with an interest, to receive payments made for the benefit of the Designated Lender under this Agreement, to deliver and receive all communications and notices under this Agreement and other Loan Documents and to exercise on the Designated Lender's behalf all rights to vote and to grant and make approvals, waivers, consent of amendments to or under this Agreement or other Loan Documents. Any document executed by such agent on the Designated Lender's behalf in connection with this Agreement or other Loan Documents shall be binding on the Designated Lender. The Borrower, the Administrative Agent and each of the Lenders may rely on and are beneficiaries of the preceding provisions. SECTION 9.07. No Margin Stock Collateral. Each of the Lenders represents to the Administrative Agent and each of the other Lenders that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (b) Any Lender may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment hereunder or any other interest of such Lender hereunder. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Lender may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related loan or loans, (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related loan or loans, (iii) the change of the principal of the related loan or loans, or (iv) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) fee is payable hereunder from the rate at which the Participant is entitled to receive interest or fee (as the case may be) in respect of such participation. Each Lender selling a participating interest to any Person other than an Affiliate or Related Fund of such Lender in any Loan, Note, Commitment or other interest under this Agreement, other than a Money Market Loan or Money Market Note or participating interest therein, shall, within 10 Domestic Business Days of such sale, provide the Borrower and the Administrative Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Article VIII with respect to its participation in Loans outstanding from time to time. (c) Any Lender may at any time assign to one or more commercial banks, finance companies, insurance companies or other financial institution or fund which, in each case, in the ordinary course of business extends credit of the type contemplated herein and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA (each an "Assignee") all or a proportionate part of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance, executed by such Assignee, such transferor Lender and the Administrative Agent (and, in the case of an Assignee that is not then a Lender or an Affiliate or Related Fund of a Lender), subject to clause (iv) below, by the Borrower); provided that (i) no interest may be sold by a Lender pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Lender's Commitment, (ii) if a Lender is assigning only a portion of its Commitment, then, the amount of the Commitment being assigned (determined as of the effective date of the assignment) shall be in an amount not less than $5,000,000, (iii) no Lender may have more than 3 Assignees of such Lender's rights and obligations at any one time that were not previously Lenders or Affiliates of such assigning Lender, and (iv) except during the continuance of a Default, no interest may be sold by a Lender pursuant to this paragraph (c) to any Assignee that is not then a Lender or an Affiliate or Related Fund of a Lender without the consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld. Upon (A) execution of the Assignment and Acceptance by such transferor Lender, such Assignee, the Administrative Agent and (if applicable) the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Administrative Agent, (C) payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, (D) payment of a processing and recordation fee to the Administrative Agent of (1) if such Assignee is a Lender or an Affiliate or Related Fund of a Lender, $1,000), and (ii) for any other Assignee, $3,500, and (E) recordation of such assignment on the Register, as defined and provided below, such Assignee shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Lenders or the Administrative Agent shall be required. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 9.08(c), to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lenders, the transfer of any Commitment of such Lenders and the rights to the principal of, and interest on, any Loan shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitment and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitment and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitment and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Acceptance pursuant to this Section 9.08(c). Coincident with the delivery of such an Assignment and Acceptance to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Commitment and/or Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Commitment and/or Loan, and thereupon one or more new Notes in the aggregate principal amount so assigned shall be issued to the new Lender and, if applicable, a new Note shall be issued to the assigning or transferor Lender in the remaining aggregate principal amount of its Commitment and/or Loan not so assigned. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 9.08(c); but excluding any such losses, claims, damages and liabilities incurred by reason of the gross negligence or willful misconduct of the Administrative Agent. Each Lender agrees to indemnify the Borrower and the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Borrower or the Administrative Agent by reason of the inaccuracy of any information which is furnished by such Lender concerning such Lender or its Lending Office or the amount assigned pursuant to an Assignment and Acceptance Agreement. (d) Subject to the provisions of Section 9.09, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee (each a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Borrower which has been delivered to such Lender by the Borrower pursuant to this Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation prior to entering into this Agreement. (e) No Transferee shall be entitled to receive any greater payment under Section 8.03 than the transferor Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Lender to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Anything in this Section 9.08 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of the Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or obligations made by the Borrower to the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Lender from its obligations hereunder. (g) Any Lender may at any time designate not more than one Designated Lender to fund Money Market Loans on behalf of such Designating Lender subject to the terms of Section 9.08(c), and the provisions of Section 9.08(c) shall not apply to such designation. No Lender may have more than one Designated Lender at any time. Such designation may occur either by the execution of the signature pages hereof by such Lender and Designated Lender next to the appropriate "Designating Lender" and "Designated Lender" captions, or by execution by such parties of a Designation Agreement subsequent to the date hereof; provided, that any Lender and its Designated Lender executing the signatures pages hereof as "Designating Lender" and "Designated Lender", respectively, on the date hereof shall be deemed to have executed a Designation Agreement, and shall be bound by the respective representations, warranties and covenants contained therein, and such designation shall be conclusively deemed to be acknowledged by the Borrower and the Administrative Agent. The parties to each such designation occurring subsequent to the execution date hereof shall execute and deliver to the Administrative Agent and the Borrower for their acknowledgment a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Lender and a designee representing that it is a Designated Lender and acknowledge by the Borrower, the Administrative Agent will acknowledge such Designation Agreement and will give prompt notice thereof to the Borrower and the other Lenders, whereupon, (i) the Borrower shall execute and deliver to the Designating Lender a Designated Lender Note payable to the order of the Designated Lender, (ii) from and after the effective date specified in the Designation Agreement, the Designated Lender shall become a party to this Agreement with a right to make Money Market Loans on behalf of its Designating Lender pursuant to Section 2.03(h), and (iii) the Designated Lender shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Lender which is not otherwise required to repay obligations of such Designated Lender which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Lender, the Designating Lender shall be and remain obligated to the Borrower, the Administrative Agent and the Lenders for each and every obligation of the Designating Lender and its related Designated Lender with respect to this Agreement, including, without limitation, any indemnification obligations under Section 7.05 and any sums otherwise payable to the Borrower by the Designated Lender. Each Designating Lender, or a specified branch or affiliate thereof, shall serve as the administrative agent of its Designated Lender and shall on behalf of its Designated Lender: (i) receive any and all payments made for the benefit of such Designated Lender and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, consents and amendments under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by a Designating Lender, or specified branch or affiliate thereof, as administrative agent for its Designated Lender and need not be signed by such Designated Lender on its own behalf. The Borrower, the Administrative Agent and the Lenders may rely thereon without any requirement that the Designated Lender sign or acknowledge the same. No Designated Lender may assign or transfer all or any portion of its interest hereunder or under any other Loan Document, other than via an assignment to its Designating Lender or Liquidity Lender (but any assignment to a Liquidity Lender shall not curtail or affect the appointment or rights of the Designating Lender pursuant to Section 9.06(c) or Section 4 of the Designation Agreement, which appointment and rights are irrevocable), if any, or otherwise in accordance with the provisions of Section 2.03(h). SECTION 9.09. Confidentiality. Each Lender agrees to exercise commercially reasonable efforts to keep any information delivered or made available by the Borrower to it which is clearly indicated to be confidential information, confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from disclosing such information (i) to any other Lender, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (iv) which has been publicly disclosed, (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors, (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 9.09 and (ix) by any Designated Lender to any rating agency, commercial paper dealer, or provider of a surety, guaranty or credit or liquidity enhancement to such Designated Lender which has agreed in writing to be bound by the provisions of this Section 9.09; provided that should disclosure of any such confidential information be required by virtue of clause (ii) of the immediately preceding sentence, to the extent permitted by law, any relevant Lender shall promptly notify the Borrower of same so as to allow the Borrower to seek a protective order or to take any other appropriate action; provided, further, that, no Lender shall be required to delay compliance with any directive to disclose any such information so as to allow the Borrower to effect any such action. SECTION 9.10. Representation by Lenders. Each Lender hereby represents that it is a commercial lender or financial institution which makes loans in the ordinary course of its business and that it will make its Loans hereunder for its own account in the ordinary course of such business; provided that, subject to Section 9.08, the disposition of the Note or Notes held by that Lender shall at all times be within its exclusive control. SECTION 9.11. Obligations Several. The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. SECTION 9.12. Georgia Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Georgia. SECTION 9.13. Severability. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.14. Interest. In no event shall the amount of interest, and all charges, amounts or fees contracted for, charged or collected pursuant to this Agreement, the Notes or the other Loan Documents and deemed to be interest under applicable law (collectively, "Interest") exceed the highest rate of interest allowed by applicable law (the "Maximum Rate"), and in the event any such payment is inadvertently received by any Lender, then the excess sum (the "Excess") shall be credited as a payment of principal, unless the Borrower shall notify such Lender in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. The right to accelerate maturity of any of the Loans does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Administrative Agent and the Lenders do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Administrative Agent or the Lenders hereunder or under any of the Notes or the other Loan Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, the Borrower covenants, to the fullest extent permitted by law, that (i) the credit or return of any Excess shall constitute the acceptance by the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any other remedy, legal or equitable , against the Administrative Agent or any Lender, based in whole or in part upon contracting for charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Administrative Agent or any Lender, all interest at any time contracted for, charged or received from the Borrower in connection with this Agreement, the Notes or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. The Borrower, the Administrative Agent and each Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non- principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each Note and each of the other Loan Documents (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by the Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of obligations hereunder and under the Notes and the other Loan Documents be automatically recomputed by the Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 9.15. Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction. The Borrower (a) and each of the Lenders and the Administrative Agent irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, (b) submits to the nonexclusive personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (d) agrees that service of process may be made upon it by certified mail in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Administrative Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. SECTION 9.17. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.18. Source of Funds -- ERISA. Each of the Lenders hereby severally (and not jointly) represents to the Borrower that no part of the funds to be used by such Lender to fund the Loans hereunder from time to time constitutes (i) assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest nor (ii) any other assets of any employee benefit plan. As used in this Section, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 9.19. No Bankruptcy Proceedings. Each of the Borrower, the Lenders, the Administrative Agent and the Co-Administrative Agent agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. AIRBORNE FREIGHT CORPORATION (SEAL) By: Lanny H. Michael, SVP & CFO P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005 COMMITMENTS WACHOVIA BANK, N.A., as Administrative Agent and as a Lender (SEAL) $47,500,000 By: Title: Lending Office Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Telecopier number: 404-332-1394 Confirmation number: 404-332-6971 NATIONAL CITY BANK (SEAL) $32,500,000 By: Title: Lending Office 155 East Broad Street Columbus, OH 43251 Attention: Jeffrey L. Hawthorne, Sr. Vice President Telecopier number: 614-463-7172 Confirmation number: 614-463-7298 THE BANK OF TOKYO-MITSUBISHI, LTD. SEATTLE BRANCH (SEAL) $32,500,000 By: Title: Lending Office Suite 1100, 1201 Third Avenue Seattle, WA 98101 Attention: Kosuke Takahashi, Vice President Telecopier number: 206-382-6067 Confirmation number: 206-362-6000 BANK OF AMERICA, N.A. (SEAL) $45,000,000 By: Title: Lending Office 231 South LaSalle Street, 10th Floor Chicago, IL 60697 Attention: R. Guy Stapleton, Managing Director Telecopier number: 312-974-8811 Confirmation number: 312-828-6583 US BANK (SEAL) $45,000,000 By: Title: Lending Office U.S. Bank Centre, Suite 1100 1420 Fifth Avenue, WWH-276 Seattle, WA 98111 Attention: James R. Farmer, Vice President Telecopier number: 206-344-3654 Confirmation number: 206-587-5237 THE BANK OF NEW YORK (SEAL) $32,500,000 By: Title: Lending Office 10000 Wilshire Boulevard Suite 1125 Los Angeles, CA 90024 Attention: Lisa Yee Brown Telecopier number: 310-996-8667 Confirmation number: 310-996-8650 ABN-AMRO BANK N.V. (SEAL) $20,000,000 By: Title: Lending Office 300 South Grand Avenue, Suite 2650 Los Angeles, CA 90071 Attention: Paul K. Stimpfl, Group Vice President Telecopier number: 213-687-2390 Confirmation number: 213-687-2303 THE INDUSTRIAL BANK OF JAPAN, LIMITED (SEAL) $20,000,000 By: Title: Lending Office 350 South Grant Avenue, Suite 1500 Los Angeles, CA 90071 Attention: Vicente L. Timiraos, Joint General Manager Telecopier number: 213-488-9840 Confirmation number: 213-893-6442 ______________________ TOTAL COMMITMENTS $275,000,000 EXHIBIT A-1 SYNDICATED LOAN NOTE Atlanta, Georgia July [______], 2000 For value received, AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Borrower"), promises to pay to the order of _____________________________ (the "Lender"), for the account of its Lending Office, the principal sum of ___________________________________ AND NO/100 DOLLARS ($__________), or such lesser amount as shall equal the unpaid principal amount of each Syndicated Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below, on the dates and in the amounts provided in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Syndicated Loan Note on the dates and at the rate or rates provided for in the Credit Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be specified from time to time pursuant to the Credit Agreement. All Loans made by the Lender, the respective maturities thereof, the interest rates from time to time applicable thereto, and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This Syndicated Loan Note is one of the Syndicated Loan Notes referred to in the Credit Agreement dated as of even date herewith among the Borrower, the Lenders listed on the signature pages thereof and Wachovia Bank, N.A., as Administrative Agent (as the same may be amended and modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the optional and mandatory prepayment and the repayment hereof and the acceleration of the maturity hereof, as well as the obligation of the Borrower to pay all costs of collection, including reasonable attorneys fees, in the event this Syndicated Loan Note is collected by law or through an attorney at law. The Borrower hereby waives presentment, demand, protest, notice of demand, protest and nonpayment and any other notice required by law relative hereto, except to the extent as otherwise may be expressly provided for in the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Syndicated Loan Note to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. AIRBORNE FREIGHT CORPORATION (SEAL) By: Title: Syndicated Loan Note (continued) SYNDICATED LOANS AND PAYMENTS OF PRINCIPAL Date Base Rate Amount Amount of Maturity Notation or of Loan Principal Date Made By Euro Repaid Dollar Loan EXHIBIT A-2 MONEY MARKET LOAN NOTE As of July [____], 2000 For value received, AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Borrower"), promises to pay to the order of ____________________________, a _______________ (the "Lender"), for the account of its Lending Office, the principal sum of ONE HUNDRED THIRTY-SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($137,500,000), or such lesser amount as shall equal the unpaid principal amount of each Money Market Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below, on the dates and in the amounts provided in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Money Market Loan Note on the dates and at the rate or rates provided for in the Credit Agreement referred to below. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be specified from time to time pursuant to the Credit Agreement. All Money Market Loans made by the Lender, the respective maturities thereof, the interest rates from time to time applicable thereto, and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This Money Market Loan Note is one of the Money Market Loan Notes referred to in the Credit Agreement dated as of even date herewith among the Borrower, the Lenders listed on the signature pages thereof, Wachovia Bank, N.A., as Administrative Agent (as the same may be amended and modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the optional and mandatory prepayment and the repayment hereof and the acceleration of the maturity hereof, as well as the obligation of the Borrower to pay all costs of collection, including reasonable attorneys fees, in the event this Money Market Loan Note is collected by law or through an attorney at law. The Borrower hereby waives presentment, demand, protest, notice of demand, protest and nonpayment and any other notice required by law relative hereto, except to the extent as otherwise may be expressly provided for in the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Money Market Loan Note to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. AIRBORNE FREIGHT CORPORATION (SEAL) By: Title: Money Market Loan Note (continued) MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL Date Interest Amount Amount of Maturity Notation Rate of Loan Principal Date Made By Repaid EXHIBIT B OPINION OF COUNSEL FOR THE BORROWER [Dated as provided in Section 3.01 of the Credit Agreement] To the Lenders and the Administrative Agent Referred to Below c/o Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attn: Syndications Group Dear Sirs: We have acted as counsel for (i) AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Borrower"), in connection with the Credit Agreement (the "Credit Agreement") dated as of July 27, 2000, among the Borrower, the Lenders listed on the signature pages thereof and Wachovia Bank, N.A., as Administrative Agent and (ii) the Material Subsidiaries in connection with the Subsidiary Guaranty dated as of July 27, 2000, made by each of the Material Subsidiaries (collectively, the "Guaranties") in favor of the Agent for the ratable benefit of the Lenders and the Contribution Agreement by and among the Borrower and the Material Subsidiaries of even date therewith. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. For purposes of this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents provided to us as originals, the conformity to authentic original documents of all documents provided to us as certified, conformed or photostatic copies, and the completeness and accuracy of all certificates obtained from public officials. As to questions of fact material to the following opinions, when all of the facts were not independently established, we have relied upon oral and written representations of officers and representatives of the Borrower and/or the Material Subsidiaries, without any independent investigation or confirmation; provided, that in connection with any such reliance, we have no reason to believe that such representations are untrue. We have assumed for purposes of our opinions set forth below that the execution and delivery of the Credit Agreement by each Lender and by the Administrative Agent have been duly authorized by each Lender and by the Administrative Agent. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has the requisite corporate power to conduct its business as presently conducted. Each Material Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation as set forth in Schedule 4.08 to the Credit Agreement and has the requisite corporate power to conduct its business as presently conducted. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument which to our knowledge is binding upon the Borrower and (v) to our knowledge, except as provided in the Credit Agreement, do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. The execution, delivery and performance by each Material Subsidiary of its respective Subsidiary Guaranty and of the Contribution Agreement (i) are within such Material Subsidiary's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Material Subsidiary or of any agreement, judgment, injunction, order, decree or other instrument which to our knowledge is binding upon such Material Subsidiary and (v) to our knowledge, except as provided in the Credit Agreement, do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 3. The Credit Agreement constitutes a valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and the Notes constitute valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity. Each Subsidiary Guaranty and the Contribution Agreement constitutes a valid and binding agreement of the Material Subsidiary party thereto, enforceable against such Material Subsidiary in accordance with its terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity. 4. To our knowledge, there is no action, suit or proceeding pending, or threatened, against or affecting the Borrower or any of its Material Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would have a Material Adverse Effect. 5. The Borrower and each Material Subsidiary has all material governmental licenses, authorizations, consents and approvals, except insofar as the failure to have such licenses, authorizations, consents or approvals would not have a Material Adverse Effect. 6. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 7. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. We are qualified to practice in the State of Washington and do not purport to be experts on any laws other than the laws of the United States, the State of Washington and the general corporation laws of the State of Delaware and this opinion is rendered only with respect to such laws. We have made no independent investigation of the laws of any other jurisdiction. Insofar as the Credit Agreement, the Notes, the Guaranties and the Contribution Agreement purport to be governed by the laws of the state of Georgia, we express no opinion as to such law, or as to the enforceability of such choice of law in a proceeding in a court sitting in the State of Washington (whether state or federal); for purposes of our opinion in paragraph 3, we have rendered such opinion with reference to the possibility that a court sitting in the State of Washington might, notwithstanding the parties' express choice of law, apply the local law of the forum, in which event we confirm our opinion as stated therein. This opinion is delivered to you in connection with the transaction referenced above and may not be relied upon in any other connection or by any person other than you, an Assignee, a Participant or another Transferee under the Credit Agreement, without our prior written consent. Very truly yours, RIDDELL WILLIAMS p.s. EXHIBIT C OPINION OF JONES, DAY, REAVIS & POGUE , SPECIAL COUNSEL FOR THE AGENT [Dated as provided in Section 3.01 of the Credit Agreement] To the Lenders and the Administrative Agent Referred to Below c/o Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attn: Syndications Group Dear Sirs: We have participated in the preparation of the Credit Agreement (the "Credit Agreement") dated as of July 27, 2000, among AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Borrower"), the lenders listed on the signature pages thereof (the "Lenders") and Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This opinion letter is limited by, and is in accordance with, the January 1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion Committee of the Corporate and Banking Law Section of the State Bar of Georgia which Interpretive Standards are incorporated herein by this reference. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, and assuming the due authorization, execution and delivery of the Credit Agreement and each of the Notes by or on behalf of the Borrower, we are of the opinion that the Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note constitutes valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as: (i) the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent conveyance, voidable preference, moratorium or similar laws applicable to creditors' rights or the collection of debtors' obligations generally; (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; and (iii) the enforceability of certain of the remedial, waiver and other provisions of the Credit Agreement and the Notes may be further limited by the laws of the State of Georgia; provided that such additional laws do not, in our opinion, substantially interfere with the practical realization of the benefits expressed in the Credit Agreement and the Notes, except for the economic consequences of any procedural delay which may result from such laws. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction except the State of Georgia. We express no opinion as to the effect of the compliance or noncompliance of the Administrative Agent or any of the Lenders with any state or federal laws or regulations applicable to the Administrative Agent or any of the Lenders by reason of the legal or regulatory status or the nature of the business of the Administrative Agent or any of the Lenders. This opinion is delivered to you in connection with the transaction referenced above and may only be relied upon by you and any Assignee, Participant or other Transferee under the Credit Agreement without our prior written consent. Very truly yours, EXHIBIT D ASSIGNMENT AND ACCEPTANCE Dated ________________ ___, 20__ Reference is made to the Credit Agreement dated as of July 27, 2000 (together with all amendments and modifications thereto, the "Credit Agreement") among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. ___________________________ (the "Assignor") and ____________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, without recourse to the Assignor, and the Assignee hereby purchases and assumes from the Assignor, a _______% interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the Effective Date (as defined below) (including, without limitation, such percentage interest in the Assignor's Commitment, in the Syndicated Loans [and Money Market Loans] owing to the Assignor and in the Note[s] held by the Assignor. 2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder, that such interest is free and clear of any adverse claim and that as of the Effective Date (without giving effect to this assignment or to other assignments thereof which have not yet become effective) its Commitment and the aggregate outstanding principal amount of Syndicated Loans [and Money Market Loans] owing to it is accurately set forth on Schedule 1 hereto; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) attaches its Syndicated Loan Note [and Money Market Loan Note][USE FOR FULL ASSIGNMENT ONLY] and requests that the Administrative Agent exchange such Note[s] for a new Note or Notes payable to the order of the Assignor and/or the Assignee as set forth on Schedule 1 hereto, each dated the Effective Date. After giving effect to this assignment, but without giving effect to other assignments which have not yet become effective, the Commitments of the Assignor and the Assignee will be as set forth on Schedule 1 attached hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.04(a) thereof (or any more recent financial statements of the Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a lender or financial institution; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; (vi) specifies as its Lending Office (and address for notices) the office set forth on Schedule 1 attached hereto, (vii) represents and warrants that the execution, delivery and performance of this Assignment and Acceptance are within its corporate powers and have been duly authorized by all necessary corporate action, (viii) makes the representation and warranty contained in Section 9.18 of the Credit Agreement[, and (ix) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such taxes at a rate reduced by an applicable tax treaty][TO BE INCLUDED IN THE CASE OF A NON-US ASSIGNEE]. 4. The Effective Date for this Assignment and Acceptance shall be _______________, 2___(the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for execution and acceptance by the Administrative Agent and to the Borrower for execution by the Borrower. 5. Upon such execution and acceptance by the Administrative Agent [and execution by the Borrower] [If required by the Credit Agreement], from and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent rights and obligations have been transferred to it by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent its rights and obligations have been transferred to the Assignee by this Assignment and Acceptance, relinquish its rights (other than under Sections 8.03, 9.03 and 9.04 of the Credit Agreement) and be released from its obligations under the Credit Agreement. 6. Upon such execution and acceptance by the Administrative Agent [and execution by the Borrower] [If required by the Credit Agreement], from and after the Effective Date, the Administrative Agent shall make all payments in respect of the interest assigned hereby to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to such acceptance by the Administrative Agent directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Georgia. [NAME OF ASSIGNOR] By: Title: [NAME OF ASSIGNEE] By: Title: WACHOVIA BANK, N.A., As Administrative Agent By: Title: [NAME OF BORROWER] If required by the Credit Agreement By: Title: Schedule 1 to Assignment and Acceptance Commitment of Assignor prior to giving effect to Assignment and Acceptance : $_______________ Amount of Commitments after giving effect to Assignment and Acceptance: Assignor: [$_______________] [ None.] Assignee: $_______________ Aggregate Outstanding Principal of Assignor's Syndicated Loans prior to giving effect to Assignment and Acceptance: $_______________ [Aggregate Outstanding Principal of Assignor's Money Market Loans prior to giving effect to Assignment and Acceptance: $_______________] New Notes to be Issued: To Assignor: [$_________ Syndicated Loan Note][None.] To Assignee: $_________ Syndicated Loan Note [$_________1 Money Market Loan Note] Lending Office and Notice Address of Assignee2: _____________________________ _____________________________ _____________________________ Attention: ____________________ Telecopier number: ____________ Confirmation number: __________ EXHIBIT E-1 NOTICE OF BORROWING _________________ ____, 20___ Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Credit Agreement (as amended and modified from time to time, the "Credit Agreement") dated as of July 27, 2000 by and among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name], the Lenders from time to time parties thereto, and Wachovia Bank, N.A., as Administrative Agent. Gentlemen: Unless otherwise defined herein, capitalized terms used herein shall have the meanings attributable thereto in the Credit Agreement. This Notice of Borrowing is delivered to you pursuant to Section 2.02 of the Credit Agreement. The Borrower hereby requests a [Euro-Dollar Borrowing] [Base Rate Borrowing] in the aggregate principal amount of $__________ to be made on ______________, 20____, and for interest to accrue thereon at the rate established by the Credit Agreement for [Euro- Dollar Loans] [Base Rate Loans]. [The duration of the Interest Period with respect thereto shall be [1 month] [2 months] [3 months] [6 months]. The Borrower has caused this Notice of Borrowing to be executed and delivered by its duly authorized officer this _________ day of ______________, 20____. [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] By: Title: EXHIBIT E-2 NOTICE OF CONTINUATION OR CONVERSION _____________________, 20____ Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Credit Agreement (as amended and modified from time to time, the "Credit Agreement") dated as of July 27, 2000 by and among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name], the Lenders from time to time parties thereto, and Wachovia Bank, N.A., as Administrative Agent. Gentlemen: Unless otherwise defined herein, capitalized terms used herein shall have the meanings attributable thereto in the Credit Agreement. This Notice of Continuation or Conversion is delivered to you pursuant to Section 2.04 of the Credit Agreement. With respect to the [Base Rate Loans] [Euro-Dollar Loans] in the aggregate amount of $___________ which has an Interest Period ending on _____________, the Borrower hereby requests that such loan be [converted to a] [Base Rate Loan] [Euro-Dollar Loan] [continued as a] [Euro-Dollar Loan] in the aggregate principal amount of $__________ to be made on such date, and for interest to accrue thereon at the rate established by the Credit Agreement for [Base Rate Loans] [Euro-Dollar Loans]. [The duration of the Interest Period with respect thereto shall be [1 month] [2 months] [3 months] [6 months]. The Borrower has caused this Notice of Continuation or Conversion to be executed and delivered by its duly authorized officer this ______ day of ____________, 20___. [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] By: Title: EXHIBIT F COMPLIANCE CERTIFICATE Reference is made to the Credit Agreement dated as of July 27, 2000 (as modified and supplemented and in effect from time to time, the "Credit Agreement") by and among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name], the Lenders from time to time parties thereto, and Wachovia Bank, N.A., as Administrative Agent. Capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement; all amounts shown herein, unless expressly set forth to the contrary, shall be without duplication. Pursuant to Section 5.01(c) of the Credit Agreement, _____________, the duly authorized __________ of the Borrower, hereby (i) certifies to the Administrative Agent and the Lenders that the information contained in the Compliance Check List attached hereto is true, accurate and complete as of _________, _____, and that, to the best of our knowledge, no Default is in existence on and as of the date hereof, (ii) restates and reaffirms that the representations and warranties contained in Article IV of the Credit Agreement are true on and as of the date hereof as though restated on and as of this date (except to the extent any such representation or warranty is expressly made as of a prior date) and (iii) certifies that the Debt Rating as of the most recent Performance Pricing Determination Date is [____ by Moody's and ___ by S&P] and the Applicable Margin in effect as a result thereof is ___% for Euro-Dollar Loans. [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] By: Its: [AIRBORNE FREIGHT CORPORATION] As of [______________], 200[__] EXHIBIT F continued 1. Negative Pledge (Section 5.17) (a) Consolidated Total Tangible Assets $_________________ (b) Amount of Debt Secured by Liens under Section 5.17(m) $_________________ Limitation (product of (a) multiplied by 0.125) $_________________ 2. Fixed Charges Coverage (Section 5.19) (a) Income Available for Fixed Charges $_________________ (b) Consolidated Fixed Charges $_________________ Ratio of (a) to (b) __________________ Requirement >2.75 to 1.0 3. Ratio of Consolidated Debt to Consolidated Total Capitalization (Section 5.20) (a) Consolidated Debt $_________________ (b) Consolidated Total Capitalization $_________________ Ratio of (a) to (b) __________________ Maximum Ratio <0.50 to 1.0 4. Minimum Consolidated Tangible Net Worth (Section 5.22) (a) $715,000,000 (b) 50% of the cumulative Reported Net Income of the Borrower and its Consolidated Subsidiaries during any period after March 31, 2000 $________________ (c) 100% of the cumulative Net Proceeds of Capital Stock received during any period after March 31, 2000 $________________ Required Consolidated Tangible Net Worth (the sum of (a) plus (b) plus (c)) $________________ Actual Consolidated Tangible Net Worth $________________ EXHIBIT G [NAME OF BORROWER] CLOSING CERTIFICATE Reference is made to the Credit Agreement (the "Credit Agreement") dated as of July 27, 2000, among AIRBORNE FREIGHT CORPORATION, a Delaware corporation, the Lenders listed therein, and Wachovia Bank, N.A., as Administrative Agent. Capitalized terms used herein have the meanings ascribed thereto in the Credit Agreement. Pursuant to Section 3.01(e) of the Credit Agreement, ______________________________, the duly authorized ____________ of _____________ hereby certifies to the Administrative Agent and the Lenders that (i) no Default has occurred and is continuing as of the date hereof, and (ii) the representations and warranties contained in Article IV of the Credit Agreement are true on and as of the date hereof. Certified as of this _____ day of _____________, 20__. By: Printed Name: Title: EXHIBIT H [NAME OF BORROWER] SECRETARY'S CERTIFICATE The undersigned, _______________________, ______________________, Secretary of AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Borrower"), hereby certifies that [s]he has been duly elected, qualified and is acting in such capacity and that, as such, [s]he is familiar with the facts herein certified and is duly authorized to certify the same, and hereby further certifies, in connection with the Credit Agreement dated as of July 27, 2000 among the Borrower, Wachovia Bank, N.A. as Administrative Agent and as a Lender, and certain other Lenders listed on the signature pages thereof, that: 1. Attached hereto as Exhibit A is a complete and correct copy of the Certificate of Incorporation of the Borrower as in full force and effect on the date hereof as certified by the Secretary of State of the State of Delaware, the Borrower's state of incorporation. 2. Attached hereto as Exhibit B is a complete and correct copy of the Bylaws of the Borrower as in full force and effect on the date hereof. 3. Attached hereto as Exhibit C is a complete and correct copy of the resolutions duly adopted by the Executive Committee of the Board of Directors of the Borrower on ____________ ___, 20__ approving, and authorizing the execution and delivery of, the Credit Agreement, the Notes and the other Loan Documents (as such terms are defined in the Credit Agreement) to which the Borrower is a party. Such resolutions have not been repealed or amended and are in full force and effect, and no other resolutions or consents have been adopted by the Board of Directors of the Borrower in connection therewith. 4. __________________, who is ______________________ of the Borrower signed the Credit Agreement, the Notes and the other Loan Documents to which the Borrower is a party, was duly elected, qualified and acting as such at the time [s]he signed the Credit Agreement, the Notes and other Loan Documents to which the Borrower is a party, and [his/her] signature appearing on the Credit Agreement, the Notes and the other Loan Documents to which the Borrower is a party is [his/her] genuine signature. IN WITNESS WHEREOF, the undersigned has hereunto set [his/her] hand as of the ____ day of _____________ ____, 20__. EXHIBIT I MONEY MARKET QUOTE REQUEST Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Money Market Quote Request This Money Market Quote Request is given in accordance with Section 2.03 of the Credit Agreement (as amended or modified from time to time, the "Credit Agreement") dated as of July 27, 2000, among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name], the Lenders from time to time parties thereto, and WACHOVIA BANK, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein as defined therein. The Borrower hereby requests that the Administrative Agent obtain quotes for a Money Market Borrowing based upon the following: 1. The proposed date of the Money Market Borrowing shall be ______________, 20__ (the "Money Market Borrowing Date").3 2. The aggregate amount of the Money Market Borrowing shall be $______________.4 3. The Stated Maturity Date(s) applicable to the Money Market Borrowing shall be _____ days.5 * All numbered footnotes appear on the last page of this Exhibit I. Very truly yours, [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] By: Title: EXHIBIT J MONEY MARKET QUOTE Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Money Market Quote to This Money Market Quote is given in accordance with Section 2.03(c)(ii) of the Credit Agreement (as amended or modified from time to time, the "Credit Agreement") dated as of July 27, 2000, among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name] (the "Borrower"), the Lenders from time to time parties thereto, and WACHOVIA BANK, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein as defined therein. In response to the Borrower's Money Market Quote Request dated ________________, 20__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Lender: 2. Person to contact at Quoting Lender: 3. Date of Money Market Borrowing:6 4. We hereby offer to make Money Market Loan(s) in the following maximum principal amounts for the following Interest Periods and at the following rates: Maximum Stated Rate Principal Maturity Per Annum9 Amount7 Date8 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement, irrevocably obligate(s) us to make the Money Market Loan(s) for which any offer(s) [is] [are] accepted, in whole or in part (subject to the last sentence of Section 2.03(c)(i) of the Credit Agreement). Very truly yours, [Name of Lender] By: Authorized Officer Dated: ______________________ EXHIBIT K Form of Designation Agreement Dated __________________, _______ Reference is made to that certain Credit Agreement dated as of July 27, 2000 (as amended prior to the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among [AIRBORNE FREIGHT CORPORATION, a Delaware corporation] [if after the Reorganization Effective Date, insert Holding Company's name], as the Borrower, the Lenders parties thereto, and Wachovia Bank, N.A., as the Administrative Agent (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. [NAME OF DESIGNATING LENDER] (the "Designating Lender") and [NAME OF DESIGNEE] (the "Designee") agree as follows: 1. Pursuant to Section 9.08(h) of the Credit Agreement, the Designating Lender hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Money Market Loans pursuant to Section 2.03(h) of the Credit Agreement. Any assignment by Designating Lender to Designee of its rights to make a Money Market Loan pursuant to such Section 2.03(h) shall be effective at the time of the funding of such Money Market Loan and not before such time. 2. Except as set forth in Section 7, below, the Designating Lender makes no representation or warranty and assumes no responsibility pursuant to this Designation Agreement with respect to (a) any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument and document furnished pursuant thereto and (b) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto. 3. The Designee (a) confirms that it has received a copy of each Loan Document, together with copies of the financial statements referred to in Sections 4.04 and 5.01(a) and (b) (for periods for which such financial statements are available) of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (b) agrees that it will independently and without reliance upon the Administrative Agent, the Designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under any Loan Document; (c) confirms that it is a Designated Lender; (d) appoints and authorizes the Administrative Agent to take such action as the Administrative Agent on its behalf and to exercise such powers and discretion under any Loan Document as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of any Loan Document are required to be performed by it as a Lender. 4. The Designee hereby appoints the Designating Lender as Designee's agent and attorney in fact and grants to the Designating Lender an irrevocable power of attorney, coupled with an interest, to receive payments made for the benefit of Designee under the Credit Agreement, to deliver and receive all communications and notices under the Credit Agreement and other Loan Documents and to exercise on Designee's behalf all rights to vote and to grant and make approvals, waivers, consent of amendments to or under the Credit Agreement or other Loan Documents. Any document executed by such agent on the Designee's behalf in connection with the Credit Agreement or other Loan Documents shall be binding on the Designee. The Borrower, the Administrative Agent and each of the Lenders may rely on and are beneficiaries of the preceding provisions. 5. Following the execution of this Designation Agreement by the Designating Lender and its Designee, it will be delivered to the Borrower for acknowledgment and to the Administrative Agent for acknowledgment and recording by the Administrative Agent. The effective date for this Designation Agreement (the "Effective Date") shall be the date of acknowledgment hereof by the Administrative Agent, unless otherwise specified on the signature page thereto. 6. The Designating Lender and, by execution of their respective acknowledgments below, the Borrower and the Administrative Agent, each hereby (i) acknowledges that the Designee is relying on the non-petition provisions of Section 9.19 of the Credit Agreement as agreed to by all signatories thereto and (ii) reaffirms that it will not institute against the Designee or join any other Person in instituting against the Designee any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any federal or state bankruptcy or similar law for one year and done day after the payment in full of the latest maturing commercial paper note issued by the Designee. 7. The Designating Lender unconditionally agrees to pay or reimburse the Designee and save the Designee harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or mature whatsoever which may be imposed or asserted by any of the parties to the Loan Documents against the Designee, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Designee hereunder or thereunder, provided that the Designating Lender shall not be liable for any portion of such Liabilities, obligations, Losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designee's gross negligence or willful misconduct. 8. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make Money Market Loans as a Designated Lender pursuant to Section 2.03(h) of the Credit Agreement and the rights and obligations of a Designated Lender related thereto; provided, however, that the Designee shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of the Designee which is not otherwise required to repay obligations of the Designee Lender which is not otherwise required to repay obligations of the Designee Lender which re then due and payable. Notwithstanding the foregoing, the Designating Lender shall be and remain obligated to the Borrower, the Administrative Agent and the Lenders for each and every of the obligations of the Designee and the Designating Lender with respect to the Credit Agreement, including, without limitation, any indemnification obligations under Section 7.05 of the Credit Agreement and any sums otherwise payable to the Borrower by the Designee. 9. This Designation Agreement shall be governed by and construed in accordance with the laws of the State of [Georgia][New York][other jurisdiction chosen by Designating Lender and Designated Lender]. 10. This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Designation Agreement. IN WITNESS WHEREOF, the Designating Lender and the Designee intending to be legally bound, have caused this Designation Agreement to be executed by their officers thereunto duly authorized as of the date first above written. [NAME OF DESIGNATING LENDER] as Designating Lender By: Title: [NAME OF DESIGNEE], as Designee By: Title: Lending Office (and address for notices): Acknowledged this ____ day Acknowledged this ____ day of ______________ ____, 20__ of ______________ __, 20__ (the Effective Date) WACHOVIA BANK, NA As the Administrative Agent as the Borrower By: _____________________________ By: Title: Title: EXHIBIT L FORM OF SUBSIDIARY GUARANTY GUARANTY THIS GUARANTY (this "Guaranty") is made as of the ____ day of _______________, 20__, ___________________________, a ______________ corporation (the "Guarantor") in favor of the Administrative Agent, for the ratable benefit of the Lenders, under the Credit Agreement referred to below; W I T N E S S E T H : WHEREAS, AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Company") and WACHOVIA BANK, N.A., as Administrative Agent (the "Administrative Agent"), and certain other Lenders from time to time party thereto have entered into a certain Credit Agreement dated as of July 27, 2000 (as it may be amended or modified further from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Lenders to the Company for the benefit of the Guarantor; WHEREAS, it is required by Sections 3.01 and 4.08 of the Credit Agreement, that the Guarantor execute and deliver this Guaranty whereby the Guarantor shall guarantee the payment when due of all principal, interest and other amounts that shall be at any time payable by the Company and, on and after the Reorganization Effective Date, the Holding Company (the Company and the Holding Company are so referred to herein as the "Borrower"), under the Credit Agreement, the Notes and the other Loan Documents; and WHEREAS, in consideration of the financial and other support that the Borrower has provided, and such financial and other support as the Borrower may in the future provide, to Guarantor, whether directly or indirectly, and in order to induce the Lenders and the Administrative Agent to enter into the Credit Agreement, the Guarantor is willing to guarantee the obligations of the Borrower under the Credit Agreement, the Notes, and the other Loan Documents; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. SECTION 2. Representations and Warranties. The Guarantor incorporates herein by reference as fully as if set forth herein all of the representations and warranties pertaining to a Subsidiary contained in Article IV of the Credit Agreement (which representations and warranties shall be deemed to have been renewed by the Guarantor upon each Borrowing under the Credit Agreement. SECTION 3. Covenants. The Guarantor covenants that, so long as any Lender has any Commitment outstanding under the Credit Agreement or any amount payable under the Credit Agreement or any Note shall remain unpaid, that the Guarantor will (i) fully comply with those covenants set forth in Article V of the Credit Agreement. SECTION 4. The Guaranty. The Guarantor hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to the Credit Agreement, and the full and punctual payment of all other amounts payable by the Borrower under the Credit Agreement (all of the foregoing obligations being referred to collectively as the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually any such amount, the Guarantor agrees that it shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Credit Agreement, the relevant Note or the relevant Loan Document, as the case may be. SECTION 5. Guaranty Unconditional. The obligations of the Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under the Credit Agreement, any Note, or any other Loan Document, by operation of law or otherwise or any obligation of any other guarantor of any of the Guaranteed Obligations; (b) any modification or amendment of or supplement to the Credit Agreement, any Note, or any other Loan Document; (c) any release, nonperfection or invalidity of any direct or indirect security for any obligation of the Borrower under the Credit Agreement, any Note, any Loan Document, or any obligations of any other guarantor of any of the Guaranteed Obligations; (d) any change in the corporate existence, structure or ownership of the Borrower or any other guarantor of any of the Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower, or any other guarantor of the Guaranteed Obligations, or its assets or any resulting release or discharge of any obligation of the Borrower, or any other guarantor of any of the Guaranteed Obligations; (e) the existence of any claim, setoff or other rights which the Guarantor may have at any time against the Borrower, any other guarantor of any of the Guaranteed Obligations, the Administrative Agent, any Lender or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (f) any invalidity or unenforceability relating to or against the Borrower, or any other guarantor of any of the Guaranteed Obligations, for any reason related to the Credit Agreement, any other Loan Document, or any other Guaranty, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower, or any other guarantor of the Guaranteed Obligations, of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement, the Notes, or any other Loan Document; or (g) any other act or omission to act or delay of any kind by the Borrower, any other guarantor of the Guaranteed Obligations, the Administrative Agent, any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder, including without limitation, any failure, omission, delay or inability on the part of the Administrative Agent or any Lender to enforce, assert or exercise any right power or remedy conferred on the Administrative Agent or any Lender under the Credit Agreement or any other Loan Documents. SECTION 6. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until all Guaranteed Obligations shall have been paid in full and the Commitments under the Credit Agreement shall have terminated or expired. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under the Credit Agreement or any other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time. SECTION 7. Waiver of Notice by the Guarantor. The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower, any other guarantor of the Guaranteed Obligations, or any other Person. SECTION 8. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower under the Credit Agreement, any Note or any other Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement, any Note or any other Loan Document shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Administrative Agent made at the request of the Required Lenders. SECTION 9. Notices. All notices, requests and other communications to any party hereunder shall be given or made by telecopier or other writing and telecopied or mailed or delivered to the intended recipient at its address or telecopier number set forth on the signature pages hereof or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the Administrative Agent in accordance with the provisions of Section 9.01 of the Credit Agreement. Except as otherwise provided in this Guaranty, all such communications shall be deemed to have been duly given when transmitted by telecopier, or personally delivered or, in the case of a mailed notice, 72 hours after such communication is deposited in the mails with first class postage prepaid, in each case given or addressed as aforesaid. SECTION 10. No Waivers. No failure or delay by the Administrative Agent or any Lenders in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Guaranty, the Credit Agreement, the Notes, and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11. Successors and Assigns. This Guaranty is for the benefit of the Administrative Agent and the Lenders and their respective successors and assigns and in the event of an assignment of any amounts payable under the Credit Agreement, the Notes, or the other Loan Documents, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty may not be assigned by the Guarantor without the prior written consent of the Administrative Agent and the Required Lenders, and shall be binding upon the Guarantor and its successors and permitted assigns. SECTION 12. Changes in Writing. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Guarantor and the Administrative Agent with the consent of the Required Lenders. SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE GUARANTOR AND THE AGENT HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE GUARANTOR AND THE AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14. Taxes, Etc. All payments required to be made by the Guarantor hereunder shall be made without setoff or counterclaim and free and clear of and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any government or any political or taxing authority as required pursuant to Section 2.13(c) of the Credit Agreement. SECTION 15. Subrogation. The Guarantor hereby agrees that it will not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, unless and until all of the Guaranteed Obligations shall have been paid in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed, under seal, by its authorized officer as of the date first above written. _____________________, a _______________ corporation (SEAL) By: Title: Attention: Telecopier number: Confirmation number: EXHIBIT M FORM OF CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of July ___, 2000 by and among AIRBORNE FREIGHT CORPORATION, a Delaware corporation (the "Company") and each of the undersigned corporations (other than the Company) respectively organized under the laws of the states set forth on the signature pages below their names (each a "Subsidiary", and collectively, the "Subsidiaries"). The Company and each of the Subsidiaries are sometimes hereinafter referred to individually as a "Contributing Party" and collectively as the "Contributing Parties". W I T N E S S E T H : WHEREAS, pursuant to that certain Credit Agreement dated as of even date herewith, among the Company, WACHOVIA BANK, N.A., as Administrative Agent for itself and the other Lenders which are party thereto from time to time (such agreement, as the same may from time to time be amended, modified, restated or extended, being hereinafter referred to as the "Credit Agreement"; unless otherwise provided herein, capitalized terms used in this Agreement have the meanings set forth in the Credit Agreement), the Lenders have agreed to extend financial accommodations to the Company, and on after the Reorganization Effective Date, the Holding Company (each of the Company and the Holding Company are referred to as "Borrower"); WHEREAS, as a condition, among others, to the Administrative Agent's and the Lenders' willingness to enter into the Credit Agreement, the Lenders have required that each Material Subsidiary execute and deliver a Subsidiary Guaranty, dated as of even date herewith (each such guaranty, as the same may from time to time be amended, modified, restated or extended, being hereinafter referred to individually as a "Guaranty" and collectively as the "Guaranties"), pursuant to which, among other things the Subsidiaries have jointly and severally agreed to guarantee the Borrower's indebtedness and other obligations owed to the Lenders under and as defined in the Credit Agreement, including, without limitation, the Borrower's obligations to repay the Loans it owes to the Lenders; and WHEREAS, each Subsidiary is a wholly-owned direct or indirect subsidiary of the Borrower and is engaged in businesses related to those of the Borrower and each other Subsidiary, and each of the Subsidiaries will derive direct or indirect economic benefit from the effectiveness and existence of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce each Subsidiary to enter into the Guaranty, it is agreed as follows: To the extent that any Subsidiary shall, under a Guaranty, make a payment (a "Contribution Payment") of a portion of the "Guaranteed Obligations" (as defined in the Guaranty), then such Contributing Party shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Contributing Parties in an amount, for each such Contributing Party, equal to a fraction of such Contributing Party Payment, the numerator of which fraction is such Contributing Party's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Contributing Parties. As of any date of determination, the "Allocable Amount" of each Contributing Party shall be equal to the maximum amount of liability which could be asserted against such Contributing Party hereunder with respect to the applicable Contribution Payment without (i) rendering such Contributing Party "insolvent" within the meaning of Section 101(31) of the Federal Bankruptcy Code (the "Bankruptcy Code") or Section 2 of either the Uniform Fraudulent Transfer Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the "UFCA"), (ii) leaving such Contributing Party with unreasonably small capital, within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or Section 5 of the UFCA, or (iii) leaving such Contributing Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or Section 6 of the UFCA. This Agreement is intended only to define the relative rights of the Contributing Parties, and nothing set forth in this Agreement is intended to or shall impair the obligations of the Subsidiaries, jointly and severally, to pay any amounts, as and when the same shall become due and payable in accordance with the terms of the Guaranties. The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets in favor of each Contributing Party to which such contribution and indemnification is owing. This Agreement shall become effective upon its execution by each of the Contributing Parties and shall continue in full force and effect and may not be terminated or otherwise revoked by any Contributing Party until all of the obligations under the Credit Agreement shall have been indefeasibly paid in full (in lawful money of the United States of America) and discharged and the Credit Agreement and financing arrangements evidenced and governed by the Credit Agreement shall have been terminated. Each Contributing Party agrees that if, notwithstanding the foregoing, such Contributing Party shall have any right under applicable law to terminate or revoke this Agreement, and such Contributing Party shall attempt to exercise such right, then such termination or revocation shall not be effective until a written notice of such revocation or termination, specifically referring hereto and signed by such Contributing Party, is actually received by each of the other Contributing Parties and by the Lenders at their notice addresses set forth in the Credit Agreement. Such notice shall not affect the right or power of any Contributing Party to enforce rights arising prior to receipt of such written notice by each of the other Contributing Parties and the Lenders. If any Lender grants additional loans to the Borrower or takes other action giving rise to additional obligations after any Contributing Party has exercised any right to terminate or revoke this Agreement but before any Lender receives such written notice, the rights of each other Contributing Party to contribution and indemnification hereunder in connection with any Contribution Payments made with respect to such loans or obligations shall be the same as if such termination or revocation had not occurred. IN WITNESS WHEREOF, each Contributing Party has executed and delivered this Agreement, under seal, as of the date first above written. AIRBORNE FREIGHT CORPORATION (SEAL) By: Title: Address: Attention: Telecopier No. Confirmation No. [NAME OF SUBSIDIARY], a ___________________ corporation (SEAL) By: Title: Address: Attention: Telecopier No. Confirmation No. EXHIBIT N FORM OF JOINDER AGREEMENT THIS JOINDER AGREEMENT dated as of [___________________], by AIRBORNE FREIGHT CORPORATION, as the original borrower (the "Original Borrower"), WACHOVIA BANK, N.A., as agent (the "Administrative Agent"), and [insert name of Holding Company], as the new borrower (the "New Borrower"). 1. The Original Borrower is a party to that certain $275,000,000 Credit Agreement dated as of July 27, 2000, among the Original Borrower, the Administrative Agent and certain other lenders party thereto from time to time (as amended or otherwise modified from time to time, the "Credit Agreement"; capitalized terms not defined herein have the meaning set forth in the Credit Agreement). Contemporaneously with the Reorganization, and as a condition to the Reorganization Effective Date, the parties hereto agree as follows: 2. The New Borrower hereby agrees to become a party to the Credit Agreement and each other Loan Document to which the Original Borrower was a party (other than the Notes) and hereby assumes all of the Original Borrower's indebtedness, obligations, and liabilities thereunder, including, without limitation, with respect to the Loans, interest thereon, and fees payable with respect thereto, all as set forth in the terms of the Credit Agreement and the other Loan Documents. The New Borrower, as the "Borrower" under the Credit Agreement, hereby makes all of the representations and warranties set forth in the Credit Agreement and each of the Loan Documents, mutatis mutandis, to the extent relating to the Borrower, and agrees to perform all of the "Borrower's" covenants and be subject to all terms and conditions applicable to the "Borrower" under the Credit Agreement and the other Loan Documents. 3. The Original Borrower is hereby released as the "Borrower" under the Credit Agreement and the other Loan Documents to which it is a party as the "Borrower" thereunder. The Original Borrower hereby agrees to become a party to the Contribution Agreement as a guarantor and a contributing party and hereby assumes all of the indebtedness, obligations, and liabilities of a Guarantor and Contributing Party thereunder, including, without limitation, with respect to the Loans, interest thereon, and fees payable with respect thereto, as set forth in the terms of the Contribution Agreement. 4. Contemporaneously with the execution and delivery of this Joinder Agreement, (i) the New Borrower hereby agrees to execute and deliver to the Administrative Agent new Notes to replace the Notes issued by the Original Borrower under the Credit Agreement as evidence of the New Borrower's assumption of the Loans, and (ii) the Original Borrower hereby agrees to execute and deliver to the Administrative Agent a Subsidiary Guaranty. By the execution and delivery of this Joinder Agreement the parties hereto agree that the execution and delivery of this Joinder Agreement shall not cause a novation with respect to the Loans notwithstanding (i) the assumption by the New Borrower of the Original Borrower's Loans and other indebtedness, obligations and liabilities under the Credit Agreement and the other Loan Documents, (ii) the New Borrower's issuance of new Notes replacing the Original Borrower's Notes, and (iii) the release of the Original Borrower as the "Borrower" under the Credit Agreement. Nothing in this Joinder Agreement shall release or be deemed to release any other guarantor under a Subsidiary Guarantor with respect to the Loans assumed by the New Borrower. IN WITNESS WHEREOF, the parties hereto have caused this Joinder Agreement to be duly executed and delivered as of the day and year first above written. AIRBORNE FREIGHT CORPORATION, as the Original Borrower By________________________ Title: [insert name of Holding Company], as the New Borrower By________________________ Title: WACHOVIA BANK, N.A., as Administrative Agent By________________________ Title: EXHIBIT O PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "Agreement"), is made and entered into as of __________ [___], 2000, by and between WACHOVIA BANK, N.A. in its capacity as Agent under the Credit Agreement hereinafter referred to (the "Agent", which term shall include any successor Agent under the Credit Agreement) for the ratable benefit of the "Lenders" under the Credit Agreement and AIRBORNE, INC. ("Borrower"); W I T N E S E T H: WHEREAS, pursuant to that certain Credit Agreement of even date herewith among the Agent, Borrower, and the "Lenders" thereunder (as amended or supplemented from time to time, the "Credit Agreement"; capitalized terms used herein without definition have the meanings given them in the Credit Agreement), Borrower is or may hereafter become indebted to the Lenders in respect of the principal and interest on Loans made from time to time by the Lenders to the Borrower under the Credit Agreement, and fees, costs, indemnification and other amounts from time to time owing by the Borrower under the Credit Agreement or any other Loan Document (collectively, the "Secured Obligations"); and WHEREAS, to induce the Lenders to extend or to continue to extend credit to the Borrower, the Borrower has agreed, at the Lenders' request, to make and enter into this Agreement; NOW, THEREFORE, for the sum of $10 in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce the Lenders to extend credit from time to time to the Borrower, the Borrower and the Agent hereby agree as follows: SECTION 1. Definitions. Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. SECTION 2. Pledge of Collateral. Borrower does hereby pledge, hypothecate, assign, transfer, set over, deliver and grant a security interest in and to the Agent, for the ratable benefit of the Lenders, in the Pledged Note issued by Airborne Freight Corporation (the "Subsidiary"), a copy of which is attached hereto as Annex A, together with all proceeds thereof, which original Pledged Note is simultaneously herewith being delivered to Agent, accompanied by an endorsement to the Agent signed by Borrower (hereinafter said Pledged Note and all proceeds thereof being collectively referred to as the "Collateral"), all as security for the payment of the Secured Obligations. SECTION 3. Holding of Collateral and Rights. (a) Borrower acknowledges and agrees that the Agent shall hold the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto forever, subject, however, to return of the Collateral (or such portion thereof as may be existing from time to time hereafter after giving effect to the terms hereof) by the Agent to Borrower upon payment in full of all the Secured Obligations and termination by the Lenders in writing of any and all credit commitments with respect thereto. (b) So long as no Event of Default shall have occurred and be continuing: (i) Borrower shall be entitled to exercise any and all rights pertaining to the Collateral or any part thereof for any purpose not prohibited by the terms of this Agreement; provided, however, that following request therefor by Agent, Borrower shall not (A) amend any provision of the Pledged Note, or (B) exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of the Collateral or any part thereof; and, provided further, that Borrower shall give Agent at least ten days' written notice of the manner in which it intends to exercise any such right; and (ii) Borrower shall be entitled to receive and retain any interest or any other distribution of property paid, payable or otherwise distributed in respect of the Collateral. Upon the occurrence and during the continuance of an Event of Default, all rights of Borrower to exercise such rights which it would otherwise be entitled to exercise pursuant hereto shall cease, and all such rights shall thereupon become vested in Agent who shall thereupon have the sole right to exercise such rights. SECTION 4. Delivery of Additional Instruments; Further Assurances. The Borrower further covenants with the Agent that at the request of the Agent at any time and from time to time, at the expense of the Borrower, the Borrower will promptly execute and deliver all further instruments and documents, including any additional instruments evidencing indebtedness of the Subsidiary to the Borrower, and take all further action that the Agent may reasonably request, in order to perfect and protect the security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights, powers and remedies hereunder with respect to any Collateral. SECTION 5. Proceeds of Collateral. So long as no Event of Default has occurred and is continuing, the Borrower shall be entitled to receive and retain any proceeds in respect of the Collateral. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall receive and hold all payments in respect of the Collateral in trust for the benefit of the Agent, and, at the request of the Agent, shall remit all such amounts to the Agent for application to the Secured Obligations in such order as the Agent (acting at the direction of the Required Lenders) shall elect. SECTION 6. Agent Appointed Attorney-in-Fact. The Borrower hereby irrevocably appoints the Agent as the Borrower's attorney- in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in the Agent's discretion, to take any action and to execute any instrument which the Agent may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, from and after the occurrence of an Event of Default to receive, endorse and collect the Pledged Note and all instruments made payable to the Borrower representing any principal and/or interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same, when and to the extent permitted by this Agreement. SECTION 7. The Agent May Perform. If the Borrower fails to perform any agreement contained herein, the Agent may perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Borrower under Section 10; provided, that, the Agent shall exercise commercially reasonable efforts to notify the Borrower prior to taking any such action (although the failure to so notify the Borrower shall not limit the Agent's rights hereunder). SECTION 8. Reasonable Care. To the maximum extent permitted by law, the Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Agent accords the Agent's own property, it being understood that the Agent shall not have responsibility for (i) ascertaining or taking action with respect to maturities, notices or other matters relative to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, unless reasonably requested to do so by the Borrower, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral. SECTION 9. Remedies. If any Event of Default shall have occurred and be continuing: A. The Agent may exercise (in compliance with all applicable laws) in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to them, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of Georgia at that time, and the Agent may also, without notice except as specified below at anytime during the existence of an Event of Default, (i) make demand for payment on the Subsidiary in respect of the Pledged Note, and (ii) sell (in compliance with all applicable securities laws) the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, over the counter or at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable or otherwise in such manner as necessary to comply with applicable federal and state securities laws. The Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers at any such sale and such purchasers shall hold the property sold absolutely, free from any claim or right on the part of the Borrower, and the Borrower hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. To the extent notice of sale shall be required by law, the Agent shall give the Borrower at least 10 days' notice of the time and place of any public sale or the time after which any private sale is to be made, which the Borrower agrees shall constitute reasonable notification. At any such sale, the Agent may bid (which bid may be, in whole or in part, in the form of cancellation of Secured Obligations) for and purchase the whole or any part of the Collateral. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. If sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Agent until the sale price is paid by the purchaser or purchasers thereof, but the Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. The Borrower agrees that any sale of the Collateral conducted by the Agent in accordance with the foregoing provisions of this Section 9 shall be deemed to be a commercially reasonable sale under O.C.G.A. 1- 9-504 of the Georgia Uniform Commercial Code. As an alternative to exercising the power of sale herein conferred upon them, the Agent may proceed by a suit or suits at law or in equity to foreclose the security interest granted under this Agreement and to sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction. B. Any cash held by the Agent as Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon or any part of the Collateral following the occurrence of an Event of Default may, in the discretion of the Agent, be held by the Agent as collateral for, and/or then or at any time thereafter applied against all or any part of the Secured Obligations, in such order of application as the Agent (acting at the direction of the Required Lenders) shall select. C. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive such surplus. SECTION 10. Expenses. The Borrower will, upon demand, pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, actually incurred, and of any experts and agents, and including any taxes or fees incurred on account of the execution, issuance, delivery or recording of this Agreement or other documents executed in connection herewith which the Agent may incur in connection with (i) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Agent hereunder, or (iii) the failure by the Borrower to perform or observe any of the provisions hereof. SECTION 11. Security Interest Absolute. All rights of the Agent hereunder, the security interest granted to the Agent hereunder, and all obligations of the Borrower hereunder, shall be absolute and unconditional irrespective of any of the following, and the Borrower expressly consents to the occurrence of any of such events and waives, in its capacity as Borrower, to the extent permitted by law, any defense arising therefrom: A. any lack of validity or enforceability of any of the Loan Documents or any other agreement or instrument relating thereto; B. any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any of the Loan Documents; C. any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any of the Loan Documents for all or any of the Secured Obligations; or D. any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of the Secured Obligations or in respect of this Agreement. SECTION 12. Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Borrower herefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 13. No Waiver; Cumulative Remedies. No failure on the part of the Agent to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Agent preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. SECTION 14. Severability. If any provision of any of this Agreement or the application thereof to any party hereto or circumstances shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to any other party thereto or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 15. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth hereinbelow or at such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party in accordance with the provisions of Section 9.01 of the Credit Agreement. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier, or personally delivered or, in the case of a mailed notice, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid. SECTION 16. Time is of the Essence. Time is of the essence in this Agreement. SECTION 17. Interpretation. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 18. The Agent Not Joint Venturer. Neither this Agreement nor any agreements, instruments, documents or transactions contemplated hereby shall in any respect be interpreted, deemed or construed as making the Agent a partner or joint venturer with the Borrower or as creating any similar relationship or entity, and the Borrower agrees that it will not make any contrary assertion, contention, claim or counterclaim in any action, suit or other legal proceeding involving the Agent and the Borrower. SECTION 19. Jurisdiction. The Borrower agrees that any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of Georgia or the United States of America for the Northern District of Georgia, Atlanta Division, all as the Agent may elect. By execution of this Agreement, the Borrower hereby submits to each such jurisdiction, hereby expressly waiving whatever rights may correspond to it by reason of its present or future domicile. Nothing herein shall affect the right of the Agent to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction or to serve process in any manner permitted or required by law. The Borrower agrees that service of process may be made upon it be certified mail in the manner prescribed in Section 9.01 in the Credit Agreement for the giving of notice of the Borrower. Nothing herein contained, however, shall prevent the Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. SECTION 20. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia and shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto. SECTION 21. Counterparts. This Agreement may be executed in two or more counterparts, each of which when fully executed shall be an original, and all of said counterparts taken together shall be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly executed under seal as of the date first above written. AIRBORNE, INC. (SEAL) By: ___________________________________ Title: P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005 ACCEPTED: WACHOVIA BANK, N.A., in its capacity as Agent By:___________________________ Title: ANNEX "A" FORM OF PLEDGED NOTE __________, 2000 For value received, AIRBORNE EXPRESS, INC., formerly known as AIRBORNE FREIGHT CORPORATION ("Maker"), promises to pay to the order of AIRBORNE, INC. (the "Parent"), and its successors and assigns (each, a "Holder"), ON DEMAND, the unpaid principal amount of each loan, advance or other credit accommodation as currently reflected on the books and records of the Parent, as well as all loans, advances and other credit accommodations hereafter made by the Parent from time to time to Maker, but in any event only to the extent constituting proceeds of "Borrowings" defined in the Parent's $275,000,000 Credit Agreement dated as of July 27, 2000 with Wachovia Bank, N.A. as administrative agent. The Maker hereby waives presentment, demand, protest, notice of demand, protest and nonpayment and any other notice required by law relative hereto. The Maker irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising out of this note, (b) submits to the nonexclusive personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this note, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this note, and (d) agrees that service of process may be made upon it by certified mail at the address listed below the Maker's signature to this note. Nothing herein contained, however, shall prevent the Holder from bringing any action or exercising any rights against the Maker or any assets of the Maker, within any other state or jurisdiction. AIRBORNE EXPRESS, INC. formerly known as Airborne Freight Corporation (SEAL) By: ___________________________________ Title: P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005 PAY TO THE ORDER OF WACHOVIA BANK, N.A., AS ADMINISTRATIVE AGENT. AIRBORNE, INC. (SEAL) By:___________________________ Title: Schedule 4.08 Subsidiaries Name Jurisdiction of Incorporation Material Subsidiary ABX Air, Inc. Delaware Yes Airborne Forwarding Delaware Yes Corporation, dba Sky Courier Airborne FTZ, Inc. Ohio Yes Wilmington Air Park, Inc. Ohio Yes Aviation Fuel, Inc. Ohio No Sound Suppression, Inc. Ohio No Advanced Logistics Services Ohio No Corporation Airborne Freight Limited New Zealand No Airborne Express (Netherlands) Netherlands No B.V. Airborne Express i Sigtuna AB Sweden No _______________________________ 1 Aggregate amount of all Commitments of all Lenders on the Effective Date, or such lesser amount to which Money Market Loans may be limited pursuant to the Credit Agreement 2 A notice address which is different from the Lending Office may be used. 3 The date must be a Euro-Dollar Business Day 4 The amount of the Money Market Borrowing is subject to Section 2.03(a) and (b). 5 The Stated Maturity Dates are subject to Section 2.03(b)(iii). The Borrower may request that up to 2 different Stated Maturity Dates be applicable to any Money Market Borrowing, provided that (i) each such Stated Maturity Date shall be deemed to be a separate Money Market Quote Request and (ii) the Borrower shall specify the amounts of such Money Market Borrowing to be subject to each such different Stated Maturity Date. 6 As specified in the related Money Market Quote Request 7 The principal amount bid for each Stated Maturity Date may not exceed the principal amount requested. Money Market Quotes must be made for at least [$5,000,000] or a larger integral multiple of [$1,000,000]. 8 The Stated Maturity Dates are subject to Section 2.03(b)(iii). 9 Subject to Section 2.03(c)(ii)(C).

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.23 SIXTH AMENDMENT TO LOAN AGREEMENT     This amendment to Loan Agreement ("Amendment") is made as of August 31, 2000 by and among the following parties:     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association ("Bank of America" and a "Lender")     U.S. Bank National Association ("U.S. Bank" and a "Lender")     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association, in its capacity as Agent ("Agent")     Each of the several financial institutions which subsequently becomes party to the Loan Agreement pursuant to Section 11.7 (each individually a "Lender")     Northwest Pipe Company, an Oregon corporation ("Borrower") R E C I T A L S     A.  The Borrower, the Lenders and the Agent are parties to that certain Amended and Restated Loan Agreement dated as of June 30, 1998, as amended as of December 23, 1998, June 16, 1999, November 30, 1999, December 30, 1999 and May 11, 2000, and as the same may be further amended, modified or extended from time to time (the "Loan Agreement") and the related Loan Documents described therein.     B.  The parties desire to amend the Loan Agreement as set forth below:     NOW, THEREFORE, the parties agree as follows: A G R E E M E N T     1.  Definitions.  Capitalized terms used herein and not otherwise defined shall have the meaning given in the Loan Agreement.     2.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the definition of "Temporary Supplemental Revolving Loan Commitment" as follows: "Temporary Supplemental Revolving Loan Commitment" means Ten Million Dollars ($10,000,000.00) until September 30, 2000, after which there shall be no Temporary Supplemental Revolving Loan Commitment.     Amendment to Section 1.1. Section 1.1 of the Loan Agreement is amended by revising the following definition of "Temporary Supplemental Revolving Loan Maturity Date" as follows: "Temporary Supplemental Revolving Loan Maturity Date" means September 30, 2000.     3.  Amendment to Section 12.1.  Section 12.1 of the Loan Agreement is amended by changing the ending date of the period during which each lender agrees to make Temporary Supplemental Revolving Loans to September 30, 2000.     4.  No Further Amendment.  Except as expressly modified by this Amendment, the Loan Agreement and the other Loan Documents shall remain unmodified and in full force and effect and the parties hereby ratify their respective obligations thereunder. Without limiting the foregoing, the Borrower expressly reaffirms and ratifies its obligation to pay or reimburse the Agent and the Lender on request for all reasonable expenses, including legal fees, actually incurred by the Agent or such Lender in connection with the preparation of this Amendment, any other amendment documents, and the closing of the transactions contemplated hereby and thereby. --------------------------------------------------------------------------------     5.  Miscellaneous.       (a) Entire Agreement.  This Amendment comprises the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, representations or commitments.     (b) Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same Amendment.     (c) Governing Law.  This Amendment and the other agreements provided for herein and the rights and obligations of the parties hereto and thereto shall be construed and interpreted in accordance with the laws of the State of Oregon.     (d) Certain Agreements Not Enforceable.  UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION, AND BE SIGNED BY THE LENDERS TO BE ENFORCEABLE. 2 --------------------------------------------------------------------------------     EXECUTED AND DELIVERED by the duly authorized officers of the parties as of the date first above written. BORROWER:   NORTHWEST PIPE COMPANY           By: BRIAN DUNHAM Its: PRESIDENT AND CHIEF OPERATING OFFICER     Address:   200 S.W. Market Street, Suite 1800 Portland OR 97201 Fax No. (503) 240-6615   LENDER:       BANK OF AMERICA, N.A.           By: ED KLUSS Its: VICE PRESIDENT     Address:   Commercial Banking 121 SW Morrison Street, Suite 1700 Portland OR 97204 Fax No. (503) 275-1391 Attn: Larry C. Ellis           U.S. BANK NATIONAL ASSOCIATION           By: TIMOTHY G. STEMPEL Its: SENIOR VICE PRESIDENT     Address:   Oregon Corporate Banking, T-4 111 SW Fifth Avenue, Suite 400 Portland OR 97208 Fax No. (503) 275-7290 Attn: Stephen Mitchell   AGENT:       BANK OF AMERICA, N.A.           By: DORA A. BROWN Its: VICE PRESIDENT             Address:   Agency Services 701 Fifth Avenue, Floor 16 Seattle WA 98104 Fax No. (206) 358-0971 Attn: Dora A. Brown 3 -------------------------------------------------------------------------------- QUICKLINKS SIXTH AMENDMENT TO LOAN AGREEMENT R E C I T A L S A G R E E M E N T

EXECUTION VERSION AIRCRAFT LEASE EXTENSION AND AMENDMENT AGREEMENT Dated as of September 29, 2000 between POLARIS HOLDING COMPANY as Lessor and FRONTIER AIRLINES, INC. as Lessee in respect of Aircraft Lease Agreement dated as of June 3, 1996 relating to one Boeing 737-2L9 aircraft manufacturer's serial number 22734 THIS AGREEMENT is dated as of September 29, 2000 BETWEEN: POLARIS HOLDING COMPANY, a company incorporated under the laws of Delaware whose principal office is c/o GE Capital Aviation Services, Inc., 201 High Ridge Road, Stamford, CT 06927 ("Lessor"); and FRONTIER AIRLINES, INC., a company incorporated under the laws of Colorado whose headquarters are at 12015 East 46th Avenue, Denver, Colorado 80239 ("Lessee"). WHEREAS: (A) By an Aircraft Lease Agreement dated as of June 3, 1996 as amended and supplemented by Letter Agreement No. 1 dated as of June 3, 1996, and as further amended and supplemented by Amendment No. 1 to Aircraft Lease Agreement dated as of November 17, 1997 and Letter Agreement No. 2 dated as of November 17, 1997 (as further amended, modified and supplemented from time to time, the "Lease"), Lessor leased to Lessee and Lessee took on lease one Boeing 737-2L9 aircraft with manufacturer's serial number 22734, together with the engines (each having 750 or more rated takeoff horsepower) installed thereon, all more fully identified in Schedule 1 hereto, together with the related parts and equipment (collectively, the "Aircraft") on the terms and subject to the conditions contained therein. (B) Interests in the Aircraft and such engines are affected by the Lease and the other instruments identified (together with information respecting their recordation by the FAA under the Federal Aviation Act) in Schedule 2 hereto. (C) Lessor and Lessee wish to enter into this Agreement for the purpose of extending the term of the Lease and making certain further amendments to the Lease. IT IS AGREED as follows: 1. INTERPRETATION 1.1 Definitions: Capitalised terms used herein but not defined shall have the respective meanings ascribed to such terms in the Lease. In this Agreement "Extended Lease" means the Lease as amended by this Agreement. 1.2 Construction: The provisions of Clause 1.2 (Construction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 2. REPRESENTATIONS AND WARRANTIES Lessee hereby repeats the representations and warranties in Clause 2.1 of the Lease as if made with reference to the facts and circumstances existing as at the date hereof and as if the references in such representations and warranties to "this Agreement" referred to the Lease as amended by this Agreement. 3. LEASE EXTENSION Lessor and Lessee hereby agree (subject to satisfaction of the conditions specified in Clause 5) to extend the period for which the Aircraft is leased to Lessee pursuant to the Lease from the current Expiry Date of June 25, 2002 to September 30, 2002. Accordingly, the Lease is hereby amended (subject to satisfaction of the conditions specified in Clause 5), by deleting the words "the day preceding the day which is the 72nd monthly anniversary of the Delivery Date" in the definition of "Expiry Date" in Clause 1.1 and replacing them with the words "September 30, 2002". 4. OTHER AMENDMENTS TO LEASE 4.1 Other Amendments: The Lease shall be further amended (subject to satisfaction of the conditions specified in Clause 5) as follows: 4.1.1 The definition of "Other Agreements" in Clause 1.1 shall be amended by deleting the words "GPA Group plc" and replacing them with the words "Airplanes Holdings Limited". 4.1.2 The following definitions shall be added in the appropriate alphabetical order in Clause 1.1: "Pre-Approved Bank Wells Fargo Bank, N.A." "Letter of Credit as defined in Clause 5.1 hereof." "Required LC Expiry Date" the date which is 91 days after the Expiry Date." 4.1.3 Clause 5.1 is hereby amended and restated its entirety as follows: "5.1 Deposit: (a) Lessee shall pay to Lessor a Deposit in the amount set forth in the definition of that term in Letter Agreement Number 1. (b) In lieu of a cash Deposit, Lessee shall have the option to provide Lessor with a letter of credit issued and payable by a Pre-Approved Bank or another bank reasonably acceptable to Lessor in its reasonable discretion and in form and substance reasonably acceptable to Lessor, and, if not issued by a Pre-Approved Bank or by the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time, will be confirmed by and payable at the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time (the "Letter of Credit"). The Letter of Credit will be issued in lieu of a cash Deposit as security for all payment obligations of Lessee under the Lease and Other Agreements (including any and all obligations to indemnify Lessor for Losses suffered or incurred by it), which shall remain in full force and effect and may be drawn down by Lessor upon demand at any time or times following the occurrence of an Event of Default until the Required LC Expiry Date. (c) With the prior written consent of Lessor, the Letter of Credit may have a validity period or periods ending prior to the Required LC Expiry Date, provided that (i) the Letter of Credit shall, in each case, be renewed and delivered to Lessor not later than 45 days prior to its expiry; and (ii) a Letter of Credit shall remain in force at all times up to the Required LC Expiry Date. (d) If at any time during the Term, Lessor reasonably determines in its reasonable discretion that the current issuing or confirming bank for the Letter of Credit is no longer an acceptable issuing or confirming bank (whether by virtue of a material adverse change in its financial condition, a decrease in any credit rating of its long-term unsecured debt obligations, or for any other reason) Lessee shall promptly procure that the Letter of Credit is replaced by a Letter of Credit issued by another bank reasonably acceptable to Lessor in its reasonable discretion and (if reasonably requested by Lessor in its reasonable discretion) that such replacement Letter of Credit is confirmed by another bank reasonably acceptable to Lessor in its reasonable discretion. (e) If Lessor makes a drawing under the Letter of Credit, Lessee shall, following a demand in writing by Lessor, procure that the maximum amount available for drawing under the Letter of Credit is promptly restored to the level at which it stood immediately prior to such drawing. (f) If Lessee elects to provide Lessor with a Letter of Credit in lieu of the cash Deposit pursuant to the provisions of this Clause 5.1, then promptly upon receipt by Lessor of such Letter of Credit, Lessor shall return such cash Deposit to Lessee. If at any time thereafter a Letter of Credit shall not be in force and effect, then Lessee shall promptly provide Lessor with a cash Deposit. (g) So long as no Default or Event of Default then exists, Lessor shall refund to Lessee all Deposits (if any) then held by Lessor or, as the case may be, return the Letter of Credit upon return and final acceptance of the Aircraft by Lessor on the Expiry Date or promptly after receipt of the Agreed Value after an Event of Loss. 4.1.4 Clause 7.3(b)(i) shall be amended by inserting the words "(if any) or, as the case may be, return the Letter of Credit" immediately after the word "Deposit". 4.1.5 Clause 16.11 shall be amended by (a) deleting the Lessor contact information and replacing it with the following: "Lessor: Address: c/o GE Capital Aviation Services, Inc., 201 High Ridge Road, Stamford, CT 06927; Attn: Contracts Leader; Facsimile: (203) 357-3201; Telephone: (203) 357-4482"; and (b) by deleting the "With a copy to" contact information. 4.1.6 The following sentence shall be added at the end of Clause 16.12(a): "The U.N. Convention on Contracts for the International Sales of Goods is not applicable to this Agreement and all of its terms must be construed in accordance with the Governing Law applicable to domestic transactions in the jurisdiction to which the Governing Law pertains." 5. CONDITIONS PRECEDENT 5.1 Conditions: This Agreement and Lessor's obligation to extend the Term shall be subject to the satisfaction of each of the following conditions and receipt of the following documents: (a) Insurances: certificates of insurance, an undertaking from Lessee's insurance broker and other evidence satisfactory to Lessor of Lessee's due compliance with the provisions of the Lease (as extended hereby) regarding Insurances; (b) Legal Opinion: a legal opinion from Lessee's counsel in form and substance reasonably acceptable to Lessor; (c) Filings and FAA Opinion: evidence of the recordation of this Amendment with the FAA and, promptly after such recordation, provision by Lessee to Lessor of an opinion of FAA counsel acceptable to Lessor who are recognized specialists with regard to FAA registration matters in a form acceptable to Lessor acting reasonably as to the due filing for recordation of this Amendment; (d) Certificate of Lease Termination: a replacement certificate of lease termination executed by a duly authorized officer of Lessee, substantially in the form of Schedule 3 hereto, acknowledging that the Extended Lease is no longer in effect with respect to the Aircraft, which certificate Lessor will hold in escrow to be filed at the FAA upon the expiration of the Term or other termination of the leasing of the Aircraft to Lessee pursuant to the Extended Lease. (e) Other: such other documents as Lessor may reasonably request. 5.2 Further Conditions: The obligation of Lessor to extend the Term under this Agreement is subject to the further condition that, as of June 25, 2002 (the Expiry Date prior to the amendment contained herein), no Default or Event of Default shall have occurred and be continuing under the Lease or any other Operative Document. 5.3 Waiver: The conditions specified in Clauses 5.1 and 5.2 are for the sole benefit of Lessor and may be waived or deferred (in whole or in part and with or without conditions) by Lessor. 6. MISCELLANEOUS 6.1 Further Assurances: Lessee agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by law or reasonably requested by Lessor to establish, maintain and protect the rights and remedies of Lessor and to carry out and effect the intent and purpose of this Agreement. 6.2 Counterparts: This Agreement may be executed in any number of separate counterparts, and each counterpart shall when executed and delivered be an original document, but all counterparts shall together constitute one and the same instrument. 6.3 Governing Law: The provisions of Clause 16.12 (Governing Law and Jurisdiction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 6.4 Variation: The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of Lessor and Lessee. 6.5 Invalidity of any Provision: If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. 6.6 Costs and Expenses: In accordance with Clause 16.9 of the Lease, Leasee shall bear the costs and expenses associated with this extension and amendment of the Lease, including without limitation the costs and expenses of legal counsel providing the legal opinions referenced in Clause 5.1 7. CONTINUATION OF LEASE Save as expressly amended by this Agreement, the Lease shall continue in full and unvaried force and effect as the legal, valid and binding rights and obligations of each of Lessor and Lessee enforceable in accordance with their respective terms. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. Signed for and on behalf of POLARIS HOLDING COMPANY By: __________________ Title: __________________ Signed for and on behalf of FRONTIER AIRLINES, INC. By: __________________ Title: __________________ SCHEDULE 1 DESCRIPTION OF AIRCRAFT ----------------------- AIRCRAFT: N271FL Manufacturer: Boeing Model: 737-2L9 Serial Number 22734 ENGINES: Type: Pratt & Whitney JT8D-17 Serial Nos.: 688416 and 702681 SCHEDULE 2 INSTRUMENTS ----------- Aircraft Lease Agreement dated as of June 3, 1996, between Polaris Holding Company as lessor and Frontier Airlines, Inc. as lessee, as supplemented by Lease Supplement No. 1 dated June 26, 1996, recorded by the Federal Aviation Administration on August 7, 1996 as Conveyance No. X129854 (the "Lease") SCHEDULE 3 [FORM OF] CERTIFICATE OF LEASE TERMINATION The undersigned hereby certify that the Aircraft Lease Agreement dated as of June 3 , 1996, as amended and supplemented by the Aircraft Lease Extension and Amendment Agreement dated as of September ___, 2000, and as further described in the Appendix attached hereto, has terminated and the aircraft and the aircraft engines covered thereby are no longer subject to the terms thereof. This certificate may be executed in one or more counterparts each of which when taken together shall constitute one and the same instrument. DATED this _________________ day of____________________________ Lessor: Lessee: POLARIS HOLDING COMPANY FRONTIER AIRLINES, INC. By: _______________________ By: ________________________ Title: Title:

EXHIBIT 10.30 E*Trade Ventures II, LLC A Delaware Limited Liability Company LIMITED LIABILITY COMPANY OPERATING AGREEMENT June 16, 2000        -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I NAME, PURPOSE AND PRINCIPAL OFFICE OF COMPANY 1   1.1.   Name 1 1.2.   Agreement 1 1.3.   Purpose; Powers 1 1.4.   Registered Office and Agent 2 1.5.   Principal Office 2 1.6.   Definitions 2   ARTICLE II TERM AND TERMINATION OF THE COMPANY 3   2.1.   Term 3 2.2.   Termination 3 2.3.   Extension of Term 3   ARTICLE III INITIAL MEMBERS; CHANGES IN MEMBERSHIP 3   3.1.   Name and Address 3 3.2.   Admission of Additional Members 3 3.3.   Death, Disability or Withdrawal of a Managing Member 3 3.4.   Withdrawal of a Member 4   ARTICLE IV MANAGEMENT, DUTIES AND RESTRICTIONS 4   4.1.   Management 4 4.2.   Conversion of Status as Managing Member 5 4.3.   Liability of Members to the Company and the Other Members 5 4.4.   Restrictions on the Members 5 4.5.   Additional Restrictions on Non-Managing Members 5 4.6.   Officers 5   ARTICLE V CAPITAL CONTRIBUTIONS 6   5.1.   Capital Commitments and Membership Interests of the Members 6 5.2.   Liability of the Members 6 5.3.   Liability of Transferees 6 5.4.   Defaulting Members 6   ARTICLE VI CAPITAL ACCOUNTS AND ALLOCATIONS 7   6.1.   Capital Accounts 7 6.2.   Definitions 7 6.3.   Allocation of Net Income or Loss 9   ARTICLE VII EXPENSES 9   i --------------------------------------------------------------------------------        Page ARTICLE VIII DISTRIBUTIONS 9   8.1.   Interest 9 8.2.   Mandatory Distributions 9 8.3.   Discretionary Distributions 9   ARTICLE IX ASSIGNMENT OR TRANSFER OF MEMBERS’ INTERESTS 10   9.1.   Restrictions on Transfer of Members’ Interests 10 9.2.   Opinion of Counsel 10 9.3.   Violation of Restrictions 11 9.4.   Agreement Not to Transfer 11 9.5.   Multiple Ownership 11 9.6.   Substitute Members 11   ARTICLE X TESTING OF PERCENTAGE INTERESTS 11   10.1.   Vesting of Managing Members’ and E*Trade’s Interests 11 10.2.   Vesting of Other Non-Managing Members’ and Additional Members’ Interests 11   ARTICLE XI DISSOLUTION AND LIQUIDATION OF THE COMPANY 11   11.1.   Liquidation Procedures 11   ARTICLE XII FINANCIAL ACCOUNTING AND REPORTS 12   12.1.   Tax Accounting and Reports 12 12.2.   Valuation of Securities and Other Assets Owned by the Company 12 12.3.   Supervision; Inspection of Books 12 12.4.   Confidentiality 12   ARTICLE XIII OTHER PROVISIONS 19   13.1.   Execution and Filing of Documents 13 13.2.   Other Instruments and Acts 13 13.3.   Binding Agreement 13 13.4.   Governing Law 13 13.5.   Notices 13 13.6.   Power of Attorney 13 13.7.   Amendment Procedure 13 13.8.   Effective Date 13 13.9.   Entire Agreement 13 13.10.   Titles; Subtitles 13 13.11.   Company Name 13 13.12.   Exculpation 13 13.13.   Indemnification 14 13.14.   Limitation of Liability of Members 14 13.15.   Arbitration 14 13.16.   Tax Matters Partner 14 13.17.   Taxation as Company 15 ii -------------------------------------------------------------------------------- Page ARTICLE XIV MISCELLANEOUS TAX COMPLIANCE PROVISIONS 15   14.1.   Substantial Economic Effect 15 14.2.   Income Tax Allocations 15 14.3.   Withholding 15 EXHIBIT A Members’ Capital Commitments and Percentage Interests          iii -------------------------------------------------------------------------------- E*TRADE VENTURES II, LLC a Delaware Limited Liability Company OPERATING AGREEMENT              This Operating Agreement is entered into as of the 16th day of June, 2000, by and among (i) Christos M. Cotsakos and Thomas A. Bevilacqua, as managing members (the “Managing Members”), and (ii) E*Trade Group, Inc. (“E*Trade”) and each of the other persons whose names are set forth under the heading “Non-Managing Members” on Exhibit A attached hereto, as non-Managing Members (such persons and any additional non-Managing Member admitted after the date of this Agreement being referred to herein as the “Non-Managing Members”). The Managing Members and the Non-Managing Members are referred to herein collectively as the “Members.”              The Members have formed the Company by causing a Certificate of Formation (the “Certificate”) conforming to the requirements of the Delaware Revised Limited Liability Company Act (the “Act”) to be filed in the Office of the Secretary of State for the State of Delaware. ARTICLE I NAME, PURPOSE AND PRINCIPAL OFFICE OF COMPANY         1.1.  Name. The name of the Company is “E*Trade Ventures II, LLC.” The affairs of the Company shall be conducted under such name or such other name as the Managing Members may, in their discretion, determine. E*Trade hereby grants the Company the right, at no cost, to use the “E*Trade” name for the term of the Company as set forth in Article II hereof.         1.2.  Agreement. In consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members executing this Agreement hereby agree to the terms and conditions of this Agreement, as it may be amended from time to time. It is the express intention of the Members that this Agreement shall be the sole statement of agreement among them, and, except to the extent a provision of this Agreement expressly incorporates matters by express reference, this Agreement shall govern even when inconsistent with or different from the provisions of the Act or any other provision of law.         1.3.  Purpose; Powers.               (a)  Purpose. The primary purpose of the Company is to act as the general partner of E*Trade eCommerce Fund II, L.P. (the “ Fund”).               (b)  Powers. Subject to all of the terms and provisions hereof, the Company shall have all powers necessary, suitable or convenient for the accomplishment of the purpose of the Company, including, without limitation, the following:         (1)  to purchase, sell, invest and trade in securities of every kind, including, without limitation, capital stock, limited partnership interests, bonds, notes, debentures, securities convertible into other securities, trust receipts and other obligations, instruments or evidences of indebtedness, as well as in rights, warrants and options to purchase securities;         (2)  to make and perform all contracts and engage in all activities and transactions necessary or advisable to carry out the purposes of the Company, including, without limitation, the purchase, sale, transfer, pledge and exercise of all rights, privileges and incidents of ownership or possession with respect to any Company asset or liability; the borrowing or lending of money and the securing of payment of any Company obligation by hypothecation or pledge of, or grant of a security interest in, Company assets; and the guarantee of or becoming surety for the debts of others; and         (3)  otherwise to have all the powers available to it as a limited liability company under the Act. 1 --------------------------------------------------------------------------------         1.4.  Registered Office and Agent. The initial address of the Company’s registered office in Delaware is 15 East North Street, Dover, Wilmington, County of Kent, and its initial agent at such address for service of process is Incorporating Services Limited. The Managing Members may change the registered office and agent for service of process as they from time to time may determine.         1.5.  Principal Office. The principal office of the Company shall initially be located at 4500 Bohannon Street, Menlo Park, California 94025. The Managing Members may change the location of the principal office of the Company at any time.         1.6.  Definitions.               (a)  Additional Members. This term shall have the meaning ascribed to it in Paragraph 3.2.               (b)  Affiliate. With reference to any person, any other person controlling, controlled by or under direct or indirect common control with such person.               (c)  Agreement. This Operating Agreement of E*Trade Ventures II, LLC, a Delaware limited liability company.               (d)  Assignee. This term shall have the meaning ascribed to it in Paragraph 5.4.               (e)  Bankruptcy. A person or entity shall be deemed bankrupt if:         (1)  any proceeding is commenced against such person or entity as “debtor” for any relief under bankruptcy or insolvency laws, or laws relating to the relief of debtors, reorganizations, arrangements, compositions or extensions and such proceeding is not dismissed within ninety (90) days after such proceeding has commenced, or         (2)  such person or entity commences any proceeding for relief under bankruptcy or insolvency laws or laws relating to the relief of debtors, reorganizations, arrangements, compositions or extensions.               (f)  Book Value. This term shall have the meaning ascribed to it in Paragraph 6.2(a).               (g)  Capital Account. This term shall have the meaning ascribed to it in Paragraph 6.2(b).               (h)  Capital Commitment. This term shall have the meaning ascribed to it in Paragraph 5.1.               (i)  Capital Contribution. This term shall have the meaning ascribed to it in Paragraph 5.1(b).               (j)  Carry. The Company’s twenty-five percent (25%) carried interest in the income of the Fund.               (k)  Certificate. The Certificate of Formation of E*Trade Ventures II, LLC, a Delaware limited liability company.               (l)  Code. The Internal Revenue Code of 1986, as amended from time to time (and any corresponding provisions of succeeding law).               (m)  Defaulting Member. This term shall have the meaning ascribed to it in Paragraph 5.4(a).               (n)  Fiscal Quarter. This term shall have the meaning ascribed to it in Paragraph 6.2(c).               (o)  Fiscal Year. This term shall have the meaning ascribed to it in Paragraph 6.2(d).               (p)  Management Fee. The management fee receivable by the Company from the Fund.               (q)  Net Income or Net Loss. This term shall have the meaning ascribed to it in Paragraph 6.2(e).               (r)  Percentage Interest. This term shall have the meaning ascribed to it in Paragraph 6.2(f).               (s)  Sale or Exchange. This term shall have the meaning ascribed to it in Paragraph 6.2(g). 2 --------------------------------------------------------------------------------               (t)  Securities Act. The Securities Act of 1933, as amended from time to time.               (u)  Securities. Securities of every kind and nature and rights and options with respect thereto, including stock, notes, bonds, debentures, evidences of indebtedness and other business interests of every type, including interests in partnerships, joint ventures, proprietorships and other business entities.               (v)  TMP. This term shall have the meaning ascribed to it in Paragraph 13.16.               (w)  Termination Date. This term shall have the meaning ascribed to it in Paragraph 2.1.               (x)  Treasury Regulations. The Income Regulations promulgated under the Code, as such Regulations may be amended from time to time (including corresponding provisions of succeeding Regulations). ARTICLE II TERM AND TERMINATION OF THE COMPANY         2.1.  Term. The term of the Company shall continue until one (1) year after the dissolution of the Fund unless sooner terminated as provided in Paragraph  2.2 or by operation of law or extended as provided in Paragraph 2.3. The last day of the term of the Company, as such may be extended as provided herein, is referred to herein as the “Termination Date.”         2.2.  Termination. The Company shall terminate prior to the end of the period specified in Paragraph 2.1 at the election of the Managing Members. The Managing Members shall deliver notice of such termination to the Non-Managing Members.         2.3.  Extension of Term. The term of the Company may be extended by the Managing Members. The Managing Members shall provide notice of any such extension to the Non-Managing Members. ARTICLE III INITIAL MEMBERS; CHANGES IN MEMBERSHIP         3.1.  Name and Address. The persons listed on Exhibit A are hereby admitted as Members of the Company. Exhibit A shall be amended from time to time to reflect changes in the membership of the Company (including the admission of Additional Members). Any such amended Exhibit A shall supersede all prior Exhibit A’s and become part of this Agreement and shall be kept on file at the principal office of the Company.         3.2.  Admission of Additional Members. Individuals involved in the activities of the Company may be admitted to the Company as additional members (“Additional Members”) on such terms and conditions as shall be determined by the Managing Members, in their sole discretion. Each Additional Member shall be admitted only if he shall have executed this Agreement or an appropriate amendment to it in which he agrees to be bound by the terms and provisions of this Agreement as they may be modified by that amendment. Admission of a new Member shall not cause the dissolution of the Company. As reflected on Exhibit A, it is anticipated that Additional Members shall have aggregate Percentage Interests of eighteen percent (18%). Unless otherwise agreed by E*Trade, the Managing Members’ Percentage Interests shall be equally diluted (and E*Trade’s Percentage Interest shall not be diluted) to the extent of Pe rcentage Interests granted to any Additional Members. In the event the Additional Members have aggregate Percentage Interests of less than eighteen percent (18%) at any time (whether by reason of a determination not to admit Additional Members or the withdrawal or failure to vest of an Additional Member), such shortfall shall revert to and be allocated equally among the Managing Members.         3.3.  Death, Disability or Withdrawal of a Managing Member.               (a)  In the case of a Managing Member’s death, permanent physical or mental disability or withdrawal from the Company, the Company shall not dissolve or terminate, but its business shall be continued without interruption or without any break in continuity by the remaining Members, with the remaining Managing Member continuing to serve as the sole Managing Member unless he appoints an additional Managing Member, in his sole discretion. Any deceased, disabled or withdrawn Managing Member (or the holder of his interest) shall become a Non-Managing Member, and the interest of such Managing Member shall become a Non-Managing Member’s interest. Such former Managing Member or the holder of such interest shall have no right to participate in 3 -------------------------------------------------------------------------------- the management of the Company and no right to consent to or vote upon any matter, except as provided in Paragraph 13.7.               (b)  If such change in the former Managing Member’s status shall result in multiple ownership of any Non-Managing Member’s interest, one or more trustees or nominees may be required to be designated to represent a portion of or the entire Non-Managing Member’s interest for the purpose of receiving all notices which may be given and all payments which may be made under this Agreement, and for the purpose of exercising all rights which such Non-Managing Member has pursuant to the provisions of this Agreement.         3.4.  Withdrawal of a Member.               (a)  Except with the consent of the Managing Members, the interest of a Member may not be withdrawn from the Company in whole or in part except in the event of the death or declaration of legal incompetency of such Member and in such event only if the election to withdraw is given by the personal representative or representatives of such Member in writing to the Managing Members within three  (3) months after the date of the appointment of such personal representative or representatives, or within six (6) months from the date of death or declaration of legal incapacity of such Member, whichever is earlier. In the event of such election to withdraw, the interest of such Member shall be withdrawn in its entirety and shall be valued as of the date of withdrawal pursuant to the provisions of Paragraph 12.2 and paid for in the manner hereinafter provided by this paragraph. The Managing Membe rs shall be entitled, in their sole discretion, to make the distribution in respect of the interest of the withdrawing Member in cash, in kind or pursuant to a promissory note due upon termination of the Company, or in any combination thereof. If any distribution is to be made in kind and if such distribution cannot be made in full because of restrictions on the transfer of Securities or for any other reason, distribution may be delayed until an effective transfer and distribution may be made, and Securities that will be transferred in respect of the withdrawing Member’s interest shall be designated. Such designated Securities will nevertheless be subject to the full right and power of the Managing Members to deal with them in the best interests of the Company, including the right to substitute other Securities of equivalent value.               (b)  In the event of the withdrawal of any Member pursuant hereto, the Percentage Interests and Capital Accounts of the withdrawing Member and the remaining Members shall be appropriately adjusted, including any adjustments required as a result of any vesting provisions applicable to the withdrawing Member’s interest.               (c)  The withdrawal of a Member shall not be cause for dissolution of the Company. ARTICLE IV MANAGEMENT, DUTIES AND RESTRICTIONS         4.1.  Management. The Managing Members shall have the sole and exclusive control of the management and conduct of the affairs of the Company. Any action shall, unless otherwise specified by the Managing Members, require approval of both Managing Members (or the sole remaining Managing Member). The right, power and authority of the Managing Members to carry on the affairs of the Company and to do any and all acts on behalf of the Company shall, subject to any specific limitations set forth in this Agreement and the Limited Partnership Agreement of the Fund, include without limitation the following:               (a)  To cause the Company to perform the duties and exercise the rights of the general partner of the Fund.               (b)  To purchase, hold, sell or otherwise effect transactions in Securities (whether marketable or unmarketable) and other investments of the Company.               (c)  To incur indebtedness on behalf of the Company and the Fund.               (d)  To guarantee indebtedness on behalf of the Company and the Fund.               (e)  To loan money to any of the Members upon such terms and conditions as the Managing Members may prescribe.               (f)  To deposit or hold Securities and other assets of the Company in the Company’s name or in such street or nominee names as may be determined from time to time by the Managing Members, at such 4 -------------------------------------------------------------------------------- securities firms, banks or depositories as shall be designated by the Managing Members. All withdrawals therefrom or directions with respect thereto shall be made on the signature of either Managing Member.               (g)  To provide management services or to designate an entity or entities to manage the Fund and to receive fees from the Fund and to enter into an agreement or agreements with such an entity or entities upon such terms and conditions as the Managing Members shall deem appropriate for the management of the Fund. Such an agreement or agreements may be entered into with firms or business entities controlled by or comprised of either or both Managing Members or an Affiliate of either or both Managing Members.               (h)  Generally, to perform all acts deemed by the Managing Members appropriate or incidental to the foregoing and to carry out the purposes and business of the Company and the Fund.         4.2.  Conversion of Status as Managing Member. Any Managing Member who has become a Non-Managing Member shall not participate in the control, management and direction of the business of the Company or the Fund.         4.3.  Liability of Members to the Company and the Other Members. No Member shall be liable to any other Member for honest mistakes in judgment or for action or inaction taken in good faith for a purpose that was reasonably believed to be in the best interests of the Company, or for losses due to such mistakes, action or inaction, or for the negligence, dishonesty or bad faith of any employee, broker or other agent of the Company; provided that such employee, broker or agent was selected, engaged or retained with reasonable care. Each Managing Member and, with the consent of the Managing Members, a Non-Managing Member, may consult with counsel and accountants on matters relating to Company affairs and shall be fully protected and justified in acting in accordance with the advice of counsel or accountants, provided that such counsel or accountants shall have been selected with reasonable care. Notwithstanding any of the for egoing to the contrary, the provisions of this Paragraph 4.3 shall not be construed so as to relieve (or attempt to relieve) any person of any liability incurred (i) as a result of recklessness or intentional wrongdoing, or (ii) to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, provided that this Paragraph 4.3 shall be construed so as to effectuate the provisions hereof to the fullest extent permitted by law.         4.4.  Restrictions on the Members.               (a)  Except with the consent of the Managing Members or as otherwise specifically permitted by this Agreement, no Member shall mortgage, encumber, pledge or otherwise dispose of his or her interest in the Company or in the Company’s assets or property or enter into any agreement as a result of which any other person shall have rights as a Member of the Company.               (b)  No Member may buy from or sell to the Company any Securities without the prior written consent of the Managing Members except purchases or sales explicitly permitted by this Agreement.               (c)  No Member shall do any act in contravention of this Agreement or the Fund’s Limited Partnership Agreement.         4.5.  Additional Restrictions on Non-Managing Members.               (a)  The Non-Managing Members shall take no part in the control or management of the affairs of the Company nor shall Non-Managing Members have any power or authority to act for or on behalf of the Company as a result of this Agreement except as expressly authorized from time to time by the Managing Members.               (b)  Except as otherwise required by law or as expressly provided herein, the Non-Managing Members shall have no rights to vote, call meetings of the Members or otherwise exercise any similar rights or powers.         4.6.  Officers. The Managing Members may appoint such officers of the Company as they shall deem advisable and shall have the discretion to remove any officers at any time. 5 -------------------------------------------------------------------------------- ARTICLE V CAPITAL CONTRIBUTIONS         5.1.  Capital Commitments and Membership Interests of the Members. Set forth opposite the name of each Member listed on Exhibit A attached hereto is such Member’s “Capital Commitment” to the Company and its percentage membership interest in the Company (“Percentage Interest”). Each Member’s Capital Commitment represents the aggregate amount of capital that such Member has agreed to contribute to the Company in accordance with the terms hereof in order to fund the Company’s capital commitment to the Fund. Exhibit A shall be amended from time to time to reflect any changes to the Capital Commitments and Percentage Interests of the Members.               (a)  The Managing Members shall provide at least twelve (12) business days’ prior written notice of any required contribution to the capital of the Company, specifying the amount thereof. The Members shall make their contributions to the Company’s capital in cash, except as otherwise determined by the Managing Members (who may allow contributions in the form of promissory notes). No Member shall be required to contribute any amount in excess of such Member’s Capital Commitment (as such Capital Commitment may be increased pursuant to subparagraph (a)) without such Member’s written consent. Any capital contributions hereunder with respect to the Capital Commitments of the Members (each a “Capital Contribution”) shall be made in such amount as shall be specified by the Managing Members and any such contributions required hereunder shall be in proportion to the Mem bers’ respective Capital Commitments.               (b)  In addition to the Capital Commitments set forth on Exhibit A, E*Trade shall make Capital Contributions (up to a maximum of $250,000) to fund any excess of the Company’s operating expenses in excess of the Management Fee. E*Trade’s Percentage Interest shall not be increased as a result of such Capital Contributions.         5.2.  Liability of the Members.               (a)  Except as expressly set forth herein, or as otherwise required by law, no Member shall be liable for any debts or obligations of the Company.               (b)  Each Member acknowledges the obligation of the Company pursuant to the Limited Partnership Agreement of the Fund to contribute to the capital of the Fund cash or Securities to satisfy the Company’s “clawback” obligation to the Fund. Each Member agrees that, in the event the Company is required to make a “clawback” payment pursuant to the Limited Partnership Agreement of the Fund, he or she will return any or all distributions made to him or her pursuant to this Agreement attributable to the Company’s carried interest in the Fund as may be required to satisfy such obligation, with each Member being severally (but not jointly) liable, in proportion to their respective shares in such distributions.         5.3.  Liability of Transferees. For purposes of this Agreement, any transferee of an interest in the Company, whether or not admitted as a substitute Member or treated as a transferee or successor in interest who has not been admitted as a substitute Member (an “Assignee”) hereunder, shall be treated as having contributed the amounts contributed to the Company by the transferor, as having received distributions made to the transferor, and as having been allocated any Net Income or Net Loss allocated to the transferor of the interest in the Company held by the transferee. In addition, the transferee shall be liable for the transferor’s liability for future contributions to the Company. Notwithstanding the above, the transfer of an interest shall not relieve the transferor from any liability hereunder except to the extent that the transferee has actually made all contributions or payments required of the tran sferor.         5.4.  Defaulting Members.               (a)  If a Non-Managing Member fails to pay any amount which it is required to pay to the Company on or before the date when such amount is due and payable, such Non-Managing Member shall be deemed to be in default hereunder (a “Defaulting Member”), and written notice of default shall be given to such Non-Managing Member by the Managing Members. The Company shall be entitled to enforce the obligations of each Non-Managing Member to make the contributions to capital specified in this Agreement, and the Company shall have all remedies available at law or in equity in the event any such contribution is not so made. In the event of any legal proceedings relating to a default by a Defaulting Member, such Defaulting Member shall pay all costs and expenses incurred by the Company, including attorneys’ fees, if the Company shall prevail. Further, such Defaulting Member shall be obligated to pay the Company interest with respect to the amount of any capital contribution not 6 -------------------------------------------------------------------------------- made when required by this Agreement, with such interest commencing on the date such contribution is initially due and ending on the date such contribution is made to the Company. Such interest shall be calculated on the basis of the then current reference rate announced by Wells Fargo Bank, N.A., or by any other U.S. commercial bank with capital in excess of Five Hundred Million Dollars ($500,000,000) selected by the Managing Members, plus two percent (2%) per annum.               (b)  In addition to the remedies provided under Paragraph 5.4(a), if the Defaulting Member does not remedy a default in the payment of a required contribution within ten (10) business days of the receipt of the notice specified in Paragraph 5.4(a): (i) the Defaulting Member shall no longer have the right (if any) to vote on any Company matter, and (ii) if the Managing Members so elect, the other Members shall have the option to pay the remaining capital contributions of the Defaulting Member in accordance with any procedures and in such proportions as may be established by the Managing Members. In such event, such Defaulting Member shall be deemed to have withdrawn from the Company and to have forfeited its interest in the Net Income and Net Losses of the Company. Such Defaulting Member shall be entitled to receive only the amount of its Capital Account at the time of the def ault, with such amount payable, without interest, to the Defaulting Member upon the dissolution of the Company. ARTICLE VI CAPITAL ACCOUNTS AND ALLOCATIONS         6.1.  Capital Accounts. A Capital Account shall be maintained on the Company’s books for each Member. In the event any interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.         6.2.  Definitions. Unless the context requires otherwise, the following terms have the meanings specified below for purposes of this Agreement:               (a)  Book Value. The Book Value with respect to any asset shall be the asset’s adjusted basis for federal income tax purposes, except as follows:         (1)  The initial Book Value of any asset contributed by a Member to the Company shall be the fair market value of such asset at the time of contribution, as determined by the contributing Member and the Company.         (2)  In the discretion of the Managing Members, the Book Values of all Company assets may be adjusted to equal their respective fair market values, as determined by the Managing Members, and the amount of such adjustment shall be treated as Net Income or Net Loss and allocated to the Capital Accounts of the Members, as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution; and (B) the distribution by the Company to a Member of more than a de minimis amount of Company assets in connection with an adjustment of such Member’s interest in the Company.         (3)  The Book Values of all Company assets shall be adjusted to equal their respective fair market values, as determined by the Managing Members, and the amount of such adjustment shall be treated as Net Income or Net Loss and allocated to the Capital Accounts of the Members, as of the following times: (A) the date the Company is liquidated within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); and (B)  the termination of the Company pursuant to the provisions of this Agreement.         (4)  The Book Values of the Company’s assets shall be increased or decreased to the extent required under Treasury Regulation Section 1.704-1(b)(2)(iv)(m) in the event that the adjusted tax basis of the Company’s assets is adjusted pursuant to Code Section 732, 734 or 743.         (5)  The Book Value of a Company asset shall be adjusted by the depreciation, amortization or other cost recovery deductions, if any, taken into account by the Company with respect to such asset in computing Net Income or Net Loss. 7 --------------------------------------------------------------------------------               (b)  Capital Account. An account maintained by the Company with respect to each Member in accordance with the following provisions:         The Capital Account of each Member shall be increased by:         (1)  the amount of money and the fair market value of any property contributed to the Company by such Member (in the case of a contribution of property, net of any liabilities secured by such property that the Company is considered to assume or hold subject to for purposes of Section 752 of the Code),         (2)  such Member’s share of Net Income (or items thereof) allocated to his Capital Account pursuant to this Agreement, and         (3)  any other amounts required by Treasury Regulation Section 1.704-1(b), provided the Managing Member determines that such increase is consistent with the economic arrangement among the Members as expressed in this Agreement.         and shall be decreased by:         (A)  the amount of money and the fair market value of any property distributed by the Company (determined pursuant to Paragraph 12.2 hereof as of the date of distribution) to such Member pursuant to the provisions of this Agreement (net of any liabilities secured by such property that such Member is considered to assume or hold subject to for purposes of Section 752 of the Code),         (B)  such Member’s share of or Net Loss (or items thereof) allocated to his Capital Account pursuant to this Agreement, and         (C)  any other amounts required by Treasury Regulation Section 1.704-1(b), provided the Managing Member determines that such decrease is consistent with the economic arrangement among the Members as expressed in this Agreement.               (c)  Fiscal Quarter. The Fiscal Quarters of the Company shall begin on January l, April 1, July 1 and October 1, and end on March 31, June 30, September 30 and December 31, respectively, except that the Company’s first Fiscal Quarter shall begin on the date of this Agreement and end on the next regular quarterend.               (d)  Fiscal Year. The Company’s first Fiscal Year shall begin on the date of this Agreement and end on December 31, 2000. Thereafter, the Company’s Fiscal Year shall commence on January 1 of each year and end on December 31 of such year or, if earlier, the date the Company terminated during such year. The Managing Members may at any time elect a different Fiscal Year if permitted by the Code and the applicable Treasury Regulations.               (e)  Net Income and Net Loss. The net book income or loss of the Company for any relevant period, as computed in accordance with federal income tax principles and as adjusted pursuant to the following provisions, under the method of accounting elected by the Company for federal income tax purposes. The Net Income or Loss of the Company shall be computed, inter alia, by:         (1)  including as income or deductions, as appropriate, any tax-exempt income and related expenses that are neither properly included in the computation of taxable income nor capitalized for federal income tax purposes;         (2)  including as a deduction when paid or incurred (depending on the Company’s method of accounting) any amounts utilized to organize the Company or to promote the sale of (or to sell) an interest in the Company, except that amounts for which an election is properly made by the Company under Section 709(b) of the Code shall be accounted for as provided therein;         (3)  including as a deduction any losses incurred by the Company in connection with the sale or exchange of property notwithstanding that such losses may be disallowed to the Company for federal income tax purposes under the related party rules of Code Section 267(a)(1) or 707(b); and 8 --------------------------------------------------------------------------------         (4)  calculating the gain or loss on disposition of Company assets and the depreciation, amortization or other cost recovery deductions, if any, with respect to the Company’s assets by reference to their Book Value rather than their adjusted tax basis.               (f)  Percentage Interest. The Percentage Interest for each Member shall generally be as set forth on Exhibit A, as it may be amended from time to time. The sum of the Members’ Percentage Interests shall be one hundred percent (100%).               (g)  Sale or Exchange. A sale, exchange, liquidation or similar transaction, event or condition with respect to any assets (except realizations of purchase discounts on commercial paper, certificates of deposit or other money-market instruments) of the Company of the type that would cause any realized gain or loss to be recognized for income tax purposes under the Code (as determined without giving effect to the related party rules of Code Sections 267(a)(1) and 707(b)).         6.3.  Allocation of Net Income or Loss.               (a)  All Net Income or Loss of the Company attributable to the Company’s investment in the Fund shall be allocated among the Members in proportion to their Capital Contributions used to fund such investment.               (b)  All Net Income or Loss attributable to the Company’s Carry shall be allocated among the Members in proportion to their Percentage Interests; provided that the Managing Members may, in their discretion, determine to allocate up to twenty percent (20%) of E*Trade’s allocable share of the Net Income attributable to the Carry realized in a particular year to other Members. The Managing Members shall make any determination to make such an allocation within two (2) months after the end of each Fiscal Year.               (c)  Any Net Income attributable to the Company’s operations shall be allocated among the Members previously allocated any cumulative Net Loss attributable to the Company’s operations in the reverse order of, and in proportion to, such previous allocations, with any such remaining Net Income being allocated entirely to E*Trade. Any Net Loss attributable to the Company’s operations shall be allocated entirely to E*Trade to the extent of the sum of any cumulative Net Income previously allocated to E*Trade and any Capital Contributions made by E*Trade to fund such Net Losses pursuant to Paragraph 5.1(c), with any such remaining Net Loss being allocated among the Members in proportion to their Capital Contributions (other than pursuant to Paragraph 5.1(c)). For this purpose, Net Income or Loss attributable to the Company’s operations shall mean the Management Fee received by the Company reduced by all expenses of the Company other than expenses directly attributable to the Company’s investment in the Fund or the Company’s Carry, as determined by the Managing Members, in their discretion. Notwithstanding the foregoing, if there is a change in control of E*Trade, the Managing Members may, in their discretion, allocate any Net Income attributable to the Company’s operations among the Members in the manner they deem appropriate. ARTICLE VII EXPENSES              The Company will pay all costs and expenses incurred in connection with its activities. The Members shall be entitled to reimbursement by the Company for expenses incurred by them relating to the Company’s business, as determined by the Managing Members in their discretion. ARTICLE VIII DISTRIBUTIONS         8.1.  Interest. No interest shall be paid to any Member on account of his interest in the capital of, or on account of his investment in, the Company.         8.2.  Mandatory Distributions. Promptly upon receipt of any tax distributions from the Fund, the Managing Members shall distribute such tax distributions to the Members in proportion to their interests in the taxable income of the Company for the period to which such distributions relate.         8.3.  Discretionary Distributions. The Managing Members may in their discretion make additional distributions of cash or Securities among the Members (not including any Defaulting Members). 9 --------------------------------------------------------------------------------               (a)  The distribution pursuant to this Paragraph 8.3 shall be made among the Members as follows (with the source of a particular distribution being in the discretion of the Managing Members):         (1)  To E*Trade or other Members allocated Net Income pursuant to Paragraph 6.3(c), to the extent of and in proportion to their respective shares of the cumulative amount of such undistributed Net Income allocated to them, to the extent attributable to any excess of the Management Fee received over the Company’s operating expenses (taking into account as current or projected expenses any payments of compensation to the Managing Members for their management of the Company if they are no longer employed by E*Trade).         (2)  Among the Members in proportion to their respective shares of the cumulative amount of undistributed Net Income attributable to the Company’s Carry to the extent made from such undistributed Net Income.         (3)  Among the Members in proportion to their respective shares of the cumulative amount of undistributed Net Income attributable to the Company’s investment in the Fund to the extent made from such undistributed Net Income.         (4)  Among the Members in proportion to their Capital Contributions to the extent constituting a return of capital.               (b)  Immediately prior to any distribution in kind of Securities (or other assets) pursuant to any provision of this Agreement, the difference between the fair market value and the Book Value of any Securities (or other assets) distributed shall be allocated to the Capital Accounts of the Members as Net Income or Net Loss pursuant to Article VI.               (c)  Securities distributed in kind pursuant to this Paragraph 8.3 shall be subject to such conditions and restrictions as the Managing Members determine are legally required. ARTICLE IX ASSIGNMENT OR TRANSFER OF MEMBERS’ INTERESTS         9.1.  Restrictions on Transfer of Members’ Interests. No Member may sell, assign, pledge, mortgage or otherwise dispose of all or any portion of his interest in the Company without the consent of the Managing Members.         9.2.  Opinion of Counsel. Notwithstanding any other provision of this Agreement, no transfer or other disposition of an interest in the Company shall be permitted until the Managing Members shall have received, or waived receipt of, an opinion of counsel reasonably satisfactory to them that the effect of such transfer or disposition would not:               (a)  result in a violation of the Securities Act;               (b)  require the Company to register as an investment company under the Investment Company Act of 1940, as amended;               (c)  require the Company or the Fund to register as an investment adviser under the Investment Advisers Act of 1940, as amended;               (d)  result in a termination of the Company for tax purposes, if such termination would have a material adverse effect on the Members;               (e)  result in a violation of any law, rule or regulation by the Members or the Company;               (f)  cause the Company to be characterized as a “publicly traded partnership” (within the meaning set forth in Sections 512, 7704(b) and 469(k) of the Code) or materially increase the risk that the Company will be so characterized.              Such legal opinion shall be provided to the Managing Members by the Company’s counsel. All costs associated with such opinion shall be borne by the transferring Member. 10 --------------------------------------------------------------------------------         9.3.  Violation of Restrictions. In the event of any purported transfer or other disposition of any Member’s interest in the Company in violation of the provisions of this Article IX, without limiting any other rights of the Company, the Managing Members shall have the option, in their sole discretion, to treat the Member as having withdrawn from the Company and to purchase or cause the Company to purchase such Member’s interest for cash at a price equal to the value thereof determined by the Managing Members as of a date selected by them. In the event of purchase, the terminated Member’s and the remaining Members’ interests in the Company shall be appropriately adjusted, and the subject Member (and his purported transferee) shall have no further interest in the Company except to receive the purchase price, if any, for his interest as determined by the Managing Members. Such option must be exercis ed, if at all, by written notice to the affected Member (or his successor(s) in interest) given not later than ninety (90) days after the Managing Members are advised in writing of the purported transfer or disposition, and the purchase or withdrawal shall be consummated on the date specified in such notice, which shall not be later than sixty (60) days after it is given.         9.4.  Agreement Not to Transfer. Each of the Members agrees with all other Members that he, she or it will not make any disposition of his, her or its interest in the Company, except as permitted by the provisions of this Article IX.         9.5.  Multiple Ownership. In the event of any disposition which shall result in multiple ownership of any Member’s interest in the Company, the Managing Members may require one or more trustees or nominees to be designated to represent a portion of or the entire interest transferred for the purpose of receiving all notices which may be given and all payments which may be made under this Agreement and for the purpose of exercising all rights which the transferor as a Member had pursuant to the provisions of this Agreement.         9.6.  Substitute Members. No transferee of a Member’s interest may be admitted to the Company as a substitute Member without the consent of the Managing Members, which consent shall be subject to the sole discretion of the Managing Members and shall not be subject to challenge by any transferor or transferee. ARTICLE X VESTING OF PERCENTAGE INTERESTS         10.1.  Vesting of Managing Members’ and E*Trade’s Interests. The Managing Members’ and E*Trade’s interests in the Company shall be one hundred percent (100%) vested as of the date hereof.         10.2.  Vesting of Other Non-Managing Members’ and Additional Members’ Interests. The interest in the Company of any Non-Managing Member (other than E*Trade) and of any Additional Member shall vest in accordance with a vesting schedule (if any) established by the Managing Members for such other Non-Managing Member or Additional Member. Any amounts allocated Non-Managing Members or Additional Members that, for any reason, do not vest shall revert to the Members whose interest in such amounts were diluted by the original allocation of such amounts to such Non-Managing Member or Additional Member. ARTICLE XI DISSOLUTION AND LIQUIDATION OF THE COMPANY         11.1.  Liquidation Procedures. Upon termination of the Company in accordance with Article II:               (a)  The affairs of the Company shall be wound up and the Company shall be dissolved. The Managing Members shall serve as the liquidators.               (b)  Distributions in dissolution may be made in cash or in kind or partly in cash and partly in kind.               (c)  The Managing Members shall use their best judgment as to the most advantageous time for the Company to sell investments or to make distributions in kind provided that any such sales shall be made as promptly as is consistent with obtaining the fair value thereof.               (d)  The proceeds of dissolution shall be applied to payment of liabilities of the Company and distributed to the Members in the following order:         (1)  to the creditors of the Company in the order of priority established by law; 11 --------------------------------------------------------------------------------         (2)  to the Members, in respect of the positive balances in their Capital Accounts, after all Net Income or Net Loss arising upon the liquidation (including amounts arising in connection with a distribution of Securities) has been allocated among the Members. ARTICLE XII FINANCIAL ACCOUNTING AND REPORTS         12.1.  Tax Accounting and Reports. The Managing Members shall cause the Company’s tax return and IRS Form 1065, Schedule K-1, to be prepared and delivered in a timely manner to the Non-Managing Members (but in no event later than ninety (90) days after the close of each of the Company’s Fiscal Years).         12.2.  Valuation of Securities and Other Assets Owned by the Company.               (a)  Subject to the specific standards set forth below, the valuation of Securities and other assets and liabilities under this Agreement shall be at fair market value. In determining the value of the interest of any Member or in any accounting between the Members, no value shall be placed on the goodwill or the name of the Company. Upon dissolution of the Company, the Company’s name and any goodwill associated with the name shall be distributed to E*Trade.               (b)  The following criteria shall be used for determining the fair market value of Securities.         (1)  Securities not subject to investment letter or other similar restrictions on free marketability:               (A)  If traded on one (1) or more securities exchanges or traded on NASDAQ, the value of each Security shall be deemed to be the Security’s closing price as reported in the Wall Street Journal or another nationally recognized publication or service that reports such data for the valuation date.               (B)  If actively traded over-the-counter (but not on NASDAQ), the value shall be deemed to be the closing bid price of such Security on the valuation date.               (C)  If there is no active public market, the Managing Members shall make a determination of the fair market value on the valuation date, taking into consideration developments concerning the issuing company subsequent to the acquisition of its Securities, the pricing of other private placements of Securities by the issuer, the price of the Securities of other companies comparable to the issuer, any financial data and projections of the issuing company provided to the Managing Members and such other factor or factors as the Managing Members may deem relevant.         (2)  In the case of Securities subject to legal or contractual restrictions on free marketability, appropriate adjustments to the value determined under Paragraph 12.2(b)(1) above shall be made to reflect the effect of the restrictions on transfer.         (3)  The value of the Company’s interest in the Fund shall be the fair market value of the Company’s interest in the Securities (and other assets) of the Fund.         (4)  If the Managing Members in good faith determine that, because of special circumstances, the valuation methods set forth in this Paragraph 12.2 do not fairly determine the value of a Security, the Managing Members shall make such adjustments or use such alternative valuation method as they deem appropriate.         12.3.  Supervision; Inspection of Books. Proper and complete books of account of the affairs of the Company shall be kept under the supervision of the Managing Members at the principal office of the Company. Such books shall be open to inspection by a Non-Managing Member, at any reasonable time, upon reasonable notice, during normal business hours.         12.4.  Confidentiality. All information provided to Non-Managing Members under this Article XII shall be used by Non-Managing Members in furtherance of their interests as Non-Managing Members and, subject to 12 -------------------------------------------------------------------------------- disclosures required by applicable law, each Non-Managing Member hereby agrees to maintain the confidentiality of such financial statements and other information provided to Non-Managing Members hereunder. ARTICLE XIII OTHER PROVISIONS         13.1.  Execution and Filing of Documents. The Managing Members shall execute and file a Certificate conforming to the requirements of the Act in the office of the Secretary of State for the State of Delaware and shall execute a fictitious business name statement and file or cause such statement to be filed if required by Delaware law.         13.2.  Other Instruments and Acts. The Members agree to execute any other instruments or perform any other acts that are or may be necessary to effectuate and carry on the Company.         13.3.  Binding Agreement. This Agreement shall be binding upon the transferees, successors, assigns and legal representatives of the Members.         13.4.  Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents made and to be performed entirely within Delaware.         13.5.  Notices. Any notice or other communication that a Member desires to give to another Member shall be in writing and shall be deemed effectively given upon personal delivery or upon deposit in any United States mail box, by registered or certified mail, postage prepaid, or upon transmission by telegram or telecopy, addressed to the other Member at the address shown in the exhibits attached to this Agreement or at such other address as a Member may designate by fifteen (15) days’ advance written notice to the other Members.         13.6.  Power of Attorney. By signing this Agreement, each Non-Managing Member designates and appoints each of the Managing Members as its true and lawful attorney, in its name, place and stead to make, execute, sign and file such instruments, documents or certificates that may from time to time be required of the Company by the laws of the United States of America, the laws of the State of Delaware or any other state in which the Company shall conduct its investment activities in order to qualify or otherwise enable the Company to conduct its affairs in such jurisdictions; provided, however, that in no event shall the Managing Members be deemed to have the authority under this Paragraph 13.6 to take any action that would result in any Non-Managing Member losing the limitation on liability afforded hereunder.         13.7.  Amendment Procedure. This Agreement (and any exhibits to this Agreement) may be amended only with the written consent of the Managing Members. No amendment shall, however, (i) enlarge the obligations of any Member under this Agreement without the written consent of such Member, (ii) dilute the relative interest of any Member in the Net Income, Net Loss, distributions or capital of the Company without the written consent of such Member (except such dilution as may result from additional capital contributions from the Members or the admission of Additional Members as specifically permitted pursuant to this Agreement or as a result of a termination or withdrawal of a Non-Managing Member), or (iii) alter or waive the terms of this Paragraph 13.7 or Paragraphs 13.14 and 13.17. The Managing Members shall promptly furnish copies of any amendments to this Agreement and the Company’s Certificate to all Members.         13.8.  Effective Date. This Agreement shall be effective on the date set forth in the first paragraph of this Agreement.         13.9.  Entire Agreement. This Agreement constitutes the entire agreement of the Members and supersedes all prior agreements between the Members with respect to the Company.         13.10.  Titles; Subtitles. The titles and subtitles used in this Agreement are used for convenience only and shall not be considered in the interpretation of this Agreement.         13.11.  Company Name. The Company shall have the exclusive ownership and right to use the Company name (and any name under which the Company shall elect to conduct its affairs) as long as the Company continues.         13.12.  Exculpation. Neither the Managing Members nor their Affiliates shall be liable to a Non-Managing Member or the Company for honest mistakes of judgment, for action or inaction taken reasonably and in good faith for a purpose that was reasonably believed to be in the best interests of the Company, for losses 13 -------------------------------------------------------------------------------- due to such mistakes, action or inaction, or to the negligence, dishonesty or bad faith of any employee, broker or other agent of the Company, the Managing Members or their Affiliates provided that such employee, broker or agent was selected, engaged or retained and supervised with reasonable care, provided that this Paragraph 13.12 shall not extend to any action which constitutes fraud, willful misconduct or gross negligence. The Managing Members may consult with counsel and accountants in respect of Company affairs and be fully protected and justified in any action or inaction that is taken in accordance with the advice or opinion of such counsel or accountants, provided that they shall have been selected with reasonable care. Notwithstanding any of the foregoing to the contrary, the provisions of this Paragraph 13.12 and of Paragraph 13.13 hereof shall not be construed so as to relieve (or attempt to relieve) any person of any liability by reason of recklessness or intention al wrongdoing or to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Paragraph 13.12 and of Paragraph 13.13 to the fullest extent permitted by law.         13.13.  Indemnification. The Company agrees to indemnify, out of the assets of the Company only, the Managing Members and their Affiliates (and their agents), to the fullest extent permitted by law and to save and hold them harmless from and in respect of all (a) reasonable fees, costs, and expenses paid in connection with or resulting from any claim, action or demand against the Managing Members, their Affiliates or any agent thereof, the Company or their agents that arise out of or in any way relate to the Company, its properties, business or affairs and (b) such claims, actions and demands and any losses or damages resulting from such claims, actions and demands, including amounts paid in settlement or compromise of any such claim, action or demand; provided, however, that this indemnity shall not extend to conduct not undertaken in good faith nor to any fraud, willful misconduct or gross negligence. Any pers on receiving an advance with respect to expenses shall be required to agree to return such advance to the Company in the event it is subsequently determined that such person was not entitled to indemnification hereunder. Any indemnified party shall promptly seek recovery under any other indemnity or any insurance policies by which such indemnified party may be indemnified or covered or from any portfolio company in which the Company has an investment, as the case may be. No payment or advance may be made to any person under this Paragraph13.13 to any person who may have a right to any other indemnity (by insurance or otherwise) unless such person shall have agreed, to the extent of any other recovery, to return such payments or advances to the Company.         13.14.  Limitation of Liability of Members. Except as otherwise expressly provided herein or as required by Delaware law, no Member shall be bound by, nor be personally liable for, the expenses, liabilities or obligations of the Company in excess of the balance of such Member’s Capital Commitment to the Company.         13.15.  Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in San Francisco, California, in accordance with the rules, then obtaining, of the American Arbitration Association. Any award shall be final, binding and conclusive upon the parties. A judgment upon the award rendered may be entered in any court having jurisdiction thereof.         13.16.  Tax Matters Partner. Thomas A. Bevilacqua shall be the Company’s Tax Matters Partner under the Code (“TMP”). The TMP shall have the right to resign by giving thirty (30) days’ written notice to the Members. Upon the resignation, dissolution or Bankruptcy of the TMP, a successor TMP shall be elected by a majority in interest of the other Members. The TMP shall employ experienced tax counsel to represent the Company in connection with any audit or investigation of the Company by the Internal Revenue Service (“IRS”) and in connection with all subsequent administrative and judicial proceedings arising out of such audit. The fees and expenses of such, and all expenses incurred by the TMP in serving as the TMP, shall be Company expenses and shall be paid by the Company. Notwithstanding the foregoing, it shall be the responsibility of the Members, at their expense, to employ tax counsel to represent their respective separate interests. If the TMP is required by law or regulation to incur fees and expenses in connection with tax matters not affecting each of the Members, then the TMP may, in his sole discretion, seek reimbursement from or charge such fees and expenses to the Members on whose behalf such fees and expenses were incurred. The TMP shall keep the Members informed of all administrative and judicial proceedings, as required by Section 6223(g) of the Code, and shall furnish a copy of each notice or other communication received by the TMP from the IRS to each Member, except such notices or communications as are sent directly to such Member by the IRS. The relationship of the TMP to the Members is that of a fiduciary, and the TMP has a fiduciary obligation to perform his duties as TMP in such manner as will serve the best interests of the Company and all of the Company’s Members. To the fullest extent permitted by law, the Company agrees to indemnify the TMP and his agents and save and hold them harmless from and in respect to all (i) reasonable fees, costs and expenses in connection with or resulting from any claim, action or demand against the TMP, the Managing Members or the Company that arise out of or in any way relate to the TMP’s status as TMP for 14 -------------------------------------------------------------------------------- the Company, and (ii) all such claims, actions and demands and any losses or damages therefrom, including amounts paid in settlement or compromise of any such claim, action or demand; provided that this indemnity shall not extend to conduct by the TMP adjudged (i) not to have been undertaken in good faith to promote the best interests of the Company or (ii) to have constituted recklessness or intentional wrongdoing by the TMP.         13.17.  Taxation as Company. The Managing Members, while serving as such, agree to use their best efforts to avoid taking any action that would cause the Company to be classified as other than a partnership for federal income tax purposes. ARTICLE XIV MISCELLANEOUS TAX COMPLIANCE PROVISIONS         14.1.  Substantial Economic Effect. The provisions of this Agreement are intended to comply generally with the provisions of Treasury Regulation Section1.704-1, and shall be interpreted and applied in a manner consistent with such Regulations; and, to the extent the subject matter thereof is otherwise not addressed by this Agreement, the provisions of Treasury Regulations Section 1.704-1 are hereby incorporated by reference unless the Managing Members shall determine that such incorporation will result in economic consequences inconsistent with the economic arrangement among the Members as expressed in this Agreement. In the event the Managing Members shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed or allocated or the manner in which distributions and contributions upon liquidation (or otherwise) of the Company (or any Member’s interest therein) are effected in order to comply with such Regulations and other applicable tax laws, or to assure that the Company is treated as a partnership for tax purposes, or to achieve the economic arrangement of the Members as expressed in this Agreement, then, notwithstanding anything in this Agreement to the contrary, the Managing Members may make such modification, provided that it is not likely to have a material detrimental effect on the tax consequences and total amounts distributable to any Non-Managing Member pursuant to Articles VIII and XI as applied without giving effect to such modification. The Managing Members shall also (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes pursuant to this Agreement, in accordance with Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate m odifications in the event unanticipated events (such as the incurrence of nonrecourse indebtedness) might otherwise cause the allocations under this Agreement not to comply with Treasury Regulations Section 1.704, provided in each case that the Managing Members determine that such adjustments or modifications shall not result in economic consequences inconsistent with the economic arrangement among the Members as expressed in this Agreement.         14.2.  Income Tax Allocations.               (a)  Except as otherwise provided in this paragraph or as otherwise required by the Code and the rules and Treasury Regulations promulgated thereunder, income, gain, loss, deduction, or credit of the Company for income tax purposes shall be allocated in the same manner the corresponding book items are allocated pursuant to this Agreement.               (b)  In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any asset contributed to the capital of the Company shall, solely for tax purposes, be allocated between the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Book Value.               (c)  In the event the Book Value of any Company asset is adjusted pursuant to the terms of this Agreement, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder.         14.3.  Withholding. The Company shall at all times be entitled to make payments with respect to any Member in amounts required to discharge any obligation of the Company to withhold or make payments to any governmental authority with respect to any federal, state, local or other jurisdictional tax liability of such Member arising as a result of such Member’s interest in the Company. Any such withholding payment shall be charged to the Member’s Capital Account. [The remainder of this page is intentionally left blank.]        15 --------------------------------------------------------------------------------              IN WITNESS WHEREOF, the Members have executed this Agreement as of the date first above written.      MANAGING MEMBERS      /s/  Christos M. Cotsakos --------------------------------------------------------------------------------      Christos M. Cotsakos           /s/  Thomas A. Bevilacqua --------------------------------------------------------------------------------      Thomas A. Bevilacqua      NON-MANAGING MEMBER E*Trade Group, Inc.   By:   /s/  Leonard C. Purkis --------------------------------------------------------------------------------   Title:   Leonard C. Purkis Chief Financial Officer        16 -------------------------------------------------------------------------------- EXHIBIT A MEMBERS’ CAPITAL COMMITMENTS AND PERCENTAGE INTERESTS Name/Address Capital Commitment Percentage Interest -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Managing Members:                             Christos M. Cotsakos   $ 250,000     25 % Thomas A. Bevilacqua     250,000     25 %               Non-Managing Members:                             E*Trade Group, Inc.     320,000     32 %(1) Anticipated Additional Non-Managing Members (Aggregate)(2)     180,000     18 % -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                 $ 1,000,000     100 % ______________          (1)   Subject to reduction (but not below 25.6%) with respect to the allocation of the Company’s Carry, as described in Section 6.3(b) of the Agreement.          (2)   The aggregate Capital Commitments and Percentage Interests of the Additional Members are based on the anticipated admission of such Additional Members. Any Percentage Interests that remain unallocated to Additional Members for any reason shall be allocated to the Managing Members (to be shared equally between them), and the corresponding Capital Commitment obligation shall become an obligation of the Managing Members (such obligation being shared equally between them).                     A-1

Exhibit 10(c) Contract No. 117183   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED March 16, 2000 UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS   1. SHIPPER is: THE PEOPLES GAS LIGHT AND COKE COMPANY, a LDC. 2. (a) MDQ totals: 85,000 MMBTU per day. (b) Service option selected (check any or all): [ ] LN [ ] SW [ ]NB 3. TERM: April 1, 2000 through April 30, 2003. 4. Service will be ON BEHALF OF: [X] Shipper or [ ]Other: 5. The ULTIMATE END USERS are customers within any state in the continental U.S.; or (specify state)________________________________________________. 6. [ ] This Agreement supersedes and cancels a _____________ Agreement dated ___________. [X] Service and reservation charges commence the latter of: (a) April 1, 2000, and (b) the date capacity to provide the service hereunder is available on Natural's System. [ ] Other:_____________________________________________ 7. SHIPPER'S ADDRESSES   NATURAL'S ADDRESSES   General Correspondence : THE PEOPLES GAS LIGHT & COKE COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA RAULIE DE LARA   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P. O. BOX 283 77001-0283     HOUSTON, TEXAS         Statements/Invoices/Accounting Related Materials : THE PEOPLES GAS LIGHT & COKE COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA DIANE FILEWICZ, 24TH FLOOR   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P.O. BOX 283 77001-0283     HOUSTON, TEXAS     Payments :     NATURAL GAS PIPELINE COMPANY OF AMERICA     P.O. BOX 70605     CHICAGO, ILLINOIS 60673-0605           FOR WIRE TRANSFER OR ACH:     DEPOSITORY INSTITUTION: THE CHASE     MANHATTAN BANK, NEW YORK, NY     WIRE ROUTING #: 021000021     ACCOUNT #: 323-206042     8. The above stated Rate Schedule, as revised from time to time, controls this Agreement and is incorporated herein. The attached Exhibits A, B, and C are part of this Agreement. NATURAL AND SHIPPER ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the entire agreement between the parties and no waiver, representation, or agreement shall affect this Agreement unless it is in writing. Shipper shall provide the actual end user purchasers names(s) to Natural if Natural must provide them to the FERC. AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President     Contract No. 117183     EXHIBIT A DATED: March 16, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 85,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS             SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: March 16, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. PGLC/NGPL CALUMET #3 COOK COOK IL 3296 09 85,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CALUMET LINE #3 IN SEC. 6-T37N-           R15E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED: March 16, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED: March 16, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity               27   0   F   0 28   27   F   85,000 33   36   F   85,000 35   28   B   85,000 36   35   F   85,000

THIRD AMENDMENT TO CNG NONEMPLOYEE DIRECTORS' FEE PLAN The CNG Nonemployee Directors' Fee Plan, as amended and restated effective October 1, 1996, and as subsequently amended by First and Second Amendments thereto, is hereby further amended as follows: 1. The last two sentences of subparagraph (d) of paragraph 3 are deleted, and the following two sentences are substituted in lieu thereof: "However, if amounts are invested in CTG Common Stock pursuant to a Director's expression of investment preference or pursuant to the provisions of subparagraph (e) of paragraph 3, no subsequent change in the investment of those amounts shall be permitted. Except as provided in the preceding sentence, a Participant may change his expression of investment preference as to existing contributions, or future contributions thereto, at any time." 2. The following sentence is added to subparagraph (c) of paragraph 4: "However, a cash distribution shall not be allowed with respect to shares of CTG Common Stock held under the Plan unless such shares had been held thereunder for a period of at least six (6) months." 3. Except as hereinabove modified and amended, the Directors' Fee Plan, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, Connecticut Natural Gas Corporation hereby executes this Third Amendment this 1st day of December, 1998. WITNESS: CONNECTICUT NATURAL GAS CORPORATION S/ Judith A. Ries                   By: S/ Jean S. McCarthy                                  Its: Vice President

> > EXHIBIT 10G-2 WPS RESOURCES CORPORATION SHORT-TERM VARIABLE PAY PLAN       As Amended Effective January 1, 1999       WPS RESOURCES CORPORATION SHORT-TERM VARIABLE PAY PLAN      1.     Purpose.             The WPS Resources Corporation Short-Term Variable Pay Plan (the "Plan") has been established effective January 1, 1998, and is amended effective January 1, 1999 as set forth herein, to promote the best interests of WPS Resources Corporation ("Company") and the stockholders of the Company by (a) attracting and retaining key employees possessing a strong interest in the above-average performance of the Company and its subsidiaries and (b) encouraging their continued loyalty, service and counsel.      2.     Administration.             The Plan will be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee shall have full and final authority and discretion to conclusively interpret the provisions of the Plan and to decide all questions of fact arising under the Plan, including the authority and discretion to: > > (i)   determine those employees who are eligible to participate in the Plan > > for any year; > > > > (ii)  review and from time to time and revise factors on which incentive > > compensation awards may be based; > > > > (iii) determine the amount (if any) awarded or to be awarded under the Plan > > to any employee for any year; and > > > > (iv)  to make all other determinations respecting the administration, > > operation and interpretation of the Plan that the Committee, in its sole > > discretion, determines to be necessary or appropriate.      3.     Designation of Participating Employees.             (a)  For each calendar year for which this Plan is in effect, the Committee shall designate: > > (i)   those employees of the Company and its subsidiaries who are eligible > > to participate in the Plan for such year ("Participants"); > > > > (ii)  the Target Award applicable to each Participant for such year (see > > Section 7); and > > > > (iii) whether each Participant is a Utility Participant or a Non-Utility > > Participant.             (b)  An employee's participation in the Plan in any year, and any amounts awarded to the employee under the Plan for any such year, does not imply that the employee is entitled to participate in or receive an award under the Plan for any subsequent year.             (c)  Nothing in the Plan shall interfere with or limit in any way the right of the Company or any subsidiary of the Company to terminate an employee's employment at any time nor confer upon any employee any right to continue in the employ of the Company or any subsidiary.      4.     Award of Incentive Compensation.             A Participant shall not have any right to an amount under this Plan until the Committee has awarded such amount to the Participant. The incentive compensation (if any) awarded to a Participant with respect to any calendar year will be an amount determined by the Committee based on both qualitative and quantitative measurements of Participant and employer performance, including, without limitation (1) utility year-end net income, (2) system reliability, (3) safety, (4) non-utility earnings per share contribution, (5) non-utility customer account growth and retention, (6) customer satisfaction and response to customer complaints, (7) environmental strategy, and (8) such other factors as the Committee in its discretion may consider relevant. In determining the amount of any incentive compensation to be awarded, the Committee may take into account the amounts determined under two non-binding target awards known as the Utility Performance Award and the Non-Utility Performance Award. In no event will the Committee make an award to a Participant unless the Participant was employed on December 31 of the year to which the award relates or the Participant terminated employment prior to December 31 of such year on account of retirement on or after age 58, permanent and total disability (as defined in the Company's long-term disability plan) or death.      5.     Utility Performance Award.             (a)  A Participant's Utility Performance Award for any year equals: > > (i)   the Participant's Base Salary for such year multiplied by > > > > (ii)  0.75 (if the Participant has been designated as a Utility Participant) > > or 0.25 (if the Participant has been designated as a Non-Utility > > Participant), multiplied by > > > > (iii) the factor determined in accordance with Section 5(d).             (b)  The Committee, in its sole discretion, may adjust the 0.75 and 0.25 factors specified in Section 5(a)(ii) above.             (c)  Definitions. > > (i)   "Base Salary" means base salary paid to the Participant by the Company > > and/or a consolidated subsidiary of the Company for services performed by > > the Participant during the applicable calendar year for which he or she has > > been designated as a Participant in the Plan. Base Salary shall include > > amounts that would have been paid to the Participant as base salary but for > > the fact that the Participant elected to defer such amounts as an elective > > contribution under a Section 125, 129 or 401(k) arrangement or as a > > Voluntary Deferral under the WPS Resources Corporation Deferred Compensation > > Plan. Base Salary shall not include extraordinary payments made to or on > > behalf of the Participant, such as overtime, bonuses, meal allowances, > > reimbursed expenses (including any tax "gross-up" payments), termination > > pay, moving pay, commuting expenses, Mandatory Deferrals under the WPS > > Resources Deferred Compensation Plan or other non-elective deferred > > compensation payments or accruals, stock options, the value of > > employer-provided fringe benefits or coverage, any contributions on behalf > > of the Participant to a survivor's income benefit plan or any other employee > > benefit plan within the meaning of ERISA, all as determined in accordance > > with such uniform rules, regulations or standards as may be prescribed by > > the Committee. In the case of an employee who is designated as a Participant > > after the first day of the calendar year, the Committee may elect to apply > > the foregoing definition with respect to the Base Salary received by the > > Participant on and after the effective date of his or her participation. > > > > (ii)  "Net Income" for any year means Wisconsin Public Service Corporation's > > after-tax earnings on common stock as reported in the Company's Form 10-K > > Annual Report for that year, as further adjusted by the Committee in its > > discretion to exclude from Net Income the effects of extraordinary items, > > non-recurring items or any other items that the Committee determines should > > be excluded from the definition of Net Income for purposes of this Plan.             (d)  For each year during which the Plan is in effect, the Committee will prescribe the criteria by (or from) which the factor applicable under Section 5(a)(iii) will be determined. Such criteria may take into account Wisconsin Public Service Corporation's Net Income or such other factors as the Committee, in its sole discretion, may determine.      6.     Non-Utility Performance Award.             (a)  A Participant's Non-Utility Performance Award for any year equals: > > (i)   the Participant's Target Award for such year multiplied by > > > > (ii)  0.25 (if the Participant has been designated as a Utility Participant) > > or 0.75 (if the Participant has been designated as a Non-Utility > > Participant), multiplied by > > > > (iii) the factor determined in accordance with Section 6(d).             (b)  The Committee, in its sole discretion, may adjust the 0.25 and 0.75 factors specified in Section 6(a)(ii) above.             (c)  Definitions. > > (i)   "EPS Impact" means, with respect to any calendar year, the fully > > diluted earnings per share of the Company taking into account only the > > after-tax net income of WPS Energy Services, Inc. and WPS Power Development, > > Inc. and their consolidated subsidiaries, as calculated to the nearest > > one-tenth of one cent in accordance with FASB 128 or any successor > > pronouncement and in a manner consistent with the methodology used by the > > Company and its consolidated subsidiaries for the purpose of reporting > > earnings per share information generally. The Committee in its discretion, > > may adjust such after-tax net income to (A) include the proportionate share > > of the after-tax net income of a non-consolidated subsidiary, and (B) > > exclude the effects of extraordinary, non-recurring items or any other items > > that the Committee determines should be excluded for purposes of this Plan. > > > > (ii)  "Account Retention" means, with respect to any calendar year, the > > percentage of "Accounts" actively served on January 1 of the calendar year > > that the Company or its non-utility subsidiaries continue to serve on > > December 31 of the same calendar year, rounded to the nearest one-tenth > > (1/10) of one percent. > > > > (iii) "Account" means an actively served customer account entered into by an > > agent or employee of the customer who has the authority to contract with WPS > > Energy Services, Inc. or WPS Power Development, Inc. with respect to all or > > a portion of the customer's business. Where a customer has multiple > > contracts with WPS Energy Services, Inc. and/or WPS Power Development, Inc., > > such contracts, although originating with the same customer, may be > > considered separate Accounts for purposes of this Plan to the extent that > > the contracts are entered into or authorized by different contacts at the > > customer each of whom has independent authority to contract with WPS Energy > > Services, Inc. and/or WPS Power Development, Inc. > > > > (iv) "Account Growth" means, with respect to any calendar year, (i) the > > total number of Accounts on December 31 of the calendar year minus the total > > number of Accounts on January 1 of the calendar year, this amount divided by > > (ii) the total number of Accounts on January 1 of the calendar year. This > > quotient shall be rounded to the nearest one-tenth (1/10) of one percent.             (d)  For each year during which the Plan is in effect, the Committee will prescribe the criteria by (or from) which the factor applicable under Section 6(a)(iii) will be determined. Such criteria may take into account EPS Impact, Account Retention, Account Growth or such other factors as the Committee, in its sole discretion, may determine.      7.     Target Award             (a)  The Target Award for each Participant shall be an amount or percentage of Base Salary selected by the Committee.             (b)  The Target Award assigned to a Participant is relevant solely for purposes of the non-binding calculation described in Section 6 above. The establishment of a Target Award with respect to any Participant does not imply that the Participant is or will become entitled to incentive compensation in the amount of the Target Award.      8.     Distribution.             (a)  Unless deferred in accordance with Section 8(b) below, incentive compensation amounts awarded under this Plan shall be paid to the eligible Participant (less applicable withholding) as soon as practicable following the date on which such payment has been authorized by the Committee.             (b)  A Participant may, but need not, elect to defer the receipt of all or any portion of the incentive compensation amounts awarded to the Participant under this Plan. If the Participant so elects, the deferred portion of the Participant's incentive compensation award will be credited to the Participant's Stock Account under the WPS Resources Corporation Deferred Compensation Plan ("Deferred Compensation Plan") for later distribution in accordance with the terms of the Deferred Compensation Plan and the Participant's elections under that plan. A Participant's election to defer all or a portion of his award under this Plan for any year shall be given effect only if the Participant's executed deferral election is received by the Committee or its delegate prior to January 1 of the calendar year during which the incentive compensation will be earned, e.g., prior to January 1, 1999 for deferral of incentive compensation amounts that may be earned in 1999. Notwithstanding the foregoing, in the case of a Participant who is designated by the Committee as being eligible to participate with respect to a particular calendar year after the beginning of such year, the Participant's deferral election for such year may be made within 30 days of the date on which the Committee designates the Participant as being eligible to participate in the Plan.      9.     Amendment or Termination.             The Committee may amend, modify or terminate the Plan at any time and for any reason, including, without limitation, the authority to alter at any time during the calendar year the amount of incentive compensation that is available or potentially available to Participants with respect to the calendar year or the terms and conditions under which such incentive compensation is or will become payable.     10.     Participant Rights Unsecured.              The right of a Participant to receive a distribution of incentive compensation awarded hereunder shall be an unsecured claim, and the Participant shall not have any rights in or against any specific assets of the Company or any of its subsidiaries. The right of a Participant to the payment of incentive compensation that has been awarded or may be awarded under this Plan may not in any manner be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment; provided that any benefits awarded to the Participant but unpaid as of the date of the Participant's death shall be paid to the Participant's estate.     11.     Successor and Assigns.              This Plan, with respect to any amount awarded to a Participant by the Committee in accordance with Section 4, shall be binding upon and inure to the benefit of the Company and its subsidiaries, their successors and assigns and to the Participant and the executor, administrator or legal representative of the Participant's estate.     12.     Governing Law.              This Plan shall be governed by and construed in accordance with the law of the State of Wisconsin.     

Exhibit 10.12 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT         THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Amendment"), is made and entered into by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Seller"), and Inktomi Corporation, a Delaware corporation ("Buyer"), effective as of July 14, 2000, with reference to the following facts. RECITALS           A.          Buyer and Seller have entered into that certain Purchase and Sale Agreement, dated as of June 30, 2000 (the "Purchase Agreement"), pursuant to which Seller has agreed to sell and Buyer has agreed to purchase that certain improved and unimproved real property located at, and contiguous to, 4000 and 4100 East Third Avenue, Foster City, California, as more particularly described in Exhibit A to the Purchase Agreement, on all of the terms and conditions set forth therein.           B.          Buyer and Seller now desire to reinstate, ratify and amend the Purchase Agreement on each and all of the terms, provisions and conditions contained herein.           NOW THEREFORE, in consideration of the promises, terms and conditions contained herein and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Buyer and Seller hereby agree as follows:           1.          Defined Terms.  All capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms as set forth in the Purchase Agreement.           2.           Recitals.  Seller and Buyer hereby agree that the recitals set forth hereinabove are true and correct and incorporated into this Amendment.           3.           Modifications to Purchase Agreement.  The parties agree that from and after the date of this Amendment the Purchase Agreement shall be modified as follows:                          3.1      Assignment.  Section 19 of the Purchase Agreement is hereby deleted and replaced in its entirety by the following:                                      19.     Assignment. >                                  19.1     Buyer may not assign its rights, > obligations and interest in this Agreement to any other person or entity, > without first obtaining Seller's prior written consent thereto, which consent > may be given or withheld in Seller's sole and absolute discretion, except that > Buyer may assign its interest in and to this Agreement and the Property so > long as (i) the assignee of Buyer assumes all of Buyer's obligations under > this Agreement and agrees to timely perform same pursuant to an assignment > agreement in form reasonably acceptable to Seller, (ii) Buyer delivers to > Seller at least ten (10) business days prior to the Closing (a) written notice > of said proposed assignment and (b) a copy of the draft of the assignment > agreement for Seller's reasonable approval, and (iii) the assignee of Buyer > unconditionally ratifies and remakes all covenants, indemnities, > representations and warranties of Buyer made in or in connection with > > 1 -------------------------------------------------------------------------------- > this Agreement, all of the foregoing for the express benefit and reliance of > Seller. No assignment shall relieve Buyer from any liability or its > obligations under or in connection with this Agreement. Any attempted > assignment not in compliance with the provisions of this Section 19 shall be > null and void. This Agreement shall inure to the benefit of and be binding > upon the parties to this Agreement and their respective successors and > permitted assigns. > >                               19.2     Notwithstanding the terms of Section > 19.1, Buyer shall have the unconditional right to assign all or a portion of > its rights and obligations under this Agreement to (i) any person who or > entity which controls, is controlled by or is under common control with Buyer, > (ii) any entity resulting from the merger, consolidation or other > reorganization with Buyer whether or not Buyer is the surviving entity, (iii) > any entity which acquires all or substantially all of the assets or stock of > Buyer (any person or entity identified in clauses (i), (ii) and (iii) of this > paragraph are hereinafter referred to as an "Affiliate") and (iv) a third > party as part of a sale/leaseback, operating lease, synthetic lease or similar > transaction pursuant to which Buyer (or Affiliate) leases the Property from su > ch third party pursuant to a written lease. For purposes of this paragraph, > the term "control" means possession, directly or indirectly, of the power to > direct or cause the direction of the management, affairs and policies of > anyone, whether through the ownership of voting securities, by contract or > otherwise. The parties acknowledge that Buyer (or Affiliate) is intended to be > the ultimate occupant and user of the Property; therefore, the parties > acknowledge that any assignee of Buyer's rights and obligations under this > Agreement is an intended third party beneficiary of all of Seller's covenants, > representations, warranties and obligations under this Agreement. An > assignment pursuant to this Section 19.2 may be made solely upon prior written > notice to Seller.                             3.2        Estoppel Certificates.  Section 4.2.1.1 of the Purchase Agreement is hereby amended such that the Estoppel Certificates to be delivered from the tenants of the Property, "Legacy" and "PE", as defined in such Section 4.2.1.1, shall be the Estoppel Certificates attached hereto as Exhibit A and Exhibit B, rather than the form of estoppel certificates prescribed in each of said tenant's leases.                             3.3        Legacy Lease Amendment.  Section 33 of the Purchase Agreement is hereby amended such that the Legacy Lease Amendment to be entered into as of the Closing Date shall be in the form attached hereto as Exhibit C, rather than the form attached to the Purchase Agreement.                             3.4        Tenant Improvement Allowance.  At Closing, Seller shall credit Buyer with any then-outstanding portion of the tenant improvement allowance payable to Buyer under the "Inktomi Lease" (as defined in the Purchase Agreement), regardless of whether Buyer shall have complied with any remaining requirements under the Inktomi Lease for payment of such tenant improvement allowance. Buyer and Seller acknowledge and agree that the current outstanding amount of such tenant improvement allowance is approximately Eighty-five Thousand Dollars and Zero Cents ($85,000.00) (or more) as of the date of this Amendment. Nothing herein shall be deemed to negate, modify or amend the "as-is" nature of this transaction or the release contained in Section 12 of the Purchase Agreement, and Buyer acknowledges and agrees that Seller shall have no obligation to Buyer to obtain, nor shall Seller have any liability to Buyer by reason of any failure to obtain, any certificate or other documentation that was to have been provided in connection with the completion of Buyer's tenant improvements under the Inktomi Lease. 2 --------------------------------------------------------------------------------                             3.5        Title Matters.  On or before Closing, Seller shall remove from title the following exceptions, as shown on that certain Preliminary Report dated May 27, 2000, issued by Fidelity National Title Company under Order No. 9522540-B, Amendment (the "Title Report"): a. Item 25 (a deed of trust);     b. Item 26 (a financing statement); and     c. Item 29 (a claim of mechanic's lien).                                                                                        Other than the foregoing, Buyer hereby elects to waive any objections to the Title Report.                             3.6        Extension of Conditions Period for Survey Update Approval.  Buyer has approved the September 24, 1999 ALTA survey prepared by Kier and Wright (the "Survey"). The Conditions Period, as defined in Section 2.1 of the Purchase Agreement, shall be extended to expire at 5:00 p.m. on July 26, 2000 (the "Extended Approval Date"), but solely for the purpose of obtaining an updated ALTA survey (the "Survey Update"), which Survey Update may contain additional exceptions for a pathway agreement and/or a pathway on the Property, and for a license agreement for a generator belonging to PE, but shall contain no material additional exceptions currently unknown to Buyer. Any and all differing dates or time periods and references to same in the Purchase Agreement are hereby deleted or modified accordingly. Unless Buyer notifies Seller (which notification may be given by Buyer in its sole and absolute discretion) prior to 5:00 p.m. (Pacific Time) o n the Extended Approval Date that the Pre-Closing Condition set forth in this Section 3.6 remains unsatisfied and that Buyer will not waive such Pre-Closing Condition (any such notice shall serve as a termination of the Purchase Agreement, in which event Escrow Holder shall promptly return the Deposits to Buyer), at 5:00 p.m. (Pacific Time) on the Extended Approval Date the Deposits shall become non-refundable to Buyer; provided, however, the Initial Deposit and the Additional Deposit (including any interest earned thereon) shall be refundable to Buyer if all of the Buyer's Closing Conditions (defined in the Purchase Agreement) are not satisfied or otherwise waived by Buyer in accordance with the provisions of Section 4.3 of the Purchase Agreement.                             3.7        Satisfaction and/or Waiver of Pre-Closing Conditions.  With the sole exception of the Pre-Closing Condition set forth in Section 3.6 hereinabove, (i) Buyer hereby expressly and unconditionally approves of, and considers satisfied, all Pre-Closing Conditions set forth in Section 4.1 of the Purchase Agreement, and (ii) Buyer hereby expressly waives its right to terminate the Purchase Agreement pursuant to the terms and provisions of Section 4.3 of the Purchase Agreement for reason of any failure of any of such Pre-Closing Conditions; provided, however, Buyer retains its right to terminate the Purchase Agreement pursuant to the terms of Section 4.3 of the Purchase Agreement for reason of failure of any of Buyer's Closing Conditions, and pursuant to Section 3.6 of this Amendment.                             3.8        Improvements Agreement.  Buyer and Seller acknowledge that Seller is a party to that certain document entitled "Improvements Agreement Bayside Towers (UP 96-011) Lincoln Property Company, N.C. Inc. and WHFST Real Estate Limited Partnership Foster City, California" dated September 23, 1998, which is reflected as item 24 on the Title Report (the "Improvements Agreement"), and that Seller has posted an improvement bond with the City of Foster 3 -------------------------------------------------------------------------------- City to secure the performance of the obligations of the Seller under the Improvements Agreement (the "Improvements Bond"). The obligations of the Seller under the Improvements Agreement (and/or under any maintenance agreement with the City of Foster City that may succeed to the Improvements Agreement) shall, notwithstanding the sale and transfer of the Property from the Seller to the Buyer, remain obligations of the Seller; and the obligations of the Seller with respect to the Improvements Bond (and/or under any maintenance bond posted with the City of Foster City to replace the Improvements Bond) shall, notwithstanding the sale and transfer of the Property from the Seller to the Buyer, remain obligations of the Seller. Notwithstanding any provision to the contrary herein or in the Purchase Agreement, the obligations of Seller under this Section 3.8 shall survive the Closing.                             3.9        Personal Property Schedule.  Attached hereto as Exhibit D is the schedule of the Personal Property to be sold, transferred and conveyed by Seller to Buyer at the Closing; and the same shall be attached to the Bill of Sale to be delivered by Seller to the Buyer at the Closing.                             3.10       Additional Seller's Representation. The following Section 26.9 is hereby added to the Purchase Agreement: >                               26.9        That certain Option Agreement made > by Seller and Specialty, dated March 1, 2000, does not violate any presently > effective agreement to which Seller is a party or by which Seller is now > bound.                             3.11        Extension of Closing Date. Buyer hereby elects pursuant to Section 6.2 of the Purchase Agreement to extend the Initial Closing Date until August 8, 2000 (the "First Extended Closing Date") and shall within one (1) business day after the date hereof deposit into Escrow the sum of One Million Dollars ($1,000,000) pursuant to the terms of such Section.                             3.12         Additional Deposit.    Buyer shall within one (1) business day from the date hereof deposit into Escrow the sum of Four Million Dollars ($4,000,000.00) as the Additional Deposit pursuant to Section 2.2 of the Purchase Agreement. Notwithstanding the seventh (7th) sentence of Section 4.3 of the Purchase Agreement (which reads, 'The funding by Buyer of the Additional Deposit shall conclusively constitute Buyer's approval of each and every aspect of the Property as well as of the Pre-Closing Conditions.'), Buyer reserves its right to approve the Pre-Closing Condition (and the corresponding aspect of the Property) as set forth in Section 3.6 of this Amendment.         4.         Reinstatement and Reaffirmation of Purchase Agreement.    Purchaser and Seller hereby acknowledge and agree that the Purchase Agreement, as modified by this Amendment, is hereby fully reinstated as though never terminated, and is hereby reaffirmed, ratified and confirmed in its entirety. Except as modified by this Amendment, the terms and provisions of the Purchase Agreement shall remain unchanged. If there is any conflict between the terms and provisions of the Purchase Agreement and this Amendment, the terms and provisions of this Amendment shall control and prevail.         5.         Governing Law.        This Amendment shall be governed by, construed and enforced in accordance with, the laws of the State of California. 4 --------------------------------------------------------------------------------         6.        Counterparts.        This Amendment may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one Amendment. Seller and Buyer agree that the delivery of an executed copy of this Amendment by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Amendment had been delivered. Facsimile signatures shall be binding upon the parties hereto.         7.        Warranty of Authority.        The signatories hereto represent that they have full and complete authority to bind their respective parties to this Amendment and that no other consent is necessary or required in order for the signatories to execute this Amendment on behalf of their respective parties.         IN WITNESS WHEREOF, Buyer and Seller have executed this Amendment on the date first above written. BUYER: Inktomi Corporation, a Delaware corporation By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------   SELLER: WHFST Real Estate Limited Partnership, a Delaware limited partnership By:          WHFST Gen-Par, Inc.,                 a Delaware corporation                 General Partner By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------     5 -------------------------------------------------------------------------------- EXHIBIT A - FORM OF LEGACY  TENANT'S ESTOPPEL CERTIFICATE The undersigned, as Tenant under that certain Office Lease (the "Lease") made and entered into as of __________________, 20__ and between WHFST REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership as Landlord, and the undersigned as Tenant, for Premises on floors one (1), two (2) and three (3) of the Building located at 4000 3rd Avenue Foster City, California hereby certifies as follows: 1.        Attached hereto as Exhibit A is a true and correct copy of the Lease and al amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises. 2.        The undersigned has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on _______________. 3.        The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A. 4.        Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: 5.        Tenant shall not modify the documents contained in Exhibit A or prepay any amounts owing under the Lease to Landlord in excess of thirty (30) days without the prior written consent of Landlord's mortgagee. 6.       Base Rent became payable on _________________. 7.       The Lease Term expires on _______________. 8.       All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. 9.        All improvements to be constructed in or about the Premises by Landlord have been completed to the satisfaction of Tenant and Tenant has received full payment of the Tenant Improvement Allowance from Landlord as required under the Tenant Work Letter attached as Exhibit B to the Lease. 10.        No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease. 11.        As of the date hereof, there are no existing defenses or offsets that the undersigned has which preclude enforcement of the Lease by Landlord. 12.        All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through ________________. The current monthly installment of Base Rent is $_______________. EXHIBIT A - PAGE 1 -------------------------------------------------------------------------------- 13.        Tenant acknowledges and agrees that for purposes of calculating Tenant’s pro rata share of real property taxes, common area expenses and operating expenses, Tenant’s Base Year is the calendar year 1999 with an adjustment to reflect one hundred percent (100%) occupancy of the Building, and that the total of such amounts is $__________ per rentable square foot. 14.        The undersigned acknowledges that this Estoppel certificate may be delivered to Landlord's prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, prospective mortgagee, or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part, and in accepting an assignment of the Lease as collateral security, and that receipt by it of this certificate is a condition of making of the loan or acquisition of such property. 15.        If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Real Property is located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. Executed at ____________________ on the __________ day of ___________________, 20__. "Tenant": LEGACY PARTNERS L.P., a California limited partnership By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------   EXHIBIT A - PAGE 2 -------------------------------------------------------------------------------- EXHIBIT B - FORM OF PE TENANT'S ESTOPPEL CERTIFICATE The undersigned, as Tenant under that certain Office Lease (the "Lease") made and entered into as of __________________, 20__ and between WHFST REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership as Landlord, and the undersigned as Tenant, for Premises on floors one (1), two (2) and three (3) of the Building located at 4000 3rd Avenue Foster City, California hereby certifies as follows: 1.        Attached hereto as Exhibit A is a true and correct copy of the Lease and al amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises. 2.        The undersigned has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on _______________. 3.        The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A. 4.        Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: 5.        Tenant shall not modify the documents contained in Exhibit A or prepay any amounts owing under the Lease to Landlord in excess of thirty (30) days without the prior written consent of Landlord's mortgagee. 6.        Base Rent became payable on _________________. 7.        The Lease Term expires on _______________. 8.        All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. 9.        All improvements to be constructed in or about the Premises by Landlord have been completed to the satisfaction of Tenant and Tenant has received full payment of the Tenant Improvement Allowance from Landlord as required under the Tenant Work Letter attached as Exhibit B to the Lease. 10.        No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease. 11.        As of the date hereof, there are no existing defenses or offsets that the undersigned has which preclude enforcement of the Lease by Landlord. 12.        All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through ________________. The current monthly installment of Base Rent is $_______________. EXHIBIT C - PAGE 1 -------------------------------------------------------------------------------- 13.        With respect to Section 1.4 of the Lease, Tenant acknowledges that the First Offer Space would not apply to space in the Building available for lease where the owner of the Building desires to occupy such space for the conduct of its own business. 14.        Tenant acknowledges a typographical error in the Lease, in that the cross reference to Section 4.2.5(xiii)(II) which appears in clause (x) of Section 4.2.4 should instead refer to Section 4.2.4(xiii)(II). 15.        The undersigned acknowledges that this Estoppel certificate may be delivered to Landlord's prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, prospective mortgagee, or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part, and in accepting an assignment of the Lease as collateral security, and that receipt by it of this certificate is a condition of making of the loan or acquisition of such property. 16.        If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Real Property is located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. Executed at ____________________ on the __________ day of ___________________, 20__. "Tenant": THE PERKIN-ELMER CORPORATION, a New York corporation By:     -------------------------------------------------------------------------------- Name: Michael W. Hunkapiller --------------------------------------------------------------------------------   Its: Senior Vice President, and President   PE Biosystems Division --------------------------------------------------------------------------------     By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------     EXHIBIT C - PAGE 2 -------------------------------------------------------------------------------- EXHIBIT C Fifth Amendment to Lease Agreement          This Fifth Amendment to Lease Agreement (the "Amendment") is made and entered into as of this ___ day of _____, 2000, by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Landlord") and Legacy Partners L.P., a California limited partnership ("Tenant"), with reference to the following facts. Recitals A.        Landlord and Tenant entered into that certain Lease Agreement, dated as of October 10, 1997, as amended by that certain First Amendment to Lease, dated October 30, 1997, that certain Second Amendment to Lease, dated as of December 11, 1998, that certain Third Amendment to Lease Agreement, dated as of August 13, 1999 and that certain Fourth Amendment to Lease Agreement, dated as of January 31, 2000 (collectively, the "Lease") for the leasing of certain premises consisting of approximately 23,155 rentable square feet located at 4000 E. Third Avenue, Foster City, California (the "Premises") as such Premises are more fully described in the Lease. B.        Landlord and Tenant wish to modify the Lease to amend the Lease upon and subject to the terms, conditions, and provisions set forth herein.         NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree as follows: 1.          Recitals.  Landlord and Tenant agree that the above recitals are true and correct and are hereby incorporated herein as though set forth in full. 2.          Base Rent:  Beginning as of July 1, 2000 (the "Effective Date") and continuing through the Expiration Date of the Lease, the monthly Base Rent and Adjustments to Base Rent set forth on page 1 of the Lease are hereby amended to be as follows: (i) for and with respect to the period commencing on the Effective Date and continuing through the day preceding the first anniversary of the Effective Date, the Base Rent shall be at the monthly rate of Four Dollars ($4.00) per rentable square foot of the Premises; (ii) for and with respect to the period commencing on the first anniversary of the Effective Date and on each and every anniversary of the Effective Date thereafter, the annual Base Rent shall increase by an amount equal to three percent (3%) per annum.  All references in the Lease to Base Rent are hereby modified accordingly. 3.          Assignment and Subletting:  Section 14.2.4 of the Lease is hereby deleted in its entirety and replaced with the following: > The terms of the proposed Transfer will allow the Transferee to exercise a > right of renewal, right of expansion, right of first offer, or other similar > right held by Tenant (or will allow the Transferee to occupy space leased by > Tenant pursuant to any such right) except in connection with a right of > renewal assigned to a Permitted Affiliate or other transferee in connection > with an assignment of Tenant's entire interest in this Lease pursuant to this > Article 14; 4.         Permitted Affiliates:  Section 14.5 of the Lease is hereby deleted in its entirety and replaced with the following: > 14.5    Affiliated Companies/Restructuring of Business organization. The > assignment or subletting by Tenant of all or any portion of this Lease or the > Premises to (i) a parent or subsidiary of Tenant, or (ii) any person or entity > which controls, is controlled by or under common control with Tenant, or (iii) > any entity which purchases all or substantially all of the assets of Tenant, > or (iv) any entity into which Tenant is merged or consolidated (all such > persons or entities described in (i), (ii), (iii) and (iv) being sometimes > hereinafter referred to as "Permitted Affiliates") shall not be deemed a > Transfer under this Article 14, and thus shall not be subject to Landlord's > > EXHIBIT C - PAGE 3 -------------------------------------------------------------------------------- > recapture right in Section 14.7, Landlord's right to receive any Transfer > Premium pursuant to Section 14.6, or Landlord's Right of First Offer pursuant > to Section 14.8, provided that: > >          14.5.1  any such Affiliate was not formed as a subterfuge to avoid > the obligations of this Article 14; 14.5.2 Tenant gives Landlord at least ten > (10) days' prior notice of any such assignment or sublease to an Affiliate; > >          14.5.3  the successor of Tenant and Tenant have as of the effective > date of any such assignment or sublease a tangible net worth, in the > aggregate, computed in accordance with generally accepted accounting > principles (but excluding goodwill as an asset), which is sufficient to meet > the obligations of Tenant under this Lease and is equal to or greater than the > net worth of Tenant as of the date of execution of this Lease; > >           14.5.4  any such assignment or sublease shall be subject and > subordinate to all of the terms and provisions of this Lease, and such > assignee or sublessee shall assume, in a written document reasonably > satisfactory to Landlord and delivered to Landlord upon or prior to the > effective date of such assignment or sublease, all the obligations of Tenant > under this Lease with respect to the Subject Space which is the subject of > such Transfer (other than the amount of Base Rent payable by Tenant with > respect to a sublease); and > >           14.5.5  Tenant and any guarantor shall remain fully liable for all > obligations to be performed by Tenant under this Lease. > > Furthermore, Tenant may allow employees of companies to whom Tenant is > providing products or services, or with which Tenant is collaborating in the > development or provision of products or services, to work in the Premises > without Landlord's consent and without being deemed to have sublet any portion > of the Premises, so long as (A) such employees do not occupy more than ten > percent (10%) of the rentable square feet of the Premises, in the aggregate, > at any one time, and such space is not separately demised from the space > occupied by Tenant and (B) the number of such employees does not exceed ten > percent (10%) of the total number of persons regularly occupying the Premises. 5.         Transfer Premium: The following is added as a new Section 14.6 of the Lease: > 14.6     Transfer Premium.     Except as otherwise provided in Sections 14.4 > and 14.5 above, if Landlord consents to a Transfer, as a condition thereto > which the parties hereby agree is reasonable, Tenant shall pay to Landlord > fifty percent (50%) of any "Transfer Premium," as that term is defined in this > Section 14.6, received by Tenant from such Transferee. "Transfer Premium" > shall mean all rent, additional rent or other consideration payable by such > Transferee in excess of the Rent and Additional Rent payable by Tenant under > this Lease on a per rentable square foot basis if less than all of the > Premises is transferred, after deducting the reasonable expenses incurred by > Tenant for (i) any changes, alterations and improvements to the Premises in > connection with the Transfer, (ii) any brokerage commissions in connection > with the Transfer, (iii) the unamortized cost of all Alterations and any > Tenant Improvements paid for by Tenant from Tenant's own funds and not > initially funded by Landlord or paid for by Landlord out of any tenant > improvement allowances, and (iv) reasonable legal fees incurred by Tenant in > negotiating the Transfer and obtaining Landlord's consent thereto and in > collecting any sums due from the Transferee (collectively, the "Subleasing > Costs"). "Transfer Premium" shall also include, but not be limited to, key > money and bonus money paid by Transferee to Tenant in connection with such > Transfer, and any payment in excess of fair market value for services rendered > by Tenant to Transferee or for assets, fixtures, inventory, equipment or > furniture transferred by Tenant to Transferee in connection with such > Transfer. 6.         Recapture:  The following is added as a new Section 14.7 of the Lease: EXHIBIT C - PAGE 4 -------------------------------------------------------------------------------- > 14.7     Landlord's Option as to Subject Space.     Notwithstanding anything > to the contrary contained in this Article 14, in the event Tenant contemplates > a sublease of (i) greater than fifty percent (50%) of the rentable square > footage of the Premises during the Initial Lease Term, or (ii) greater than > twenty-five percent (25%) of the rentable square footage of the Premises > during the Option Term to any person or entity (other than a Transfer to a > Permitted Affiliate pursuant to Section 14.5 above), Tenant shall give > Landlord notice (the "Intention to Transfer Notice") of such contemplated > sublease (whether or not the terms of the contemplated sublease have been > determined). The Intention to Transfer Notice shall specify the portion of and > amount of square feet of the portion of the Premises which Tenant intends to > sublet (the "Contemplated Transfer Space"), the contemplated date of > commencement of the contemplated sublease (the "Contemplated Effective Date"), > and the contemplated length of the term of such contemplat ed sublease, and > shall specify that such Intention to Transfer Notice is delivered to Landlord > pursuant to this Section 14.7 in order to allow Landlord to elect to recapture > the Contemplated Transfer Space for the term set forth in the Intention to > Transfer Notice.  Thereafter, Landlord shall have the option, by giving > written notice to Tenant within thirty (30) days after receipt of any Transfer > Notice, to recapture the Contemplated Transfer Space. Such recapture shall > cancel and terminate this Lease, with respect to the Contemplated Transfer > Space as of the date stated in the Transfer Notice as the effective date of > the proposed Transfer until the last day of the term of the Transfer as set > forth in the Transfer Notice. In the event of a recapture by Landlord, the > Rent reserved herein shall be prorated on the basis of the number of rentable > square feet retained by Tenant in proportion to the number of rentable square > feet contained in the Premises, and this Lease as so amended shall continue > thereafter in full force and effect, and upon request of either party, the > parties shall execute written confirmation of the same. If Landlord declines, > or fails to elect in a timely manner to recapture the Contemplated Transfer > Space under this Section 14.7, then, subject to the other terms of this > Article 14, for a period of six (6) months (the "Six Month Period") commencing > on the last day of such thirty (30) day period, Landlord shall not have any > right to recapture the Contemplated Transfer Space with respect to any > sublease made during the Six Month Period, provided that any such sublease is > substantially on the terms set forth in the Intention to Transfer Notice, and > provided further that any such sublease shall be subject to the remaining > terms of this Article 14. If such a sublease is not so consummated within the > Six Month Period (or if a sublease is so consummated, then upon the expiration > of the term of any sublease of such Contemplated Transfer Space consummated > within such Six Month Period), Tenant shall again be required to submit a new > Intention to Transfer Notice to Landlord with respect any contemplated > sublease of the Contemplated Transfer Space (or portion thereof), as provided > above in this Section 14.7. 7.        Landlord's Right of First Offer:  The following is added as a new Section 14.8 of the Lease: > [Insert First Offer language tracking Section 1.4 of the Inktomi Lease for any > space offered to a non-Permitted Affiliate that is not subject to the > recapture rights set forth in Section 14.7 above] 8.          Estoppel Certificates:  Article 17 of the Lease is hereby modified to provide that Tenant shall have twenty (20) days following written request by Landlord to execute and deliver an estoppel certificate in the prescribed form. 9.        Events of Default: Section 19.1 of the Lease is deleted in its entirety and replaced with the following: > 19.1.1         Any failure by Tenant to pay any Rent or other charge required > to be paid under this Lease, or any part thereof, within five (5) days after > written notice of delinquency; provided, however, that if Landlord has given > Tenant two (2) such delinquency notices in the preceding twelve (12) month > period, then Tenant’s subsequent failure to pay any Rent or other charge when > due shall constitute a default under this Lease without requirement of any > notice or cure period except as required by statute; or > > 19.1.2         Any failure by Tenant to observe or perform any other > provision, covenant, or condition of this Lease to be observed or performed by > Tenant where such failure continues for thirty (30) days after written notice > thereof from Landlord to Tenant; provided, however, that if the nature of > > EXHIBIT C - PAGE 5 -------------------------------------------------------------------------------- > such default is such that the same cannot reasonably be cured within a thirty > (30) day period.  Tenant shall not be deemed to be in default if it diligently > commences such cure within such period and thereafter diligently proceeds to > rectify and cure said default as soon as possible; provided, further, however, > that the maximum period for Tenant's cure of such default will not exceed two > hundred ten (210) days after Landlord's written notice of default. 10.        Substitution of Other Premises:  Article 22 of the Lease is hereby deleted in its entirety. 11.       Late Charges:  Article 25 of the Lease is hereby deleted in its entirety and replaced with the following: > If any installment of Rent or any other sum due from Tenant shall not be > received by Landlord or Landlord's designee within five (5) days after notice > from Landlord that said amount is past due, then Tenant shall pay to Landlord > a late charge equal to five percent (5%) of the amount due or in the case of a > delinquent installment of Base Rent, two percent (2%) of the delinquent > amount; provided, however, that if Landlord has given Tenant one (1) such > delinquency notice in the preceding twelve (12) month period, then the late > charge shall be imposed for any subsequent delinquent payment of Rent by > Tenant, without requirement of any notice or cure period. The late charge > shall be deemed Additional Rent and the right to require it shall be in > addition to all of Landlord's other rights and remedies hereunder or at law > and shall not be construed as liquidated damages or as limiting Landlord's > remedies in any manner. In addition to the late charge described above, any > Rent or other amounts owing hereunder which are not paid when they are due > shall thereafter bear interest until paid at a rate (the "Interest Rate") > equal to the lower of (i) the then-current prime interest rate as such rate is > announced by The Wall Street Journal plus two (2) percentage points, or (ii) > the highest rate permitted by applicable law. 12.      Signage:  Section 29.27 of the Lease is deleted in its entirety and replaced with the following: > Building Name and Signage.  Landlord shall have the right at any time to > change the name of the Building and Real Property and to install, affix and > maintain any and all signs on the exterior and on the interior of the Building > or any portion of the Real Property. Notwithstanding any provision contained > herein to the contrary, Landlord may not modify, relocate, remove or otherwise > alter any existing Tenant signage in, on or about the Premises, Building, or > Real Property without the prior written consent of Tenant, which consent may > be withheld at Tenant’s sole discretion. At all times during the Term of this > Lease, subject to the approval of all applicable governmental entities and > compliance with all applicable governmental laws and ordinances, Tenant shall > have the non-exclusive right, at Landlord's sole cost and expense, to place > its name and/or logo on any monument sign existing now or hereafter > constructed in, on or about the Real Property. In the event of a Transfer to > any entity o ther than a Permitted Affiliate, such Transferee shall be > entitled to Building standard signage only, as reasonably determined by > Landlord. Tenant shall not use the name of the Building or Real Property or > use pictures or illustrations of the Building or Real Property in advertising > or other publicity, without the prior written consent of Landlord; provided > such consent shall not be unreasonably withheld where the purpose is to > identify Tenant's role in the development of the Building and Real Property. 13.       Extension Option:  The Bayside Towers Extension Option Rider to the Lease is hereby deleted in its entirety and replaced with the Bayside Towers Extension Option Rider attached hereto and incorporated herein. Notwithstanding any provision contained herein or in the Lease to the contrary, the rights contained in the Extension Rider are personal to Tenant and may only be exercised by Tenant or a Permitted Affiliate. 14.       Effect of Amendment:  Except as modified herein, the terms and conditions of the Lease shall remain unmodified and continue in full force and effect. In the event of any conflict between the terms and conditions of the Lease and this Amendment, the terms and conditions of this Amendment shall prevail. 15.        Definitions:  Unless otherwise defined in this Amendment, all terms not defined in this Amendment shall have the meanings assigned to such terms in  the Lease.  EXHIBIT C - PAGE 6 -------------------------------------------------------------------------------- 16.       Authority:  Subject to the assignment and subletting provisions of the Lease, this Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, representatives, successors and assigns. Each party hereto and the persons signing below warrant that the person signing below on such party's behalf is authorized to do so and to bind such party to the terms of this Amendment. 17.       Incorporation:  The terms and provisions of the Lease are hereby incorporated in this Amendment. 18.      Counterparts:  This Amendment may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one Amendment.  Landlord and Tenant agree that the delivery of an executed copy of this Amendment by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Amendment had been delivered. Facsimile signatures shall be binding upon the parties hereto. LANDLORD: WHFST Real Estate Limited Partnership, a Delaware limited partnership By:           Legacy Partners Commercial Inc.,                  a Texas corporation                  as manager and agent for WHFST Real Estate Limited Partnership By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------   TENANT: Legacy Partners L.P., a California limited partnership By:     -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Its: --------------------------------------------------------------------------------      EXHIBIT C - PAGE 7 -------------------------------------------------------------------------------- BAYSIDE TOWERS  EXTENSION OPTION RIDER      This Extension Option Rider ("Extension Rider") is made and entered into by and between WHFST REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and LEGACY PARTNERS L.P., a California limited partnership ("Tenant"), and is dated as of the date of the Office Lease ("Lease") by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this Extension Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this Extension Rider are inconsistent with the terms of the Lease, the terms of this Extension Rider shall control.          1.        Option Right.  Landlord hereby grants Tenant one (1) option to extend the Lease Term for all, but not less than all, of the Premises for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written Exercise Notice (as defined below) delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Exercise Notice, Tenant is not in monetary or material non-monetary default under the Lease and any applicable notice of such default has been delivered and any applicable cure period has expired. Upon the proper exercise of such option to extend, and provided that, as of the end of the initial Lease Term Tenant is not in monetary or material non-monetary default under the Lease beyond any applicable notice and cure period, the Lease Term shall be extended for the Option Term. The rights contained in this Extension Rider shall be personal to Tenant and may only be exercised by Tenant or a Permitted Affiliate (and not by any other s ublessee or other transferee of Tenant's interest in the Lease).          2.        Option Rent.  The Annual Base Rent payable by Tenant during the Option Term (the "Option Rent") shall be equal to the "Fair Market Rental Rate" for the Premises. For purposes hereof, the "Fair Market Rental Rate" shall mean the rent at which tenants, as of the commencement of the Option Term will be leasing non-sublease, non-encumbered space on a net basis comparable in size, location and quality to the Premises for a comparable term, which comparable space is located in Comparable Buildings (defined below) taking into consideration all out-of-pocket monetary concessions and inducements generally being granted at such time, including any tenant improvement allowances provided for such space (but in determining any such tenant improvement allowance, the quality and quantity of tenant improvements in the Premises shall be taken into account and the value thereof deducted from such allowance), and also taking into consideration and requiring Tenant to provide for security or collateral for the Optio n Term in such amounts and of such types (such as, for example, a cash security deposit and/or a letter of credit), if any, as are generally being required by landlords in connection with such extensions and rental amounts and concessions for such comparable space by tenants of comparable net worth as Tenant. All other terms and conditions of the Lease shall apply throughout the Option Term; however, Tenant shall, in no event, have the option to extend the Lease Term beyond the Option Term described in Section 1 above.          3.        Exercise of Option.  The option contained in this Extension Rider shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice to Landlord not less than fourteen (14) months prior to the expiration of the initial Lease Term stating that Tenant may be interested in exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall deliver notice (the "Option Rent Notice") to Tenant not less than thirteen (13) months prior to the expiration of the initial Lease Term setting forth Landlord's good-faith determination of the Fair Market Rental Rate for the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the date (the "Exercise Date") which is the later of (A) the date occurring twelve (12) months prior to the expiration of the initial Lease Term, and (B) the date occurring thirty (30) days after Tenant's receipt of the Option Rent Notice, exercise the option by delivering written notice ("Exercise Notice") thereof to Landlord, and upon and concurrent with such exercise, Tenant may, at its option, object to Landlord's determination of the Fair Market Rental Rate for the Option Rent contained in the Option Rent Notice, in which case the parties shall follow the procedure and the Fair Market Rental Rate for the Option Term shall be determined as set forth in Section 4 below. If Tenant does not timely object to Landlord's determination of the Option Rent, Landlord's determination shall be conclusive and the arbitration procedures in Section 4 below shall not be applicable. Tenant's failure to deliver the Exercise Notice on or before the Exercise Date shall be deemed to constitute Tenant's waiver of its extension right hereunder.          4.        Determination of Fair Market Rental Rate.  In the event Tenant timely objects in writing to the applicable Fair Market Rental Rate initially determined by Landlord, Landlord and Tenant shall attempt to agree upon the applicable Fair Market Rental Rate, using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) business days EXHIBIT C - PAGE 8 -------------------------------------------------------------------------------- following Tenant's objection to the applicable Fair Market Rental Rate (the "Outside Agreement Date"), then each party shall submit to the other party a separate written determination of the applicable Fair Market Rental Rate within ten (10) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below; provided, however, that if the Fair Market Rental Rate determination submitted by Landlord is less than the Fair Market Rental Rate originally provided by Landlord in Landlord's Option Rent Notice, Tenant shall thereafter have five (5) business days to accept such determination as the Option Rent in which event the arbitration proceedings in Sections 4.1 through 4.6 below shall not apply. Failure of Tenant or Landlord to submit a written determination of the applicable Fair Market Rental Rate within such ten (10) business day period shall conclusively be deemed to be the non-determining party's approval of the applicable Fair Market Rental Rate submitted within such ten (10) business day period by the other party.                      4.1        Landlord and Tenant shall each appoint, one arbitrator who shall by profession be an independent real estate appraiser holding the professional designation as an MAI (or its equivalent) who has no financial interest in Landlord or Tenant and who shall have been active over the five (5) year period ending on the date of such appointment in the appraisal rental purposes of rentals of space in first-class office buildings in San Mateo County, California ("Comparable Buildings"). The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Fair Market Rental Rate is the closest to the actual Fair Market Rental Rate as determined by the arbitrators, taking into account the requirements of Section 2 of this Extension Rider. Each such arbitrator shall be appointed within thirty (30) days after the applicable Outside Agreement Date.                         4.2        The two (2) arbitrators so appointed shall within ten (10) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria as set forth hereinabove for qualification of the initial two (2) arbitrators, except that the third arbitrator shall not have been previously engaged by Landlord or Tenant for any purpose.                         4.3        The three (3) arbitrators shall conduct a hearing within twenty (20) days after the appointment of the third arbitrator and within ten (10) days thereafter reach a decision as to which of the Landlord's or Tenant's submitted Fair Market Rental Rate is closest to the actual Fair Market Rental Rate, and the arbitrators shall use whichever of Landlord's or Tenant's submitted Fair Market Rental Rate is closest to the actual Fair Market Rental Rate to be paid during the Option Term and shall notify Landlord and Tenant thereof.                           4.4        The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.                      4.5        If either Landlord or Tenant fails to appoint an arbitrator within thirty (30) days after the Outside Agreement Date, and if such failure shall continue for an additional fifteen (15) days after written notice thereof is received by the non-appointing party, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant.                      4.6        If the two (2) arbitrators fail to agree upon and appoint a third arbitrator within the time period provided in Section 4.2 above, then the parties shall mutually select the third arbitrator. If Landlord and Tenant are unable to agree upon the third arbitrator within ten (10) days, then either party may, upon at least five (5) days' prior written notice to the other party, request the Presiding Judge of the San Mateo County Superior Court, acting in his private and nonjudicial capacity, to appoint the third arbitrator. Following the appointment of the third arbitrator, the panel of arbitrators shall within thirty (30) days thereafter reach a decision as to whether Landlord's or Tenant's submitted Fair Market Rental Rate shall be used and shall notify Landlord and Tenant thereof.                      4.7        The cost of the arbitrators and the arbitration proceeding shall be paid by Landlord and Tenant equally, except that each party shall pay for the cost of its own witnesses and attorneys. EXHIBIT C - PAGE 9 -------------------------------------------------------------------------------- EXHIBIT D SCHEDULE OF PERSONAL PROPERTY   SEE ATTACHED --------------------------------------------------------------------------------

EXHIBIT 10.1 THE COLONEL'S INTERNATIONAL, INC. 1995 LONG-TERM INCENTIVE PLAN (As amended through September 28, 2000) SECTION 1 Establishment of Plan; Purpose of Plan           1.1          Establishment of Plan.  The Colonel's Holdings, Inc., hereby establishes the 1995 LONG-TERM INCENTIVE PLAN (the "Plan") for its corporate, divisional, and Subsidiary directors, officers, and other key employees. The Plan permits the grant and award of Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Awards, and Tax Benefit Rights.           1.2          Purpose of Plan.  The purpose of the Plan is to provide directors, officers, and key management employees of the Company, its divisions, and its Subsidiaries with an increased incentive to make significant and extraordinary contributions to the long-term performance and growth of the Company and its Subsidiaries, to join the interests of directors, officers, and key employees with the interests of the Company's stockholders through the opportunity for increased stock ownership, and to attract and retain officers and key employees of exceptional ability. The Plan is further intended to provide flexibility to the Company in structuring long-term incentive compensation to best promote the foregoing objectives. SECTION 2 Definitions                     The following words have the following meanings unless a different meaning is plainly required by the context:   2.1 "Act" means the Securities Exchange Act of 1934, as amended.         2.2 "Board" means the Board of Directors of the Company.         2.3 "Change in Control" means (a) the sale, lease, exchange, or other transfer of substantially all of the Company's assets (in one transaction or in a series of related transactions) to, or the merger or consolidation of the Company with, a corporation that is not controlled by the Company; or (b) a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act; provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Act), other than a Subsidiary or any employee benefit plan of the Company or a Subsidiary or any entity holding Common Stock pursuant to the terms of any such employee benefit plan, is or becomes the beneficial owner (as defined in Rule 13(d)-3 under the Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority of the Board, unless the election, or nomination for election by the --------------------------------------------------------------------------------     Company's shareholders, of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of the period.         2.4 "Code" means the Internal Revenue Code of 1986, as amended.         2.5 "Committee" means the Compensation Committee of the Board or such other committee as the Board shall designate to administer the Plan. The Committee shall consist of at least two members of the Board and all of its members shall be "non-employee directors" as defined in Rule 16b-3 issued under the Act. The Board, in its discretion, may also require that members of the Committee be "outside directors" as defined in the rules promulgated pursuant to Section 162(m) of the Code.         2.6 "Common Stock" means the Common Stock of the Company, par value $0.01 per share.         2.7 "The Company" means The Colonel's Holdings, Inc., a Michigan corporation, and its successors and assigns.         2.8 "Incentive Award" means the award or grant of a Stock Option, Stock Appreciation Right, Restricted Stock, Stock Award, or Tax Benefit Right to a Participant pursuant to the Plan.         2.9 "Market Value" of any security on any given date means:  (a) if the security is listed for trading on one or more national securities exchanges (including the NASDAQ National Market System), the last reported sales price on the principal such exchange on the date in question, or if such security shall not have been traded on such principal exchange on such date, the last reported sales price on such principal exchange on the first day prior thereto on which such security was so traded; or (b) if the security is not listed for trading on a national securities exchange (including the NASDAQ National Market System) but is traded in the over-the-counter market, the mean of highest and lowest bid prices for such security on the date in question, or if there are no such bid prices on the first day prior thereto on which such prices existed; or (c) if neither (a) nor (b) is applicable, the value as determined by any means deemed fair and reasonable by the Committee, which determination shall be final and binding on all parties.         2.10 "Participant" means a corporate director or officer, divisional officer, or other key employee of the Company, its divisions, or its Subsidiaries who the Committee determines is eligible to participate in the Plan and who is designated to be granted an Incentive Award under the Plan.         2.11 "Restricted Period" means the period of time during which Restricted Stock awarded under the Plan is subject to restrictions. The Restricted Period may differ among Participants and may have different expiration dates with respect to shares of Common Stock covered by the same Incentive Award.         2.12 "Restricted Stock" means Common Stock awarded to a Participant pursuant to Section 6 of the Plan. -2- --------------------------------------------------------------------------------   2.13 "Retirement" means the voluntary termination of all employment and service as a director with the Company by a Participant after the Participant has attained 60 years of age, or age 55 with at least five years of service, or such other age as shall be determined by the Committee in its sole discretion or as otherwise may be set forth in the Incentive Award agreement or other grant document with respect to a Participant and a particular Incentive Award.         2.14 "Stock Appreciation Right" means a right granted in connection with a Stock Option pursuant to Section 8 of the Plan.         2.15 "Stock Award" means an award of Common Stock awarded to a Participant pursuant to Section 7 of the Plan.         2.16 "Stock Option" means the right to purchase Common Stock at a stated price for a specified period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option within the meaning of Section 422(b) of the Code or a nonqualified stock option, and the option shall be interpreted in accordance with such intention as stated in the applicable Stock Option Agreement.         2.17 "Subsidiary" means any corporation or other entity of which fifty percent (50%) or more of the outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled by the Company or by one or more Subsidiaries of the Company.         2.18 "Tax Benefit Right" means any right granted to a Participant pursuant to Section 9 of the Plan. SECTION 3 Administration           3.1          Power and Authority. The Committee shall have full power and authority to interpret the provisions of the Plan, and shall have full power and authority to supervise the administration of the Plan. All determinations, interpretations, and selections made by the Committee regarding the Plan shall be final and conclusive. The Committee shall hold its meetings at such times and places as it deems advisable. Action may be taken by a written instrument signed by a majority of the members of the Committee, and any action so taken shall be fully as effective as if it had been taken at a meeting duly called and held. The Committee shall make such rules and regulations for the conduct of its business as it deems advisable. The members of the Committee shall not be paid any additional fees for their services.           3.2          Grants or Awards to Participants. In accordance with and subject to the provisions of the Plan, the Committee shall have the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as are consistent with the terms of the Plan, including, without limitation, the following:  (a) the employees who shall be selected as Participants; (b) the nature and extent of the Incentive Awards to be made to each employee (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in which an Incentive Award will vest or become exercisable, and the form of payment for the Incentive Award); -3- -------------------------------------------------------------------------------- (c) the time or times when Incentive Awards will be granted to employees; (d) the duration of each Incentive Award; and (e) the restrictions and other conditions to which payment or vesting of Incentive Awards may be subject.           3.3          Amendments or Modifications of Awards. The Committee shall have the authority to amend or modify the terms of any outstanding Incentive Award granted to an employee Participant in any manner, provided that the amended or modified terms are not prohibited by the Plan as then in effect, including, without limitation, the authority to: (a) modify the number of shares or other terms and conditions of an Incentive Award; (b) extend the term of an Incentive Award; (c) accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award; (d) accept the surrender of any outstanding Incentive Award; or (e) to the extent not previously exercised or vested, authorize the grant of new Incentive Awards in substitution for surrendered Incentive Awards. Modification of options granted to nonemployee directors may be made only as necessary or desirable to comply with securities or income tax law. No such amendment or modification shall become effective without consent of the Participant except to the extent that such amendment operates solely to the benefit of the Participant.           3.4          Indemnification of Committee Members.  Each person who is or shall have been a member of the Committee shall be indemnified and held harmless by the Company from and against any cost, liability, or expense imposed or incurred in connection with such person's or the Committee's taking or failing to take any action under the Plan. Each such person shall be justified in relying on information furnished in connection with the Plan's administration by any appropriate person or persons.           3.5          Incentive Awards for Nonemployee Directors. Directors who are not also employees shall receive nondiscretionary Stock Options awarded automatically under the terms of subsection 5.5, and shall not receive other Incentive Awards. SECTION 4 Shares Subject to the Plan           4.1          Number of Shares. Subject to adjustment as provided in subsection 4.2 of the Plan, a maximum of 1,000,000 shares of Common Stock shall be available for Incentive Awards under the Plan. Such shares shall be authorized and may be either unissued or treasury shares.           4.2          Adjustments. If the number of shares of Common Stock outstanding changes by reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination, exchange of shares, or any other change in the corporate structure or shares of the Company, the number and kind of securities subject to and reserved under the Plan, together with applicable exercise prices, shall be appropriately adjusted. No fractional shares shall be issued pursuant to the Plan, and any fractional shares resulting from adjustments shall be eliminated from the respective Incentive Awards, with an appropriate cash adjustment for the value of any Incentive Awards eliminated. If an Incentive Award is cancelled, surrendered, modified, exchanged for a substitute Incentive Award, or expires or terminates during the term of the Plan but prior to the exercise or vesting of the Incentive Award in full, the shares subject to but not delivered under such Incentive Award shall be available for other Incentive Awards. -4- -------------------------------------------------------------------------------- SECTION 5 Stock Options           5.1          Grant. A Participant may be granted one or more Stock Options under the Plan. Stock Options shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. In addition, the Committee may vary, among Participants and among Stock Options granted to the same Participant, any and all of the terms and conditions of the Stock Options granted under the Plan. The Committee shall have complete discretion in determining the number of Stock Options granted to each Participant. The Committee may designate whether or not a Stock Option is to be considered an incentive stock option as defined in Section 422(b) of the Code.           5.2          Stock Option Agreements. Stock Options shall be evidenced by Stock Option agreements containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall from time to time determine. Stock Options shall be subject to the terms and conditions set forth in this Section 5.           5.3          Stock Option Price.  The per share Stock Option price shall be determined by the Committee, but shall be a price that is equal to or greater than one hundred percent (100%) of the Market Value on the date of grant.           5.4          Medium and Time of Payment.  The exercise price for each share purchased pursuant to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents, in shares of Common Stock (including Common Stock to be received upon a simultaneous exercise) or other consideration substantially equivalent to cash. The time and terms of payment may be amended with the consent of a Participant before or after exercise of a Stock Option, but such amendment shall not reduce the Stock Option price. The Committee may from time to time authorize payment of all or a portion of the Stock Option price in the form of a promissory note or installments according to such terms as the Committee may approve. The Board may restrict or suspend the power of the Committee to permit such loans and may require that adequate security be provided.           5.5          Stock Options Granted to Nonemployee Directors.           (a)          Automatic Grants.  Options shall be granted to nonemployee Directors on March 1 and September 1 of each year, and no discretionary options shall be granted to such Directors under the Plan. The number of shares subject to options granted on September 1, 1995, shall be 500 shares. The number of shares to be subject to options granted on each succeeding option date during the term of the Plan thereafter shall be 105% of the previous period's grant, with the result rounded up or down to the nearest 5 share increment. This provision for automatic grants shall be effective when there are insufficient shares available for such automatic grants under prior Company stock option plans.           (b)          Price and Terms.  The price shall be 100% of the Market Value as of the date of the grant and may be paid in cash or shares of Common Stock. The term shall be ten years. -5- --------------------------------------------------------------------------------           (c)          New Directors. Any new nonemployee Director elected or appointed other than on a grant date shall receive, as of the date of his or her election or appointment, an option for the number of shares granted to a nonemployee Director as of the previous grant date. The option price for such new Director shall be the higher of the market value as of the date of grant or the market value as of the prior grant date.           5.6          Limits on Exercisability.  Stock Options shall be exercisable for such periods as may be fixed by the Committee, not to exceed 10 years from the date of grant. At the time of the exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must represent to the Company that the shares are being acquired for investment and not with a view to the distribution thereof. The Committee may in its discretion require a Participant to continue the Participant's service with the Company and its Subsidiaries for a certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed vesting provisions. No Stock Option issued to directors and employees subject to Section 16 of the Act shall be exercisable during the first six months of its term.           5.7          Restrictions on Transferability.           (a)          General. Unless the Committee otherwise consents or unless the Stock Option agreement or grant provide otherwise: (i) no Stock Options granted under the Plan may be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or hypothecated except by will or the laws of descent and distribution; and (ii) all Stock Options granted to a Participant shall be exercisable during the Participant's lifetime only by such Participant, his guardian, or legal representative.           (b)          Other Restrictions. The Committee may impose other restrictions on any shares of Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the Committee deems advisable, including, without limitation, restrictions under applicable federal or state securities laws.           5.8          Limits on Grants. No Participant shall be granted, during any calendar year, Options to purchase more than 250,000 shares of Common Stock, subject to adjustment as provided in subsection 4.2 of the Plan. The purpose of this subsection 5.8 is to ensure that the Plan provides performance based compensation under Section 162(m) of the Code. This subsection 5.8 shall be interpreted or amended to achieve that purpose.           5.9          Termination of Employment or Directorship.           (a)          General. If a Participant ceases to be employed by or a director of the Company or one of its Subsidiaries for any reason other than the Participant's death, disability, Retirement, or termination for cause, the Participant may exercise his Stock Options only for a period of three months after such termination of employment or director status, but only to the extent the Participant was entitled to exercise the Stock Options on the date of termination, unless the Committee otherwise consents or the terms of the Stock Option agreement or grant provide otherwise. For purposes of the Plan, the following shall not be deemed a termination of employment or officer status: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military service or for any other purpose approved -6- -------------------------------------------------------------------------------- by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided that the employee's right to reemployment is guaranteed either by statute or contract; or (iv) a termination of employment with continued service as a director.           (b)          Death. If a Participant dies either while an employee or director of the Company or one of its Subsidiaries or after the termination of employment other than for cause but during the time when the Participant could have exercised a Stock Option under the Plan, the Stock Option issued to such Participant shall be exercisable by the personal representative of such Participant or other successor to the interest of the Participant for one year after the Participant's death, but only to the extent that the Participant was entitled to exercise the Stock Option on the date of death or termination of employment or directorship, whichever first occurred, unless the Committee otherwise consents or the terms of the Stock Option agreement or grant provide otherwise.           (c)          Disability. If a Participant ceases to be an employee or director of the Company or one of its Subsidiaries due to the Participant's disability, the Participant may exercise a Stock Option for a period of one year following such termination of employment or directorship, but only to the extent that the Participant was entitled to exercise the Stock Option on the date of such event, unless the Committee otherwise consents or the terms of the Stock Option agreement or grant provide otherwise.           (d)          Participant Retirement. If a Participant Retires as an employee or director of the Company or one of its Subsidiaries, any Stock Option granted under the Plan may be exercised during the remaining term of the Stock Option, unless the terms of the Stock Option agreement or grant provide otherwise.           (e)          Termination for Cause. If a Participant is terminated for cause, the Participant shall have no further right to exercise any Stock Option previously granted. SECTION 6 Restricted Stock           6.1          Grant. A Participant may be granted Restricted Stock under the Plan. Restricted Stock shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as shall be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, consistent with the provisions of the Plan, to the vesting of Restricted Stock as it deems appropriate. No more than one-half of the total shares available for Incentive Awards under the Plan shall be awarded in the form of Restricted Stock. Forfeited Restricted Stock shall again become available for awards of Restricted Stock.           6.2          Restricted Stock Agreements. Awards of Restricted Stock shall be evidenced by Restricted Stock agreements containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall from time to time determine. Unless a Restricted Stock agreement provides otherwise, Restricted Stock Awards shall be subject to the terms and conditions set forth in this Section 6. -7- --------------------------------------------------------------------------------           6.3          Termination of Employment or Officer Status.           (a)          General. In the event of termination of employment during the Restricted Period for any reason other than death, disability, Retirement, or termination for cause, then any shares of Restricted Stock still subject to restrictions at the date of such termination shall automatically be forfeited and returned to the Company; provided, however, that in the event of a voluntary or involuntary termination of the employment of a Participant by the Company, the Committee may, in its sole discretion, waive the automatic forfeiture of any or all such shares of Restricted Stock and/or may add such new restrictions to such shares of Restricted Stock as it deems appropriate. For purposes of the Plan, the following shall not be deemed a termination of employment: (i) a transfer of an employee from the Company to any Subsidiary; (ii) a leave of absence, duly authorized in writing by the Company, for military service or for any other purpose approved by the Company if the period of such leave does not exceed 90 days; (iii) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided that the employee's right to reemployment is guaranteed either by statute or contract; and (iv) a termination of employment with continued service as a director.           (b)          Death, Retirement, or Disability. Unless the Committee otherwise consents or unless the terms of the Restricted Stock agreement or grant provide otherwise, in the event a Participant terminates his or her employment with the Company because of death, disability, or Retirement during the Restricted Period, the restrictions applicable to the shares of Restricted Stock shall terminate automatically with respect to that number of shares (rounded to the nearest whole number) equal to the total number of shares of Restricted Stock granted to such Participant multiplied by the number of full months that have elapsed since the date of grant divided by the maximum number of full months of the Restricted Period. All remaining shares shall be forfeited and returned to the Company; provided, however, that the Committee may, in its sole discretion, waive the restrictions remaining on any or all such remaining shares of Restricted Stock either before or after the death, disability, or Retirement of the Participant.           (c)          Termination for Cause. If a Participant's employment is terminated for cause, the Participant shall have no further right to exercise or receive any Restricted Stock, and all Restricted Stock still subject to restrictions at the date of such termination shall automatically be forfeited and returned to the Company.           6.4          Restrictions on Transferability.           (a)          General. Unless the Committee otherwise consents or unless the terms of the Restricted Stock agreement or grant provide otherwise: (i) shares of Restricted Stock shall not be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or hypothecated during the Restricted Period except by will or the laws of descent and distribution; and (ii) all rights with respect to Restricted Stock granted to a Participant under the Plan shall be exercisable during the Participant's lifetime only by such Participant, his or her guardian, or legal representative. -8- --------------------------------------------------------------------------------           (b)          Other Restrictions. The Committee may impose other restrictions on any shares of Common Stock acquired pursuant to an award of Restricted Stock under the Plan as the Committee deems advisable, including, without limitation, restrictions under applicable federal or state securities laws.           6.5          Legending of Restricted Stock. Any certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: >           The shares represented by this certificate were issued subject to > certain restrictions under The Colonel's Holdings, Inc. 1995 LONG-TERM > INCENTIVE PLAN (the "Plan"). A copy of the Plan is on file in the office of > the Secretary of the Company. This certificate is held subject to the terms > and conditions contained in a restricted stock agreement that includes a > prohibition against the sale or transfer of the stock represented by this > certificate except in compliance with that agreement, and that provides for > forfeiture upon certain events.           6.6          Representations and Warranties. A Participant who is awarded Restricted Stock shall represent and warrant that the Participant is acquiring the Restricted Stock for the Participant's own account and investment and without any intention to resell or redistribute the Restricted Stock. The Participant shall agree not to resell or distribute such Restricted Stock after the Restricted Period except upon such conditions as the Company may reasonably specify to ensure compliance with federal and state securities laws.           6.7          Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation, and other rights with respect to Restricted Stock held of record by such Participant as if the Participant held unrestricted Common Stock; provided, however, that the unvested portion of any award of Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture imposed pursuant to subsections 6.1 and 6.4 of the Plan. Unless the Committee otherwise determines or unless the terms of the Restricted Stock agreement or grant provide otherwise, any noncash dividends or distributions paid with respect to shares of unvested Restricted Stock shall be subject to the same restrictions as the shares to which such dividends or distributions relate. SECTION 7 Stock Awards           7.1    Grant.          A Participant may be granted one or more Stock Awards under the Plan in lieu of, or as payment for, the rights of a Participant under any other compensation plan, policy, or program of the Company or its Subsidiaries. Stock Awards shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion.           7.2    Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation, and other rights with respect to shares of Common Stock issued to the Participant as a Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common Stock granted pursuant to such Stock Awards; provided, however, that the Committee may impose such restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it deems appropriate. -9- -------------------------------------------------------------------------------- SECTION 8 Stock Appreciation Rights           8.1    Grant. The Committee may grant Stock Appreciation Rights to individuals granted related options under the Plan.           8.2    Restrictions.  A Stock Appreciation Right may be granted simultaneously with or subsequent to the option to which the right is related, but each Stock Appreciation Right must relate to a particular option. In exchange for the surrender in whole or in part of the right to exercise the related option to purchase shares of Common Stock, the exercise of a Stock Appreciation Right shall entitle a Plan participant to an amount equal to the appreciation in value of the shares covered by the related option surrendered. Such appreciation in value shall be equal to the excess of the market value of such shares at the time of the exercise of the Stock Appreciation Right over the option price of such shares. Stock Appreciation Rights may be exercised only when the related option could be exercised and only when the market price of the stock subject to the option exceeds the exercise price of the option. Neither a Stock Appreciation Right nor any related stock option issued to officers and directors subject to Section 16 of the Securities and Exchange Act of 1934 shall be exercisable during the first six months of the terms of the respective right or option.           8.3    Payment.  Upon the exercise of a Stock Appreciation Right, payment by the Company may be made in cash, in shares of Common Stock, or partly in cash and partly in shares of Common Stock. The Committee shall have sole discretion to determine the form of payment made upon the exercise of a Stock Appreciation Right. If payment is made in shares of Common Stock, such shares shall be valued at their market value as of the date of surrender of the right to exercise the option. When an appreciation right is exercised pursuant to an option, the shares subject to the underlying option shall no longer be available for grant of Incentive Awards under the Plan. SECTION 9 Tax Benefit Rights           9.1    Grant. A Participant may be granted Tax Benefit Rights under the Plan to encourage a Participant to exercise Stock Options and provide certain tax benefits to the Company. A Tax Benefit Right entitles a Participant to receive from the Company or a Subsidiary a cash payment not to exceed the amount calculated by multiplying the ordinary income, if any, realized by the Participant for federal tax purposes as a result of the exercise of a nonqualified stock option, or the disqualifying disposition of shares acquired under an incentive stock option, by the maximum federal income tax rate (including any surtax or similar charge or assessment) for corporations, plus the applicable state and local tax imposed on the exercise of the Stock Option or the disqualifying disposition.           9.2    Restrictions. A Tax Benefit Right may be granted only with respect to a stock option issued and outstanding or to be issued under the Plan or any other plan of the Company or its Subsidiaries that has been approved by the shareholders as of the date of the Plan and may be granted concurrently with or after the grant of the stock option. Such rights with respect to outstanding stock options shall be issued only with the consent of the Participant if the effect would be to disqualify an incentive stock option, -10- -------------------------------------------------------------------------------- change the date of grant or the exercise price, or otherwise impair the Participant's existing stock options. A stock option to which a Tax Benefit Right has been attached shall not be exercisable by a director, officer or employee subject to Section 16 of the Act for a period of six months from the date of the grant of the Tax Benefit Right.           9.3    Terms and Conditions. The Committee shall determine the terms and conditions of any Tax Benefit Rights granted and the Participants to whom such rights will be granted with respect to stock options under the Plan or any other plan of the Company. The Committee may amend, cancel, limit the term of, or limit the amount payable under a Tax Benefit Right at any time prior to the exercise of the related stock option, unless otherwise provided under the terms of the Tax Benefit Right. The net amount of a Tax Benefit Right, subject to withholding, may be used to pay a portion of the stock option price, unless otherwise provided by the Committee. SECTION 10 Change in Control           10.1    Acceleration of Vesting. If a Change in Control of the Company shall occur, then, unless the Committee or the Board otherwise determines with respect to one or more Incentive Awards, without action by the Committee or the Board (a) all outstanding Stock Options shall become immediately exercisable in full and shall remain exercisable during the remaining term thereof, regardless of whether the Participants to whom such Stock Options have been granted remain in the employ or service of the Company or any Subsidiary; and (b) all other outstanding Incentive Awards shall become immediately fully vested and nonforfeitable.           10.2    Cash Payment for Stock Options.          If a Change in Control of the Company shall occur, then the Committee, in its sole discretion, and without the consent of any Participant affected thereby, may determine that some or all Participants holding outstanding Stock Options shall receive, with respect to some or all of the shares of Common Stock subject to such Stock Options, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the greater of the excess of (a) the highest sales price of the shares on the NASDAQ Market System (or other public exchange upon which the Company's stock is then traded) on the date immediately prior to the effective date of such Change in Control of the Company or (b) the highest price per share actually paid in connection with any Change in Control of the Company over the exercise price per share of such Stock Options.           10.3    Limitation on Change in Control Payments. Notwithstanding anything in subsection 10.1 or 10.2 to the contrary, if, with respect to a Participant, the acceleration of the vesting of an Incentive Award as provided in subsection 10.1 or the payment of cash in exchange for all or part of a Stock Option as provided in subsection 10.2 (which acceleration or payment could be deemed a "payment" within the meaning of Section 280G(b)(2) of the Code), together with any other payments that such Participant has the right to receive from the Company or any corporation that is a member of an "affiliated group" (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Code), then the payments to such Participant pursuant to subsection 10.1 or 10.2 shall be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code. -11- -------------------------------------------------------------------------------- SECTION 11 General Provisions           11.1    No Rights to Awards. No Participant or other person shall have any claim to be granted any Incentive Award under the Plan, and there is no obligation of uniformity of treatment of Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and conditions of Incentive Awards of the same type and the determination of the Committee to grant a waiver or modification of any Incentive Award and the terms and conditions thereof need not be the same with respect to each Participant.           11.2    Withholding. The Company or a Subsidiary shall be entitled to (a) withhold and deduct from future wages of a Participant (or from other amounts that may be due and owing to a Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state, and local withholding and employment-related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise, or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of Common Stock received upon exercise of an incentive stock option; or (b) require a Participant promptly to remit the amount of such withholding to the Company before taking any action with respect to an Incentive Award. Unless the Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be received upon exercise or by delivery to the Company of previously owned Common Stock. The Company may establish such rules and procedures concerning timing of any withholding election as it deems appropriate to comply with Rule 16b-3 under the Act.           11.3    Compliance With Laws; Listing and Registration of Shares. All Incentive Awards granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be subject to all applicable laws, rules, and regulations, and to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration, or qualification of the shares covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of such Incentive Award or the issue or purchase of shares thereunder, such Incentive Award may not be exercised in whole or in part, or the restrictions on such Incentive Award shall not lapse, unless and until such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.           11.4    Limit on Plan Awards.  No participant shall be eligible to receive Incentive Awards under the Plan which in the aggregate constitute more than 25% of the total Incentive Awards granted under the Plan.           11.5          No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, including the grant of stock options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.           11.6    No Right to Employment. The grant of an Incentive Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The Company or any Subsidiary may at any time dismiss a Participant from employment, free from any -12- -------------------------------------------------------------------------------- liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any written agreement with a Participant.           11.7    Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable federal law.           11.8          Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. SECTION 12 Termination and Amendment                     The Board may terminate the Plan at any time, or may from time to time amend the Plan as it deems proper and in the best interests of the Company, provided that without stockholder approval no such amendment may: (a) materially increase either the benefits to Participants under the Plan or the number of shares that may be issued under the Plan; (b) materially modify the eligibility requirements; (c) modify the formula grant provisions of subsection 5.5 with respect to nonemployee directors more than once in any six month period, or (d) impair any outstanding Incentive Award without the consent of the Participant, except according to the terms of the Plan or the Incentive Award. No termination, amendment, or modification of the Plan shall become effective with respect to any Incentive Award previously granted under the Plan without the prior written consent of the Participant holding such Incentive Award unless such amendment or modification operates solely to the benefit of the Participant. SECTION 13 Effective Date and Duration of the Plan                     This Plan shall take effect upon approval by the shareholders at the 1995 Annual Meeting of Shareholders or any adjournment thereof or at a Special Meeting of Shareholders. Unless earlier terminated by the Board of Directors, the Plan shall terminate on November 21, 2005. No Incentive Award shall be granted under the Plan after such date. -13-

EX-10.64 6 hrbm1064.htm 10.64 SYSTEMS AND MARKETING AGREEMENT SYSTEMS AND MARKETING AGREEMENT This Systems and Marketing Agreement ("Agreement") is entered into as of March 31, 2000 ("Effective Date") between H&R Block Mortgage Corporation, a Massachusetts corporation having an address at 3 Ada, Irvine, California 92618 ("HRBM") and E-LOAN, Inc., a Delaware corporation having an office at 5875 Arnold Road, Dublin, California 94568 ("E-LOAN") (collectively, the "Parties")   WHEREAS, HRBM is engaged in providing mortgage services that include processing, origination, and funding mortgage loans secured by residential properties located in the United States; and   WHEREAS, E-LOAN is engaged in marketing mortgage services via the Internet including attracting visitors to E-LOAN's website, providing visitors with a variety of mortgage options, and displaying a variety of competitive loan products available on the market;   WHEREAS, HRBM and E-LOAN wish to develop and continue a systems communication and marketing program("Program") to facilitate and market HRBM's loan products to visitors of E-LOAN's website;   NOW, THEREFORE, in consideration of their mutual promises, the Parties hereby agree as follows:   I. The Program   (a) E-LOAN shall market HRBM's various mortgage programs and products to Internet users. The Program shall include a comprehensive marketing plan designed, executed, and paid for by E-LOAN, to attract visitors to E-LOAN's website ("Customers") for the purpose of obtaining mortgage loans from HRBM and other mortgage companies. All Customers meeting HRBM Specified Criteria, as set forth in Exhibit A, will be noted and the on-line preliminary application will be transferred to HRBM for processing; provided, however, that all such preliminary applications relating to Customers sourced by or through any of E-LOAN's affinity relationships ("Affinity Customers") shall be processed by E-LOAN and shall not be transferred to HRBM under this Agreement. For purposes of this Agreement, "Affinity Customers" are Customers (1) who are employed by or in like manner associated with companies or other entities with which E-LOAN has a significant strategic relationship evidenced by a strategic alliance agreement (or similarly named agreement),, and (2) for whom E-LOAN elects to retain the right to process such loans in order to maintain or support a strategic alliance in accordance with a strategic alliance agreement (or similarly named agreement), including the fulfillment of promotion or special advantage programs offered to such Customers by virtue of such alliance. (b) Although E-LOAN shall market HRBM to its Customers as required by the Program: (i) E-LOAN shall not be required to, and shall not, endorse HRBM, in any communications under the Program that are targeted to Customers;(ii) E-LOAN shall not be required to recommend HRBM as a mortgage provider and (iii) E-LOAN shall not be required to, and shall not as part of the Program, provide advice, counseling or assistance to Customers (other than Affinity Customers) in connection with any particular HRBM mortgage product or program, for which they have applied. E-Loan shall not hold itself out as a partner, joint venturer, or similar business affiliate of HRBM. (c) E-LOAN agrees that in the event E-LOAN makes loans meeting the Specified Criteria set forth on Exhibit A to Affinity Customers, E-LOAN will make its best efforts to work with HRBM to transfer such loans to HRBM on a wholesale basis.   2. Compensation.     (a) HRBM shall pay E-Loan a marketing fee of $[*] per month (the "Monthly Marketing Fee") for the marketing activities provided under this Agreement in connection with the Program. Each Monthly Marketing Fee shall be paid on or before the twentieth (20th) day following the end of each month. To illustrate, the Monthly Marketing Fee due for April, 2000 marketing shall be due on or before May 20,2000. The Parties each acknowledge and agree that the Monthly Marketing Fee reflects the reasonable and fair market value of the goods and services to be provided by E-LOAN under the Program, without regard to the value or volume of mortgage loans that may be attributable to the Program.   3. Term and Termination. (a) The term of this Agreement shall be for a period of three (3) months commencing on its Effective Date unless earlier terminated in accordance with the provisions of this Section 3. (b) Notwithstanding anything to the contrary in this Agreement, either party may terminate this Agreement at any time, in the following situations ("Events of Default"): (1) Material breach or this Agreement by the other party which remains uncured after thirty (30) days' written notice thereof; (2) A party makes a general assignment for the benefit of creditors, or files a voluntary petition in bankruptcy or for reorganization or arrangement under the bankruptcy laws, or a petition in bankruptcy is filed against a party and is not dismissed within sixty (60) days after filing, or a receiver or trustee is appointed for all or any part of the property or assets of a party.   (c) Upon expiration or earlier termination of this Agreement, all of the parties' obligations hereunder shall terminate, except: (i) HRBM shall continue to process, in due course any mortgage loan applications submitted by any Customer and transferred to HRBM prior to the date of termination; (ii) HRBM's obligation to pay any then due Monthly Marketing Fee will be prorated as of such date; and (iii) the provisions of Sections 7, 8 and 14 of this Agreement shall survive.   4. Relationship. The relationship between HRBM and E-LOAN shall be that of independent contractors and neither party shall be or represent itself to be an agent, employee, partner or joint venturer of the other, nor shall either party have or represent itself to have any power or authority to act for, bind or commit the other. 5. Representations and Warranties. (a) HRBM's Authority/Legal Actions. HRBM is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full corporate power and authority to transact the business contemplated by this Agreement and it possesses all requisite authority, power, license. permits and franchises to conduct its business as presently conducted. Its execution, delivery and compliance with its obligations under the terms of this Agreement are not prohibited or restricted by any government agency. There is no claim, action, suit, proceeding or investigation pending or, to the best of HRBM's knowledge, threatened against it or against any of its principal officers, directors or key employees, which, either in any one instance or in the aggregate may result in an adverse change in the business, operations, financial condition, properties or assets of HRBM, or in any impairment of the right or ability of HRBM to carry on its business substantially as now conducted through its existing management group, or in any material liability on the part of HRBM, or which would draw into question the validity of this Agreement.   (b) E-LOAN's Authority/Legal Actions. E-LOAN is a corporation duly organized, validly existing and in good standing under the laws of the State or Delaware with full corporate power and authority to transact any and all business contemplated by this Agreement and it possesses all requisite authority. power, license, permits and franchises to conduct its business as presently conducted. Its execution, delivery and compliance with its obligations under the terms of this Agreement are not prohibited or restricted by any government agency. There is no claim, action, suit. proceeding or investigation pending or, to the best of E-LOAN's knowledge, threatened against it or against any of its principal officers, directors or key employees which, either in any one instance or in the aggregate, may result in an adverse change in the business, operations, original condition, properties or assets of E-LOAN, or in any impairment of the right or ability of E-LOAN to carry on its business substantially as now conducted through its existing management group, or in any material liability on the part of E-LOAN, or which would draw into question the validity of this Agreement. The information and content on the E-LOAN website (other than information supplied by HRBM)and the E-LOAN Marks (as defined below) licensed hereunder, do not and will not infringe on the patent, copyright, trademark, trade name or other proprietary right of any third party. (c) E-LOAN's Compliance. E-LOAN's website structure, format, information, and content, as built and as used by E-LOAN shall be in full compliance with all applicable federal and state laws and this Agreement. E-LOAN has obtained, or will have obtained in connection with the transactions contemplated by this Agreement, all necessary federal and state approvals in connection with operation and ownership or its website and the content thereof and will make the necessary changes to its website to reflect this Agreement and insure accurate representation. The Privacy notices and Privacy Policies of E-LOAN's website shall be consistent with the Federal Trade Commission's procedure or rules, and comply with acceptable trade practices.   6. Execution/Conflict with Existing Laws or Contracts. The parties have taken all necessary action to authorize their respective execution, delivery and performance of this Agreement The execution and delivery of this Agreement and the performance of the obligations of the respective parties hereunder will not (i) conflict with or violate the Certificate or Incorporation or By-laws of either party or any provision of any law or regulation or any decree, demand or order to which either pad is subject or (ii) conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under any or the terms, conditions or provisions of any agreement or instrument to which either party is a party or by which it is bound, or any order or decree applicable to either party, or result in the creation or imposition of any lien on any of their assets or property.     7. Confidential Information. Each party recognizes that during the term of this Agreement, its directors, officers, employees and authorized representatives such as attorneys and accountants, may obtain knowledge or trade secrets, customer lists, membership lists and other confidential information or the other party which is valuable, proprietary, special or unique to the continued business of that party, which information is initially delivered in written form including electronic form or is summarized and delivered in writing within thirty (30) days after initial delivery in non-written form, and which writing is marked "Confidential" or in a similar nature to indicate its nonpublic and proprietary nature ("Confidential information. However, Confidential Information does not include information that is or (i) becomes available to the general public other than through a breach by the recipient party, (ii) already known to the recipient party as or the time of communication to the recipient party, (iii) developed by the recipient party independently or and without reference to information communicated by the other party, or (iv) rightfully received by the recipient party from a third party which third party is not under a legal duty of confidentiality with respect to such information. Accordingly, each party as a recipient of the other's Confidential Information agrees to hold the Confidential Information of the communicating party and the terms and conditions of this Agreement in confidence and to use diligent efforts to ensure that the communicating party's Confidential Information the terms hereof are held in confidence by it officers, directors, employees, representatives and others over whom it exercises control Upon discovering any unauthorized disclosure of the communicating party's Confidential Information or the terms or this Agreement, the recipient will use diligent efforts to recover such information and to prevent its further disclosure to additional third parties. In addition, the recipient party will promptly notify the communicating party in writing of any such unauthorized disclosure of the communicating party's Confidential Information. The parties' obligations under this paragraph will survive for a period or three (3) years following the expiration or earlier termination of this Agreement.   8. Hold Harmless.   (a) HRBM agrees to indemnify, defend and hold E-LOAN harmless from and against any andall claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which E-LOAN, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any misrepresentation, negligent act or omission by HRBM, its affiliates, officers. agents, representatives or employees or out of any act by HRBM, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit or action, liability or loss, expense or damage that resulted from E-LOAN'S negligent act or omission or a breach by E-LOAN of any of its representations, warranties or obligations under this Agreement, or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of F-LOAN. As a condition of the foregoing indemnity obligation, E-LOAN agrees to give HRBM reasonably prompt notice of any third party claim.   (b) E-LOAN agrees to indemnify, defend and hold HRBM harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which HRBM, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any misrepresentation, negligent act or omission by E-LOAN, its affiliates, officers, agents, representatives or employees or out of any act by E-LOAN, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit or action, liability or loss, expense or damage that resulted from a negligent act or omission of HRBM or that is attributable to a breach by HRBM of any of its representations, warranties or obligations pursuant to this Agreement, or(b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of HRBM. As a condition of the foregoing indemnity obligation, HRBM agrees to give E-LOAN reasonably prompt notice of any third party claim.   9. Notices. All notices required or permitted by this Agreement shall be in writing and shall be given by certified mail, return receipt requested or by reputable overnight courier with package tracing capability and sent to the address at the read of this Agreement or such other address that a party specified in writing in accordance with this paragraph.   10. Disclaimer Concerning Tax Effects. Neither party to this Agreement makes any representation or warranty to the other regarding the effect that this Agreement and the consummation of the transactions contemplated hereby may have upon the foreign, federal, state or local tax liability of the other.   11 . Disclaimer of Warranties. Neither E-LOAN nor HRBM guarantees continuous or uninterrupted display or distribution of any links contemplated hereunder, or continuous or uninterrupted operation of their respective websites. In the event of interruption of display or distribution of E-LOAN's or HRBM's links or the parties' websites (or any portion there to the parties' sole obligation to each other shall be to restore service as soon as practical. In no event will either party be liable for consequential, punitive. special or indirect damages in connection with this Agreement or the obligations contemplated hereby even if they are advised of the possibility of such damages. Notwithstanding the foregoing, or any other provision in this Agreement, should operation be interrupted for eight or more hours throughout a day (an "Interrupted Day") for five consecutive calendar days or longer, the Monthly Marketing Fee shall be reduced by that amount equal to $2,500 per day for each Interrupted Day.   12. Capitalized Terms. Capitalized terms used herein shall have the meanings set forth herein.   13. Amendment. The terms and conditions of this Agreement may not be modified or amended other than by a writing signed by both parties.   14. Trademark License. Neither party may use the other parties trademarks, service marks, trade names, logos, or other commercial or product designation(collectively "Marks") for any purpose whatsoever without the prior written consent of the other party.   15. Assignment/Binding Nature. Neither party may assign, voluntarily, by operation of law, or otherwise, any rights, or delegate any duties under this Agreement to any party that is not an affiliate of itself as of the Effective Date, without the other party's prior written consent, except that either party may assign this Agreement or any of its rights or obligations arising hereunder to the surviving entity in a merger, acquisition, reorganization or consolidation in which it participates, or to a purchaser of substantially all of its assets; providing that the assigning party will give reasonable written notice to the non-assigning party in advance of such merger, acquisition or other assignment and that the surviving entity is not a competitor to the non-assigning party. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties. 16. Entire Agreement. This Agreement and any Exhibits attached hereto constitute the entire Agreement between the Parties and supersede all oral and written negotiations of the Parties with respect to the subject matter hereof.   17. Governing Law. This agreement shall be subject to and construed under the laws of the State of California, without reference to conflicts of law provisions thereof.   18. Severability. If any provision of this Agreement should be invalid, illegal or in conflict with any applicable state or federal law or regulation, such law or regulation shall control, to the extent or such conflict, without affecting the remaining provisions or this Agreement. This Agreement shall be deemed to be severable and, if any provision is determined to be void or unenforceable, then that provision will be deemed severed and the remainder or the Agreement will remain in effect. Without limiting the foregoing, if either party is advised by counsel or a regulatory body having jurisdiction over the party's activities that any provision of this Agreement violates any applicable federal or state law or regulation, then the parties agree cooperate to comply with such advice by modifying or terminating this Agreement (in whole or in part).     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written.     E-LOAN, Inc. , H&R Block Mortgage Corporation By: By:               Exhibit A   HRBM Specified Criteria   [*].  

Exhibit 10(k) Contract No. 117183   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 3 DATED May 4, 2000 TO AGREEMENT DATED March 16, 2000 (Agreement)   1. [ ] Exhibit A dated May 4, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated May 4, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [X] Exhibits A and B dated May 4, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated May 4, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [X] Revise Agreement MDQ: [X] Increase [ ] Decrease In Section 2. of Agreement substitute 85,000 MMBTU for 20,000 MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [ ] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [ ] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 3 becomes effective October 15, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Executive Vice President     EXHIBIT A DATED: May 4, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 85,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: May 4, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. PGLC/NGPL CALUMET #3 COOK COOK IL 3296 09 85,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CALUMET LINE #3 IN SEC. 6-T37N-           R15E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED May 4, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED May 4, 2000 EFFECTIVE DATE: October 15, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 27   0   F   0 28   27   F   85,000 33   36   F   85,000 35   28   B   85,000 36   35   F   85,000

EXHIBIT 10.3 SEPARATION AGREEMENT AND GENERAL RELEASE              The parties to this Separation Agreement and General Release (“Agreement”) are Larry D. Grandia (“Grandia” ) and DAOU Systems, Inc. (“DAOU” or the “Company”), (collectively, the “Settling Parties”). The Effective Date of this Agreement is the date of execution. RECITALS              This Agreement is made with reference to the following facts:         A.  Grandia intends to resign his position as Chief Executive Officer and President of the Company effective November 14, 2000 or as of the date a new Chief Executive Officer accepts employment with DAOU, whichever is sooner. The date of his resignation will be the “Separation Date” for purposes of this Agreement. For the period from October 31, 2000 through the Separation Date, Grandia agrees to devote significant attention and time as Chief Executive Officer of DAOU to the recruitment and selection of a new Chief Executive Officer of DAOU. As of the Separation Date, Grandia’s rights and obligations as an employee will cease, except as set forth in this Agreement.         B.  The Company and Grandia desire to resolve and dispose of, fully and completely, all claims, demands, and causes of action, known or unknown, which Grandia may have against the Company or its subsidiaries or affiliates, including, those rights, claims, demands and causes of action arising out of the employment relationship, the June 15, 1999 employment agreement between Grandia and DAOU ( the “Employment Agreement”) and the termination of the employment relationship between Grandia and DAOU. AGREEMENT         1.  Effect of Separation on Salary and Benefits.               1.1  On the Separation Date, DAOU shall provide Grandia with a final paycheck which includes accrued and unused vacation pay, less all applicable federal, state and local income, social security and other payroll taxes.               1.2  Within 14 days of the Separation Date, DAOU will provide Grandia with election forms for medical insurance continuation as provided by the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”). Any cost associated with the continuation of Grandia’s medical, life and car insurance through November 30, 2000 will be assumed by DAOU.               1.3  The Company will pay Grandia’s reasonable and customary business expenses, if any, through November 30, 2000.         2.  Additional Consideration to Grandia.               2.1  Forgiveness of Loan. As of the Separation Date, DAOU releases Grandia from his obligation under Section 3.5 of the Employment Agreement to repay principal and accrued interest on the loan of Two Hundred Thousand Dollar ($200,000.00) described in that Section 3.5.               2.2  Transfer in Ownership of Company Car and other DAOU property. On the Separation Date, DAOU agrees to transfer ownership to Grandia of the 1999 Infinity Q45 that Grandia utilized during his employment with DAOU. Grandia further is entitled to retain two DAOU personal computers that he utilized during his employment with DAOU.               2.3  Exceptions to Covenants. Pursuant to Section 7.2(b) of the Employment Agreement, Grandia is prohibited for a period of one (1) year from the Separation Date from soliciting business of the same or similar type being carried on by DAOU, from any person known by Grandia to be a customer of DAOU and with whom Grandia had personal contact during and by reason of his employment with DAOU. DAOU acknowledges that Grandia has accepted the position of Executive Vice President, Chief Technology Officer for Premier, Inc. By this Agreement, DAOU releases Grandia from his obligations under Section 7.2(b) of the Employment Agreement -------------------------------------------------------------------------------- for the limited purpose of satisfying his employment obligations to Premier, Inc. Other than this limited exception, Grandia understands and agrees that he continues to be bound by the obligations described in Section 7.2(b) through 7.2(d) of the Employment Agreement for the time periods defined in the Employment Agreement.               2.4  Continuation of Vesting. In connection with the Employment Agreement, Grandia received non-statutory options (the “ Non-Statutory Options”) and incentive stock options (the “Incentive Stock Options”) to purchase shares of DAOU Common Stock. A portion of the Non-Statutory Options were granted pursuant to DAOU’s 1996 Stock Option Plan (the “Plan ”) and a portion of the Non-Statutory Options were granted outside the Plan.                      After the Separation Date and during any period in which Grandia serves on DAOU’s Board of Directors (the “Board”) pursuant to Section 2.2 below, Grandia will continue vesting any Non-Statutory Options covered by the Plan according to the schedule set forth in any stock option agreement between DAOU and Grandia reflecting the grant of Non-Statutory Options under the Plan. Grandia’s time to exercise any vested Non-Statutory Options covered by this Section will run from the date he, for any reason, ceases to serve on the Board.                      From the Separation Date, Grandia will cease accruing any Non-Statutory Stock Options granted outside the Plan and any Incentive Stock Options. Treatment of the Non-Statutory Stock Options granted outside the Plan will be pursuant to any stock option agreement reflecting that grant. Treatment of any Incentive Stock Options will be pursuant to the Plan and any stock option agreement between Grandia and DAOU reflecting that grant.               2.5  No Other Obligations. Except as specified above, the Company shall have no payment or other obligation to Grandia.               2.6  Tax Consequences. The Company has made no representations to Grandia as to his tax liability with respect to any of the above Consideration. Grandia acknowledges that he has consulted with his own professional advisors with respect to all tax matters, and is not relying on any representation by the Company on any tax matter. Grandia will be solely responsible for any and all tax responsibility for the payment by the Company, and for any additional tax responsibility which may be assessed either against his or against the Company, including any penalties assessed by any agency against any party, which may arise as a result of his characterization of any payment.         3.  Consideration from Grandia.               3.1  General Release. In exchange for the consideration set forth above, and specifically in Sections 2.1-2.3 above, and for other good and valuable consideration, each of the Settling Parties, except as to such rights or claims as may be created by this Agreement, releases and forever discharges each of the Settling Parties, their present and former agents, employees, officers, directors, shareholders, principals, predecessors, alter egos, partners, parents, subsidiaries, affiliates, attorneys, insurers, successors and assigns, from any and all claims, demands, grievances, causes of action or suit of any kind arising out of, or in any way connected with, the dealings between the parties through the Separation Date, including the employment relationship and its termination. The Settling Parties also release and waive any and all legal or administrative claims arising under any express or implied contract, law, rule, regulation, or ordinance, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Family Rights’ Act, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or the Age Discrimination in Employment Act of 1967, as amended (“ADEA”). Grandia agrees that, except as described in this Agreement, as of the Separation Date and the execution of this Agreement, Grandia is not entitled to any benefits, consideration or sums from DAOU.               3.2  Transition Services. In exchange for the consideration set forth above, and specifically in Sections 2.1-2.3 above, and for no other additional compensation, after the Separation Date and through December 31, 2000 Grandia agrees to provide the Company with transition services as shall be reasonably requested by the Board (the “Transition Services”). DAOU agrees that Grandia will not be required to provide Transition Services in an amount greater than two hours per week.               3.3  Board of Directors. In exchange for the consideration to Grandia described in Section 2.4 above, Grandia agrees to serve as a member of the Board for a period of one (1) year from the Separation Date. 2 -------------------------------------------------------------------------------- Grandia’s vesting as described in Section 2.4 will terminate in the event his status as a member of the Board terminates for any reason. Grandia will receive compensation as a member of the Board in an amount equal to that received by other members of the Board.         4.  Indemnification. Nothing in this Agreement may be construed as a waiver by Grandia of any rights he may have for indemnification under any DAOU insurance policy or written indemnification agreement for acts by Grandia in his capacity as an officer or director of DAOU.         5.  Acknowledgments. Each of the Settling Parties acknowledges that with this document they have been advised in writing of their right to consult with an attorney prior to executing this Agreement and release. The Settling Parties expressly waive any rights and benefits they otherwise might have under California Civil Code Section 1542, which provides:         A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.         6.  Settlement. Nothing in this Agreement shall be construed as an admission by the Company of any liability of any kind to Grandia.         7.  Confidentiality and Other Agreements.               7.1  Grandia acknowledges and agrees that he has a continuing obligation to protect the Company’s Confidential Information according to the terms and conditions of the Company’s Confidentiality and Invention Agreement (“Confidentiality Agreement”) which he signed on June 15, 1999.               7.2  The Settling Parties agree to keep confidential the terms of this Agreement and agree to refrain from disclosing any information regarding this Agreement to any third party unless required to do so (a) by a regulatory body (e.g. filings with the Securities Exchange Commission (“SEC”); (b) in financial disclosures to auditors or in audited financial statements; (c) under oath, if properly ordered, in a court of competent jurisdiction; (d) to his wife; or (e) previously disclosed publicly by the Company to the extent so disclosed. Each of the Settling Parties agrees to notify the other Settling Parties in writing upon first notification that he or it may be required by law to disclose any information deemed confidential by this Agreement. Notice must be provided in sufficient time for the party receiving notice to oppose or otherwise respond to the request.               7.3  Grandia agrees that he will not interfere with or otherwise act adverse to the business affairs of the Company, including, without limitation, making disparaging remarks, either orally or in writing, to any person concerning the Company or the Company’s business.         8.  Representations and Warranties. The parties represent and warrant as follows:               8.1  Each party has read this Agreement, understands its contents, and understands its legal effect and binding nature. Each party further acknowledges that he or it is acting voluntarily and of his own free will in executing this Agreement.               8.2  Grandia is not relying upon any statement, representation or promise of the Company, or any of its officers, directors, agents, partners, employees, consultants, representatives or attorneys in executing this Agreement or in making this settlement except as expressly stated in this Agreement.               8.3  Grandia acknowledges that with this document he has been given a twenty-one (21) day period in which to consider entering into the release of the ADEA claims, if any. In addition, Grandia acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven days after executing this Agreement.         9.  Claims Arising out of this Agreement.               9.1  To the extent there is any controversy or dispute concerning the interpretation or enforcement of any provisions of this Agreement, including the arbitrability of such dispute, the Settling Parties shall submit such dispute to arbitration in San Diego, California by one or more experienced labor and employment law arbitrators licensed to practice law in California and selected in accordance with the Employment Arbitration 3 -------------------------------------------------------------------------------- Rules of the American Arbitration Association. The arbitrator(s) shall not have the power to modify any of the provisions of this Agreement. The arbitrator(s)’ decision shall be final and binding upon the parties and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The arbitrator will decide how the costs of arbitration should be shared.               9.2  In the event of any arbitration arising out of or relating to this Agreement, its breach or enforcement, including an action for declaratory relief, the prevailing party in such action or proceedings shall be entitled to receive his or its damages, court costs, and reasonable out-of-pocket expenses including reasonable attorneys’ fees. Such recovery shall include court costs, reasonable out-of-pocket expenses, and attorneys’ fees on appeal, if any. The arbitrator(s) or court shall determine who is the prevailing party, whether or not the dispute or controversy proceeds to final judgment. Both Grandia and the Company expressly acknowledge this paragraph is not intended to in any way alter the parties’ agreement that arbitration shall be the exclusive method of resolving any dispute related to this Agreement or Grandia’s employment with the Company.         10.  Miscellaneous.               10.1  This Agreement shall be deemed to have been executed and delivered within the State of California, and its rights and obligations shall be construed and enforced in accordance with and governed by, the laws of California.               10.2  Grandia and the Company understand and agree that this Agreement shall bind and benefit their heirs, employees, parent corporation, subsidiaries, affiliates, controlled corporations, sister corporations, agents, representatives, predecessors, successors and assigns. The Company’s successors shall include (without limitation) any person, corporation or other entity who or which enters into a Corporate Transaction with the Company (hereinafter “Company Successor”). For purposes of this Agreement, a “Corporate Transaction” is defined to mean a transaction in which any person, corporation or other entity acquires, directly or indirectly, all or substantially all of the stock, business or assets of the Company, whether by way of merger, consolidation, sale, transfer or otherwise.               10.3  This Agreement may be amended only by an agreement in writing designated as an amendment to this Agreement and signed by the parties.               10.4  This Agreement may be executed in counterparts, and when each party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with the other executed counterparts, shall constitute one Agreement, which shall be binding upon and effective as to all parties.      Dated: November 11, 2000      /s/ Larry D. Grandia      --------------------------------------------------------------------------------      Larry D. Grandia      Daou Systems, Inc. Dated: November 11, 2000   By:    /s/ Georges J. Daou      --------------------------------------------------------------------------------      Georges J. Daou Chairman of the Board of Directors 4

AMENDMENT TO THE TELLABS, INC. 1986 NON-QUALIFIED STOCK OPTION PLAN (As Amended and Restated Effective June 26, 1992)   WHEREAS, Tellabs, Inc. (the "Corporation") has heretofore established the Tellabs, Inc. 1986 Non-Qualified Stock Option Plan (the "Plan") for the benefit of participating officers and other key employees of the Corporation and its subsidiaries; WHEREAS, the Corporation deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of the Corporation; WHEREAS, the Compensation Committee of the Corporation has considered the recommendations and recommended that the Board of Directors of the Corporation approve this Amendment to the Plan; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Article 2 of the Plan, the following definition of "Change in Control" shall be added: (o) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Corporation or any subsidiary of the Corporation, or any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of the Corporation and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Corporation; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. II. Under Article 2 of the Plan, the following definition of "Disability" shall be added: (r) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Article 14 shall be amended in its entirety to read as follows: 14. Termination of Employment. Except as set forth in Article 14A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option Agreement, the following rules shall apply upon termination of the Grantee's employment with the Corporation and all subsidiaries: (a) Except as set forth in subsections (b), (c) and (d) below, in the event a Grantee ceases to be an employee of the Corporation and its subsidiaries for any reason, any Option or unexercised portion thereof granted under this Plan may be exercised, to the extent such Option would have exercisable by the Grantee hereunder on the date on which the Grantee ceased to be an employee, within three months of such date (seven months in the event such termination occurs after the occurrence of a Change in Control), but in no event later than the date of expiration of the term of the Option. (b) In the event of termination of employment due to the death the Grantee, each Option held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option held by the Grantee may, to the extent exercisable at the time of such termination, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Corporation or its subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or an affiliate of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points          75% of each unvested option shall vest At least 90 points                                  100% of each unvested option shall vest and all Options held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's retirement, whichever period is shorter. IV. The Plan shall hereby be amended by adding a new Article 14A to read: 14A. Change in Control. (a) Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. V. Article 15 of the Plan shall be amended in its entirety to read as follows: 15. Effect of Change in Stock Subject to Plan. Except as provided below, the Board shall make equitable adjustments in the number and class of shares of stock subject to the Plan, and to the Option rights granted hereunder and the exercise prices of such Option rights, in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, acquisition, separation or other change in the capital structure of the Corporation. IN WITNESS WHEREOF, the foregoing amendments to the Tellabs, Inc. 1986 Non-Qualified Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   TELLABS, INC.   By: /s Michael J. Birck Name: Michael J. Birck Its:President and Chief Executive Officer

Exhibit 10.1 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT   THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is dated and is effective as of September 29, 2000, among SED INTERNATIONAL HOLDINGS, INC. and SED INTERNATIONAL, INC., jointly and severally (collectively, the "Borrowers"), WACHOVIA BANK, N.A., as Agent (the "Agent") and the Banks party to the "Credit Agreement" defined below (collectively, the "Banks"); W I T N E S S E T H: WHEREAS, the Borrowers, the Agent and the Banks executed and delivered that certain $50,000,000 Second Amended and Restated Credit Agreement, dated as of August 31, 1999 (the "Credit Agreement"); WHEREAS, the Borrowers have requested and the Agent and the Banks have agreed to make certain amendments to the Credit Agreement, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Borrowers, the Agent and the Banks hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement from and after the date hereof refer to the Credit Agreement as amended hereby. 2. Waiver and Amendments. (a) The Borrowers have advised the Agent and the Banks that the Borrowers were in Default under Section 6.28(vi) of the Credit Agreement during the period from December 31, 1999 through and including the date of this Amendment, which Default constitutes an Event of Default under the Credit Agreement (the "Financial Covenant Event of Default"). The Borrower has requested that the Agent and the Banks waive such Financial Covenant Event of Default solely for the period from December 31, 1999 through and including the date of this Amendment (the "Waiver Period"). The Agent and each of the Banks hereby waive the Financial Covenant Event of Default solely for the Waiver Period. Such waiver of the Financial Covenant Event of Default granted by the Agent and the Banks under this letter shall not extend beyond the Waiver Period and shall thereafter be null and void, and of no force or effect. The waiver of the Financial Covenant Event of Default contained in this letter shall not extend to any other existing Default or Event of Default or other provision of the Credit Agreement or any of the other Loan Documents, whether now existing or hereafter arising. All other provisions of the Credit Agreement and the other Loan Documents remain in full force and effect.. (b) Clauses (j) and (k) of Section 6.18 of the Credit Agreement hereby are amended and restated in their entirety and a new clause (l) hereby is added thereto as follows: (j) any Lien permitted under any Lien Subordination Agreement or the FINOVA Intercreditor Agreement; (k) a Lien against a certificate of deposit owned by a Borrower securing Debt of SED Colombia permitted by this Agreement, such amounts in such deposit secured by such Lien not to exceed $700,000; and (l) any Lien on any specific fixed asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, providedthat (x) such Lien attaches to such asset concurrently with or within 18 months after the acquisition or completion of construction thereof, (y) such Lien may not secure any other indebtedness, and (z) the aggregate outstanding principal amount of all Debt secured by such Liens shall not at any time exceed $1,500,000. (c) Section 6.24 of the Credit Agreement hereby is amended and restated in its entirety as follows: SECTION 6.24. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth will as of June 30, 1999 be not less than $40,000,000, and at all times thereafter will not be less than (x) $40,000,000 plus (y) the sum of (i) 75% of the cumulative Reported Net Income of the Borrowers and the Consolidated Subsidiaries during any period after March 31, 1999 (taken as one accounting period), calculated quarterly at the end of each Fiscal Quarter (but excluding from such calculations of Reported Net Income for purposes of this clause (i), any Fiscal Quarter in which the Reported Net Income of the Borrowers and the Consolidated Subsidiaries is negative), and (ii) 100% of the cumulative Net Proceeds of Capital Stock received during any period after March 31, 1999, calculated quarterly at the end of each Fiscal Quarter. (d) Section 6.28 of the Credit Agreement hereby is amended and restated in its entirety as follows: SECTION 6.28. Additional Debt. Neither of the Borrowers or any of their Subsidiaries shall incur or permit to exist any Debt other than (i) Debt in the amounts listed on Schedule 6.28, (ii) Debt permitted to be secured by Liens permitted by Section 6.18, (iii) Debt of the types described in clause (vii) of the definition of Debt which is incurred in the ordinary course of business in connection with the sale or purchase of goods or to assure performance of any obligation to a utility or a governmental entity or a worker's compensation obligation; (iv) Debt permitted by the FINOVA Intercreditor Agreement; (v) so long as the same is not Guaranteed by either Borrower, Debt with a maturity date no later than 6 months after the date of issuance incurred by Foreign Subsidiaries not to exceed an aggregate amount outstanding at any time of $6,000,000; (vi) other Debt not to exceed an aggregate amount outstanding at any time equal to the lesser of (A) $500,000 or (B) $6,000,000 minus the outstanding Debt permitted under clause (v) of this Section 6.28; (vii) trade payables arising in the ordinary course of business; (viii) Investments permitted by Section 6.17 in Subsidiaries consisting of Debt excluded under the definition of "Restricted Investment"; and (ix) Debt consisting of a Guarantee by SEDH of SED's obligations to purchase certain equity interests in SED Magna such investment amount permitted under the definition of "Restricted Investment." 3. Exhibits and Schedules. Page 119 of the Credit Agreement constituting a part of the Compliance Certificate attached to Exhibit H of the Credit Agreement is amended and restated in its entirety as set forth on Exhibit A to this Amendment. 4. Effect of Waiver and Amendment. Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents remain in full force and effect, and constitute the legal, valid, binding and enforceable obligations of the Borrowers. The waiver and amendments contained herein will be deemed to have prospective application only, unless otherwise specifically stated herein. 5. Ratification. Each of the Borrowers hereby restates, ratifies and reaffirms each and every term, covenant and condition set forth in the Credit Agreement and the other Loan Documents effective as of the date hereof. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which counterparts, taken together, will constitute but one and the same instrument. 7. Section References. Section titles and references used in this Amendment have substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 8. No Default; Release. To induce the Agent and the Banks to enter into this Amendment and to continue to make advances pursuant to the Credit Agreement, each of the Borrowers hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, (i) there exists no Default or Event of Default, (ii) there exists no right of offset, defense, counterclaim, claim or objection in favor of the Borrowers arising out of or with respect to any of the Loans or other obligations of the Borrowers owed to the Banks under the Credit Agreement, and (iii) the Agent and each of the Banks has acted in good faith and has conducted its relationships with each of the Borrowers in a commercially reasonable manner in connection with the negotiations, execution and delivery of this Amendment and in all respects in connection with the Credit Agreement, each of the Borrowers hereby waiving and releasing any such claims to the contrary. A default or breach of representation or warranty by the Borrowers under this Amendment shall constitute an Event of Default under the Credit Agreement. 9. Further Assurances. Each of the Borrowers agrees to take such further actions as the Agent reasonably requests in connection herewith to evidence the amendments herein contained. 10. Governing Law. This Amendment is governed by, and construed and interpreted in accordance with, the laws of the State of Georgia. 11. Conditions Precedent. This Amendment becomes effective only upon the execution and delivery of this Amendment by each of the parties hereto. IN WITNESS WHEREOF, the Borrowers, the Agent and each of the Banks has caused this Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. SED INTERNATIONAL HOLDINGS, INC.   By: Larry G. Ayers, Vice President   SED INTERNATIONAL, INC.   By: \a\ Larry G. Ayers, Vice President   WACHOVIA BANK, N.A., as Agent and as the sole Bank   By: /s/ Kevin B. Harrison, Senior Vice President EXHIBIT A (Amended and Restated Page 119 of Credit Agreement constituting a part of the Compliance Certificate set forth on Exhibit H to the Credit Agreement) 6. Minimum Profitability (Section 6.23) Tested at the end of each Fiscal Quarter, the Borrower's EBITDA shall not be less than $500,000 for such Fiscal Quarter. (a) EBITDA - Schedule 5 $_____________ (b) Requirement $500,000 7. Minimum Consolidated Tangible Net Worth (Section 6.24) Consolidated Tangible Net Worth will as of June 30, 1999 be not less than $40,000,000, and at all times thereafter will not be less than (x) $40,000,000 plus (y) the sum of (i) 75% of the cumulative Reported Net Income of the Borrowers and the Consolidated Subsidiaries during any period after March 31, 1999 (taken as one accounting period), calculated quarterly at the end of each Fiscal Quarter (but excluding from such calculations of Reported Net Income for purposes of this clause (i), any Fiscal Quarter in which the Reported Net Income of the Borrowers and the Consolidated Subsidiaries is negative), and (ii) 100% of the cumulative Net Proceeds of Capital Stock received during any period after March 31, 1999, calculated quarterly at the end of each Fiscal Quarter. (a) $40,000,000 (b) 75% of positive Reported Net Income after March 31, 1999 $_______________ (c) 100% of cumulative Net Proceeds of Capital Stock received after March 31, 1999 $_______________ Actual Consolidated Tangible Net Worth - Schedule 4 $_______________ Required Consolidated Tangible Net Worth (sum of (a) plus (b) plus (c) $_______________

Amendment No. 1 To the A318/A319 Purchase Agreement Dated as of March 10, 2000 between AVSA, S.A.R.L. and FRONTIER AIRLINES, INC. This Amendment No. 1 (hereinafter referred to as the "Amendment") is entered into as of July _____, 2000, between AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France, having its registered office located at 2, Rond-Point Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the "Seller"), and Frontier Airlines, Inc., a corporation organized and existing under the laws of the State of Colorado, United States of America, having its principal corporate offices located at 12015 East 46th Avenue, Suite 200, Denver, CO 80239-3116, USA (hereinafter referred to as the "Buyer"). WITNESSETH WHEREAS, the Buyer and the Seller entered into an A320 Purchase Agreement, dated as of March 10, 2000, relating to the sale by the Seller and the purchase by the Buyer of certain Airbus Industrie A318-100 and A319-100 model aircraft (the "Aircraft") which, together with all Exhibits, Appendixes and Letter Agreements attached thereto is hereinafter called the "Agreement". WHEREAS, the Buyer and the Seller have agreed to make changes to the delivery schedule of the Aircraft. NOW, THEREFORE, IT IS AGREED AS FOLLOWS 1. DEFINITIONS ----------- Capitalized terms used herein and not otherwise defined herein will have the meanings assigned to them in the Agreement. The terms "herein", "hereof" and "hereunder" and words of similar import refer to this Amendment. 2. CLAUSE 9: DELIVERY SHEDULE --------------------------- 2.1 The Buyer and the Seller agree *. 2.2 In addition, the Buyer hereby exercises its option under *. 2.3 As a consequence of Paragraphs 2.1 and 2.2 above, the delivery schedule set forth in Clause 9.1.1 of the Agreement is hereby canceled and replaced by the following quoted provisions: QUOTE Firm Aircraft No. Aircraft Type Delivery ----------------- ------------- -------- 1 * 2 * 3 * 4 * 5 * 6 * 7 * 8 * 9 * 10 * 11 * 12 * Option Aircraft No. Aircraft Type Delivery ------------------ ------------- -------- 1 * 2 * 3 * 4 * 5 * 6 * 7 * 8 * 9 * UNQUOTE 3. PREDELIVERY PAYMENTS -------------------- The schedule of Predelivery Payments for the Aircraft. is hereby amended to reflect the changes detailed above in Paragraph 2. On signature of this Amendment, the Buyer will make all Predelivery Payments then due to the Seller. 4. CLAUSE 5.3: DEPOSIT -------------------- On signature of this Amendment, the Buyer will pay the Seller the sum of US$*, which represents the nonrefundable deposit for the Additional Option Aircraft. The deposit paid will be credited without interest against the first Predelivery Payment for such Aircraft. 5. EFFECT OF THE AMENDMENT ----------------------- The Agreement will be deemed amended to the extent herein provided, and, except as specifically amended hereby, will continue in full force and effect in accordance with its original terms. This Amendment supersedes any previous understandings, commitments, or representations whatsoever, whether oral or written, related to the subject matter of this Amendment. Both parties agree that this Amendment will constitute an integral, nonseverable part of the Agreement and be governed by its provisions, except that if the Agreement and this Amendment have specific provisions that are inconsistent, the specific provisions contained in this Amendment will govern. 6. CONFIDENTIALITY --------------- This Amendment is subject to the confidentiality provisions set forth in Clause 22.5 of the Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers or agents on the dates written below. AVSA, S.A.R.L. By: _________________ Its: _________________ Date: ________________ FRONTIER AIRLINES, INC. By: __________________ Its: __________________ Date: ________________

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(m) SEPARATION AND CONSULTING AGREEMENT     This Separation and Consulting Agreement (the "Agreement") is made and entered into on July 17, 2000 by and between Thomas J. McGoldrick ("McGoldrick"), a Minnesota resident, and Minntech Corporation ("Company"), a Minnesota corporation. BACKGROUND     A.  McGoldrick has been employed by the Company for fifteen years, and has served as a Director, Vice Chairman of the Board, and as President and Chief Executive Officer.     B.  By agreement of the parties, McGoldrick's separation from the Company will be effective July 7, 2000.     C.  The parties have agreed that McGoldrick will continue to render services to the Company as a consultant and will not enter into competition with the Company for certain time periods thereafter.     D.  McGoldrick will continue to serve as a Director of the Company until the expiration of his current term.     E.  The parties are concluding their employment relationship amicably, but mutually recognize that any employment relationship may give rise to potential claims or liabilities.     F.  The parties expressly deny that they may be liable to each other on any basis or that they have engaged in any improper or unlawful conduct or wrongdoing against each other, and McGoldrick and the Company desire to resolve all issues potentially in dispute between them.     G.  McGoldrick and the Company have agreed to a full settlement of all issues potentially in dispute between them.     H.  One of the purposes of this Agreement is to provide for the exchange of consideration between the parties, to provide for the exchange of releases of claims and potential claims between the parties, and to consolidate within one document the parties' continuing obligations to each other.     NOW, THEREFORE, in consideration of the mutual promises and provisions contained in this Agreement and the Releases referred to below, the parties agree as follows:     1.  Release of Claims by McGoldrick.  Concurrently with the execution of this Agreement, McGoldrick will execute a release, in the form attached to this Agreement as Exhibit A ("McGoldrick Release"), in favor of the Company, its insurers, affiliates, divisions, directors, officers, employees, agents, successors, and assigns. This Agreement shall not be interpreted or construed to limit the McGoldrick Release in any manner. The existence of any dispute respecting the interpretation of this Agreement or the alleged breach of this Agreement will not nullify or otherwise affect the validity or enforceability of the McGoldrick Release.     2.  Release of Claims by the Company.  Concurrently with the execution of this Agreement, the Company will also execute a release, in the form attached to this Agreement as Exhibit B ("Minntech Release"), in favor of McGoldrick and his heirs, successors, representatives, and assigns. This Agreement shall not be interpreted or construed to limit the Minntech Release in any manner. The existence of any dispute respecting the interpretation of this Agreement or the alleged breach of this Agreement will not nullify or otherwise affect the validity or enforceability of the Minntech Release.     3.  Consulting Relationship.  McGoldrick will become a consultant to the Company and shall perform such services for the Company as set forth in this paragraph 3.     a.  Term.  McGoldrick's consultancy with the Company shall begin on July 8, 2000 and end on July 7, 2001 (the "Consultancy Period"). --------------------------------------------------------------------------------     b.  Status.  As a consultant to the Company, McGoldrick shall be an independent contractor and not an employee of the Company.     c.  Reporting Relationship.  McGoldrick will interact with and report to the Company's Chairman and Chief Executive Officer (the "CEO").     d.  Duties.  McGoldrick shall perform work for the Company at the Company's request, subject to the limitations described in subparagraph 3.e., related to the Company's business. By way of example, McGoldrick shall consult with and advise the Company's senior managers and other Directors at their request at mutually agreed upon times concerning the general business of the Company. During the Consultancy Period the Company shall provide McGoldrick with files and other information that he reasonably requires to perform his duties as a consultant to the Company.     e.  Time.  At the Company's request, McGoldrick will devote up to an average of 4 hours per month to his duties as a Consultant.     f.  Location.  McGoldrick will perform his duties as a consultant at any location chosen by him (including his residence).     g.  Expenses.  The Company will reimburse McGoldrick for his actual operating expenses as a consultant, such as long-distance telephone and facsimile charges and copier expense. In addition, the Company will reimburse McGoldrick for his actual travel expenses, such as registration fees, air fare, hotel, meals, ground transportation, and incidentals, for his attendance at industry trade shows outside the Twin Cities metropolitan area, so long as McGoldrick's attendance at a given trade show is requested and approved in advance by the CEO. McGoldrick will be responsible for submitting to the CEO a report on a form provided by the Company showing all of his monthly operating expenses and travel expenses as a consultant to the Company with supporting documentation. The Company will make reimbursement payments to McGoldrick within 30 days following the Company's receipt of an expense report from him.     h.  Intellectual Property.        (i) All Inventions related to Minntech Products (defined in subparagraph 8(a)(iii) below) made by McGoldrick during the Consultancy Period are the exclusive property of the Company unless released to McGoldrick in writing by the CEO.     (ii) Except as otherwise provided in subparagraph h.(iii)B. below, the Company will not be required to designate McGoldrick as inventor of any invention or author or any related documentation distributed publicly or otherwise. McGoldrick waives and releases, to the extent permitted by law, all rights to the foregoing.     (iii) McGoldrick further agrees that he will:     A.  promptly and fully disclose all Inventions in writing to the CEO; such disclosure will include, if requested, a detailed report of the procedures employed and the results achieved by McGoldrick; and     B.  give the Company all assistance it requires to perfect, protect, and use its rights to Inventions, including, but not limited to, signing all documents, doing all things, and supplying all information that the Company may deem necessary or desirable to: (1) transfer or record the transfer of McGoldrick's entire right, title, and interest in Inventions to the Company, and (2) enable the Company to obtain and maintain patent, copyright, or trademark protection for Inventions anywhere in the world.     (iv) The obligations of this subparagraph 3.h. will continue beyond the end of the Consultancy Period with respect to Inventions conceived or made by McGoldrick during the 2 -------------------------------------------------------------------------------- Consultancy Period. For purposes of this Agreement, any Invention relating to existing or reasonably foreseeable Minntech Products or related to areas in which McGoldrick provides consulting services and for which McGoldrick files a patent application within one year after the end of the Consultancy Period will be presumed to be an Invention conceived by McGoldrick during the Consultancy Period, subject to proof to the contrary that such Invention was conceived and made following termination of the Consultancy Period.     (v) For purposes of this subparagraph 3.h., "Invention" means any invention, discovery, improvement, concept, idea, method of doing business whether or not patentable (including those which may be subject to copyright protection), including, but not limited to, computer software and hardware technology, machines, devices, processes, methods, techniques, and formulae which are generated, conceived, or reduced to practice by McGoldrick alone or in conjunction with others, during or after working hours, while serving as a consultant to the Company.     (vi) McGoldrick is hereby notified that this Agreement does not apply to any invention for which no equipment, supplies, facility, trade secret information, or Confidential Information (defined in subparagraph 8.(a)(iv) below) of the Company was used and which was developed entirely on McGoldrick's own time, and (1) which does not relate directly to the existing business of the Company or to the Company's actual or reasonably foreseeable research or development; or (2) which does not result from any work performed by McGoldrick for the Company.     i.  Termination.  McGoldrick's consultancy with the Company will end immediately upon (i) McGoldrick's death or disability; (ii) McGoldrick's receipt of written notice from the Company of the termination of McGoldrick's consultancy for Cause; or (iii) upon expiration of the term of the consultancy. The date on which the consultancy ends will be the "Consultancy Termination Date."     j.  Payments upon Termination.  (i) If McGoldrick's consultancy ends by reason of expiration of the term of the consultancyor if McGoldrick dies or becomes disabled prior to July 7, 2001, then the Company will pay McGoldrick's Consultant's Fee through the end of the Consultancy Period.     (ii) If McGoldrick's consultancy ends by reason of termination by the Company for Cause, then the Company shall pay McGoldrick's Consultant's Fee through the end of the month in which the Consultancy Termination Date occurs. Termination of McGoldrick's consultancy by the Company for Cause as used herein shall mean termination for:     A.  McGoldrick's failure or refusal to perform his duties as a consultant under this Agreement, provided that the Company first gives McGoldrick written notice of such failure or refusal and allows him 30 days thereafter to remedy or correct such failure or refusal; or     B.  material breach of the Agreement by McGoldrick provided that the Company first gives McGoldrick written notice of such breach and allows him 30 days thereafter to remedy or correct such breach. "Disability" as used herein shall mean the inability of McGoldrick to perform his duties as a consultant by reason of illness or other physical or mental impairment or condition, if such inability continues for an uninterrupted period of 90 hours or more. A period of inability will be "uninterrupted" unless and until McGoldrick is able to work as a consultant for a continuous period of at least 30 hours per month. 3 --------------------------------------------------------------------------------     (iii) If the Company terminates McGoldrick's consultancy for Cause under Section 2.i.(ii), any exercisable Stock Options shall be exercisable for a period of 90 days from the date of such notice of termination, unless the Company terminates this Agreement for material breach under Section 8.a.,8.c. or 13 in which case any exercisable Stock Options shall be exercisable until the end of the business day following the day that McGoldrick receives written notice of such termination by the Company, and this Agreement shall terminate. Notwithstanding the foregoing, Sections 1, 2, 3(h), 3(j), 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 20, 21, 22, 23, 24, 25, 29 and 30 and the time periods stated therein, if any, shall survive any such termination.     4.  Payments.  In consideration of McGoldrick's past services to the Company as a director, employee, and officer of the Company and his agreements to continue to render services to the Company as a consultant and not to enter into competition with the Company as provided in this Agreement, the Company will make the payments set forth in subparagraph 4.a. below to McGoldrick or for his benefit, but only if (i) McGoldrick has not rescinded this Agreement or the McGoldrick Release within the applicable rescission period; and (ii) the Company has received written confirmation from McGoldrick, in the form attached to this Agreement as Exhibit C, dated not earlier than the day after the expiration of the applicable rescission period, that McGoldrick has not rescinded and will not rescind this Agreement or the McGoldrick Release. Payment of any amount set forth below will not modify or terminate the parties' obligations to each other as established by this Agreement. The payments set forth below will be sent by first-class mail to McGoldrick's last known residence address, unless he advises the Company in writing that he wants the payments sent to a different address.     a.  Consultancy Fee.  The Company shall pay McGoldrick (or his designated beneficiary or estate, as the case may be) a total amount equal to $276,917, in 26 approximately equal bi-monthly installments less applicable payroll and legal withholding taxes during the period from July 8, 2000 through July 7, 2001; provided, however, that no installment will be paid to McGoldrick before the second business day following the expiration of the applicable rescission period (the "Payment Date"). Any installments otherwise due prior to the Payment Date will not be forfeited but will be paid to McGoldrick on the Payment Date. The Company shall also pay to McGoldrick on July 7, 2000 a lump sum payment $11,715.44 less applicable payroll and legal withholding taxes for earned vacation of 15 days.     b.  Loan Outstanding.  McGoldrick acknowledges that he owes the Company an amount equal to $63,787.87 in accordance with that certain Promissory Note dated April 14, 1997 between the Company and McGoldrick, attached hereto as Exhibit D. At such time as the Company owes McGoldrick, in accordance with the terms of this Agreement, an amount equal to $63,787.87 plus interest accruing thereon at the rate of 6.49% per annum from the Effective Date of this Agreement, then McGoldrick shall pay such amount to the Company in full upon written notice thereof. If the Company does not receive such amount from McGoldrick then the Company shall have the right of offset against all remaining amounts owing to McGoldrick under the terms of this Agreement and McGoldrick waives any rights he may have against the Company to such amount.     c.  Auto.  On the Effective Date, McGoldrick shall pay to the Company an amount equal to $22,215.20, which amount the parties agree is the fair market value of the 1997 Audi Cabriolet (VIN#WAUAA87G7VN003356) provided to McGoldrick by the Company. Upon payment of such amount, the Company shall assign the title to the car to McGoldrick. If McGoldrick does not pay such amount then on July 7, 2000 he shall turn the keys and the car into the Company's CEO.     d.  Beneficiary Designation.  Any designation of a beneficiary for purposes of subparagraphs 4.a. above must be made by McGoldrick in writing and must be furnished to the Company's Executive Vice President and General Counsel. If no effective beneficiary designation is on file with the Company at the time of McGoldrick's death, then any remaining Consultant's Fee will be paid to his estate. 4 --------------------------------------------------------------------------------     5.  Stock Options.  (a) McGoldrick is a participant in the Company's 1989 and 1998 Stock Option Plans (the "Stock Plans"). Under the terms of the Stock Plans and McGoldrick's agreements relating to options to purchase shares of the Company's common stock (the "Option Agreements"), as of July 7, 2000 McGoldrick is fully vested in options to purchase a total of 217,000 shares of the common stock of the Company, which are listed in Schedule 1 attached to this Agreement (the "Stock Options"). McGoldrick understands that if he does not exercise his incentive stock options to purchase 47,562 shares of common stock of the Company (the "47,562 Shares") on or before October 7, 2000, then the 47,562 Shares will become nonqualified stock options. McGoldrick also understands that options to purchase 30,000 shares of the common stock of the Company (the "30,000 Shares") must be exercised on or before April 2, 2001 as set forth in the attached Schedule 1; if he does not exercise the 30,000 Shares by that date, then the 30,000 Shares will lapse. All other remaining options (187,000 shares) shall be exercisable during the term of this Agreement until the end of the business day on July 7, 2001, thus extending the period to exercise such options under the Option Agreements in respect thereof by an additional nine-month period.     (b) If McGoldrick rescinds this Agreement and the McGoldrick Release prior to the termination of the applicable rescission period, then he must exercise the 217,000 shares on or before October 7, 2000. If McGoldrick does not rescind this Agreement and the McGoldrick Release, then the Board will take the required action to extend the time for McGoldrick to exercise any stock options held by him that were not previously exercised until the earlier of July 7, 2001 or three months after the Company has given McGoldrick notice in writing that he is in violation of the terms of this Agreement under Sections 8.a., 8.b., 8.c., 14, 15, or 16.     6.  Insurance Continuation.       a.  Health Insurance.  During the Consultancy Period the Company shall make group health insurance and supplemental life insurance available to McGoldrick on the same basis and on the same terms that such insurance is made available to senior executives of the Company. The Company will pay the same portion of the premium as the Company pays for its senior executives for such coverage, and any portion of the premium for such coverage payable by McGoldrick will be paid by him at least monthly on or before the last day of each month during which he is subject to such coverage. The Company will have no obligation to pay any portion of any premiums for either group health insurance coverage or for an individual health insurance policy provided by the Company after the month in which the Consultancy Period ends. McGoldrick acknowledges that his separation from the Company as of July 7, 2000 is a qualifying event under COBRA and that his right to elect under COBRA health insurance coverage provided by the Company will terminate no later than January 7, 2002 as provided by current law. If the Consultancy Period ends for any reason prior to January 7, 2002, then McGoldrick will have the right to elect under COBRA group health insurance coverage provided by the Company under such terms existing at the time of such election as are made available to similarly-situated former employees of the Company, provided that McGoldrick pays 102 percent of the cost of the health insurance option selected by McGoldrick and provided by the Company as provided by law until January 7, 2002, or until he obtains other qualifying group coverage or his COBRA rights terminate for some other reason, if earlier.     b.  Life Insurance.  McGoldrick will have the right to continue his group life insurance and supplemental life insurance coverage after July 7, 2000 under Minnesota law under such terms as are made available to similarly-situated former employees of the Company, provided that McGoldrick pays 102 percent of the cost of that insurance as provided by law, for 18 months, or until he obtains other qualifying group coverage or his statutory rights terminate for some other reason, if earlier. 5 --------------------------------------------------------------------------------     7.  Retirement Plans.  McGoldrick is a participant in the Minntech Profit Sharing and Retirement Plan and in the Supplemental Executive Retirement Plan (the "Retirement Plans"). McGoldrick will be entitled to begin drawing his retirement benefits at the times and under the terms and conditions set forth in the Retirement Plans.     8.  No-Competition, Non-Solicitation, and Non-Disclosure Agreements.       a.  Agreement Not to Compete.        (i) McGoldrick will not, on or before July 7, 2003, without the prior written consent of the Company, either directly or indirectly through third parties, on his own account or in the service of others, engage in the design, development, assembly, manufacture, marketing, or sale of a Competitive Product in any area or territory in which the Company engages or will have engaged in business during the Consultancy Period.     (ii) For purposes of this Agreement "Competitive Product" means any product, process, or service (including any component thereof or research to develop information useful in connection with a product or service) that is being designed, developed, assembled, manufactured, marketed, or sold by anyone other than the Company and which is of the same general type, performs similar functions, competes with, or is used for the same purposes as an existing or reasonably foreseeable Minntech Product.     (iii) For purposes of this Agreement "Minntech Product" means any existing product, process, or service or reasonably foreseeable product, process or service (including any component thereof or research to develop information useful in connection with a product or service) that, within three years prior to the termination or expiration of the Consultancy Period, was being designed, developed, assembled, manufactured, marketed, or sold by the Company, or with respect to which the Company had acquired Confidential Information which it intends to use in the design, development, manufacture, assembly, or sale of a product or service. Notwithstanding the foregoing, the definition of Minntech Product shall specifically exclude those products that the Company has divested of and ceased selling and/or has abandoned excluding oxygenators, cardioplegia heater coolers, and cardioplegia heat exchanges.     (iv) For purposes of this Agreement "Confidential Information" means information not generally known, including trade secrets, about the Company's methods, processes, and products, including, but not limited to, information relating to such matters as research and development, manufacturing methods, processes, techniques, chemical composition of materials, applications for particular technologies, materials or designs, vendor names, customer lists, management systems, and sales and marketing plans. All information disclosed to McGoldrick or to which McGoldrick has access during the Consultancy Period or had access during the time of his employment with the Company, which he has a reasonable basis to believe is Confidential Information or which is treated by the Company as Confidential Information, will be presumed to be Confidential Information. Confidential Information shall exclude information that (i) is in the public domain or otherwise becomes part of the public domain through no fault of McGoldrick; (ii) McGoldrick can verify was in his lawful possession prior to having received the Confidential Information from the Company; (iii) is received by McGoldrick from a third party without a breach of confidentiality owed by the third party to the Company; (iv) McGoldrick can verify was independently developed by him without having knowledge of the Company's Confidential Information; or (v) the disclosure of which may be necessary by reason of legal or regulatory requirements (provided that McGoldrick first gives reasonable notice to the Company to permit it to oppose such requirement). 6 --------------------------------------------------------------------------------     b.  Agreement Not to Solicit Employees.  McGoldrick will not, on or before July 7, 2003, without the prior written consent of the Company, solicit any person who is then employed by or otherwise engaged to perform services for the Company to terminate his or her relationship with the Company or interfere with the Company's relationship with any such person. McGoldrick will not, on or before July 7, 2003, without the prior written consent of the Company, provide substantive or qualitative information regarding any person who is then employed by or otherwise engaged to perform services for the Company to any person or entity engaged in the design, development, assembly, manufacture, marketing, or sale of a Competitive Product in any area or territory in which the Company engages or will have engaged in business during Consultancy Period.     c.  Agreement Not to Disclose Confidential Information.  (i) McGoldrick will not, without the prior written consent of the Company, directly or indirectly use or disclose Confidential Information for the benefit of anyone other than the Company, either during or after the Consultancy Period or during or after the time of his employment with the Company. McGoldrick will hold secret and confidential all Confidential Information of the Company concerning which McGoldrick has acquired knowledge or information during the Consultancy Period or during the time of his employment with the Company. McGoldrick will not disregard his obligations of confidence by using any trade secret or other confidential business and/or technical information of which he becomes informed during the Consultancy Period or was informed during his employment to guide him in a search of publications or other publicly available information, selecting a series of items of knowledge from unconnected sources, and fitting them together to claim that he did not violate any agreements set forth in this Agreement.     (ii) In addition to the foregoing, in no event shall Confidential Information be used by McGoldrick or any of McGoldrick's affiliates (as defined in Section 13) in connection with purchases or sales of, or trading in, any securities of the Company, including but not limited to direct or indirect purchases or sales, offers or agreements to purchase or sell, or rights or options to purchase or sell any such securities. McGoldrick acknowledges that he is aware of his responsibilities under United States federal and state securities laws with respect to trading in securities while in possession of material non-public information obtained from the issuer of such securities and with respect to providing such information to other persons who purchase or sell securities of such issuer.     d.  Scope of Restrictions.  The parties intend that, if any court of competent jurisdiction holds that any restriction in subparagraphs 8.a. through 8.c. above exceeds the limit of restrictions that are enforceable under applicable law, then the restriction will nevertheless apply to the maximum extent that is enforceable under applicable law.     9.  Company Cooperation.  The Company will ensure that all proper steps are followed to comply with McGoldrick's written instructions with respect to his stock options, retirement benefits, and health and life insurance benefits, and will provide him with information that he reasonably requires in accordance with the applicable employee benefit plans sponsored by the Company in which he is a participant.     10.  Indemnification.  Notwithstanding McGoldrick's separation from the Company, with respect to events that occurred during his tenure as an employee or officer of the Company, McGoldrick will be entitled, as a former employee or officer of the Company, to the same rights that are afforded to senior executive officers of the Company, now or in the future, to indemnification and advancement of expenses provided in the charter documents of the Company and under applicable law or otherwise, and to coverage and a legal defense under any applicable general liability and/or directors' and officers' liability insurance policies maintained by the Company. 7 --------------------------------------------------------------------------------     11.  McGoldrick Representation.  McGoldrick represents that, during the entire period that he was an employee or officer of the Company, he acted in good faith, had no reasonable cause to believe that his conduct was unlawful, and reasonably believed that his conduct was in the best interests of the Company. The parties intend that the terms used in this paragraph will have the same meaning as the same terms used in paragraph 302A.531 of the Minnesota Statutes.     12.  Company Representation.  The Company represents that on the date of this Agreement no transaction or other event has occurred that would constitute a "Change in Control" as that term is defined in the Management Agreement dated September 1, 1996 between McGoldrick and the Company. McGoldrick acknowledges that he will be relinquishing his rights under the Management Agreement upon execution of this Agreement and the McGoldrick Release of Claims.     13.  Standstill.  McGoldrick agrees that during the Standstill Period (as hereinafter defined), McGoldrick and his affiliates [as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")] will not (and he and they will not assist or encourage others to), directly or indirectly:     (a) Acquire or agree, offer, seek, request permission or propose to acquire, or cause to be acquired (by merger, tender offer, purchase, statutory share exchange or otherwise), ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any of the Company's assets (other than acquisitions of inventory in the ordinary course of business) or businesses or any voting stock that would result in beneficial ownership by you and your affiliates of voting stock of the Company in excess of 4% of the total voting power of the outstanding shares of stock of the Company in the aggregate, for which purpose any rights or options (including without limitation convertible securities) to acquire such ownership of voting stock shall constitute beneficial ownership of such voting stock, regardless of when they are exercisable (except, in each event, pursuant to any proposal expressly solicited by the Chief Executive Officer of the Company, and in such event such proposal shall not be pursued by you or your affiliates if you are hereafter advised by the Chief Executive Officer of the Company that the Company is no longer interested in pursuing such proposal, provided, however, that nothing contained herein shall preclude you from orally contacting the Chief Executive Officer of the Company to inform him that you are interested in pursuing such a proposal if invited to do so by the Chief Executive Office of the Company); or     (b) seek or propose to influence or control the management or policies of the Company or to obtain representation on the Company's Board of Directors, or solicit, or participate in the solicitation of, proxies or consents with respect to any securities of the Company in connection with the election of directors or any other matter or disclose to the public by press release or other communication its or their position concerning the election of directors or any other matter to be considered by the shareholders of the Company, or request permission to do any of the foregoing; or     (c) make any other public announcement with respect to any of the foregoing; or     (d) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing; or     (e) contact any employee, representative, agent, or Board member of the Company other than the Company's Chief Executive Officer to request that the Company, directly or indirectly, waive or amend any provision of this paragraph 13. As used herein, the Standstill Period means the period commencing as of the date hereof and terminating one year from the date hereof. McGoldrick covenants that as of the date hereof neither he nor any of his affiliates are engaged in any discussions regarding any acquisition proposal and that any prior discussions regarding any acquisition proposal have been terminated. 8 --------------------------------------------------------------------------------     14.  Mutual Non-Disparagement.  McGoldrick will not disparage, defame, or besmirch the reputation, character, image, products, or services of the Company, or the reputation or character of its directors, officers, employees, or agents. The Company will not disparage, defame, or besmirch the reputation, character, talents, skills, business reputation, or image of McGoldrick.     15.  Claims and Actions Involving the Company.  During the period commencing on the Effective Date and ending two years from the Effective Date, McGoldrick will not recommend or suggest to any potential claimants or plaintiffs or their attorneys or agents that they initiate claims or lawsuits against the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents, nor will McGoldrick voluntarily aid, assist, or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits now pending or commenced in the future against the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents; provided, however, that this paragraph will not be interpreted or construed to prevent McGoldrick from giving testimony in response to questions asked pursuant to a legally enforceable subpoena, deposition notice, or other legal process, during any legal proceedings involving the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents.     16.  Waiver of Notice.  Concurrently with the execution of this Agreement, McGoldrick shall execute a Waiver of Notice in substantially the form attached hereto as Exhibit E.     17.  Company Property.  The Company hereby sells to McGoldrick for $1.00 (i) the mobile telephone the Company has previously provided to him and agrees to allow McGoldrick the use of the mobile telephone for business purposes up to a maximum charge of $50 per month until the earlier of (x) the expiration of the Consultancy Period or (y) upon full-time employment by a third party; (ii) the personal computer, lap top computer, and fax machine the Company has previously provided to him. McGoldrick shall return to the Company all other equipment, records, correspondence, documents, financial data, plans, computer disks, and other tangible property in his possession and all copies thereof, if any, belonging to the Company, wheresoever located. McGoldrick acknowledges that all files related to the Company's business that may have been downloaded onto his personal computer during his employment with the Company and all copies thereof constitute confidential information of the Company and is the property of the Company for purposes of this paragraph 16 and shall be returned to the Company and otherwise immediately deleted from all computer systems under McGoldrick's control.     18.  Time to Consider Agreement.  Because this Agreement includes a release of any rights McGoldrick may have under the Age Discrimination in Employment Act, under federal law the parties acknowledge that McGoldrick is entitled to a period of at least 21 days from receipt of this Agreement to decide whether to sign this Agreement and the McGoldrick Release, which 21 day period will commence on the date on which McGoldrick receives copies of this Agreement and the McGoldrick Release for review. McGoldrick represents that if he signs this Agreement and the McGoldrick Release before the expiration of the 21 day period, it is because he has decided that he does not need any additional time to decide whether to sign this Agreement and the McGoldrick Release.     19.  Right to Rescind or Revoke.  McGoldrick understands that he has the right to rescind or revoke this Agreement and the McGoldrick Release for any reason within 15 calendar days after he signs them (which 15-day period expressly includes any other shorter time periods provided by law). McGoldrick understands that this Agreement and the McGoldrick Release will not become effective or enforceable unless and until he has not rescinded this Agreement and the McGoldrick Release and any applicable rescission period has expired. McGoldrick understands that if he wishes to rescind, the rescission must be in writing and hand delivered or mailed to the Company. If hand-delivered, the rescission must be (a) addressed to Ms. Barbara A. Wrigley, Executive Vice President and General Counsel, Minntech Corporation, 14605 28th Avenue North, Minneapolis, Minnesota 55447; and (b) delivered to Ms. Wrigley within the 15-day period. If mailed, the rescission must be: (a) postmarked 9 -------------------------------------------------------------------------------- within the 15-day period; (b) addressed to Ms. Barbara A. Wrigley, Executive Vice President and General Counsel, Minntech Corporation, 14605 28th Avenue North, Minneapolis, Minnesota 55447; and (c) sent by certified mail, return receipt requested.     20.  Full Compensation.  McGoldrick understands that the payments made and other consideration provided by the Company under this Agreement will fully compensate McGoldrick for and extinguish any and all of the claims McGoldrick is releasing in the McGoldrick Release, including, but not limited to, his claims for attorneys' fees and costs and any and all claims for any type of legal or equitable relief.     21.  No Admission of Wrongdoing.  McGoldrick understands that this Agreement does not constitute an admission that the Company has violated any local ordinance, state or federal statute, or principle of common law, or that the Company has engaged in any improper or unlawful conduct or wrongdoing against McGoldrick. McGoldrick will not characterize this Agreement or the payment of any money or other consideration made in accordance with this Agreement as an admission that the Company has engaged in any improper or unlawful conduct or wrongdoing against him.     22.  Authority.  McGoldrick represents and warrants that he has the authority to enter into this Agreement and the McGoldrick Release, and that no causes of action, claims, or demands released pursuant to this Agreement and the McGoldrick Release have been assigned to any person or entity not a party to this Agreement and the McGoldrick Release.     23.  Representation.  McGoldrick acknowledges that he has had a full opportunity to consider this Agreement and the McGoldrick Release, that he has had a full opportunity to ask any questions that he may have concerning this Agreement, the McGoldrick Release, or the settlement of his potential claims against the Company, and that he has not relied upon any statements or representations made by the Company or its attorneys, written or oral, other than the statements and representations that are explicitly set forth in this Agreement, the McGoldrick Release, the Minntech Release, the Stock Plans and McGoldrick's agreements relating thereto, the Retirement Plans, and any other employee benefit plans sponsored by the Company in which McGoldrick is a participant.     24.  Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the parties and their respective heirs, representatives, successors, and assigns, including, but not limited to, a purchaser of substantially all the business or assets of the Company, but will not be assignable by either party without the prior written consent of the other party.     25.  Invalidity.  In the event that any provision of this Agreement, the McGoldrick Release, or the Minntech Release is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such a determination will not affect the validity, legality, or enforceability of the remaining provisions of this Agreement, the McGoldrick Release, or the Minntech Release, and the remaining provisions of this Agreement, the McGoldrick Release, and the Minntech Release will continue to be valid and enforceable, and any court of competent jurisdiction may modify the objectionable provision so as to make it valid and enforceable.     26.  Entire Agreement.  Before signing this Agreement, the McGoldrick Release, and the Minntech Release, the parties and their representatives engaged in discussions and negotiations and generated certain documents, in which the parties and their representative considered the matters that are the subject of this Agreement, the McGoldrick Release, and the Minntech Release. In such discussions, negotiations, and documents, the parties and their representatives may have expressed their opinions and beliefs concerning the intentions, capabilities, and practices of the parties, and may have forecast future events. The parties recognize, however, that all business transactions, including the transactions upon which the parties' respective opinions, beliefs, and forecasts are based, contain an element of risk, and that it is normal business practice to limit the legal obligations of contracting parties only to those promises and representations that are essential to the transaction so as to provide certainty as to their 10 -------------------------------------------------------------------------------- respective future rights and remedies. Accordingly, this Agreement, the McGoldrick Release, the Minntech Release, the Stock Plans and McGoldrick's agreements relating thereto (as modified by this Agreement), the Retirement Plans, and any other employee benefit plans sponsored by the Company in which McGoldrick is a participant are intended to define the full extent of the legally enforceable undertakings of the parties, and no promises or representations, written or oral, that are not set forth explicitly in this Agreement, the McGoldrick Release, the Minntech Release, the Stock Plans and McGoldrick's agreements relating thereto (as modified by this Agreement), the Retirement Plans, or any other employee benefit plans sponsored by the Company in which McGoldrick is a participant are intended by either party to be legally binding, and all other agreements and understandings between the parties are hereby superseded.     27.  Headings.  The descriptive headings of the paragraphs and subparagraphs of this Agreement are inserted for convenience only, and do not constitute a part of this Agreement.     28.  Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.     29.  Governing Law.  This Agreement, the McGoldrick Release, and the Minntech Release will be interpreted and construed in accordance with, and any dispute or controversy arising from any breach or asserted breach of this Agreement, the McGoldrick Release, or the Minntech Release will be governed by, the laws of Minnesota.     30.  Outplacement Services.  The Company shall pay directly to Lee Hecht Harrison an amount equal to $15,000 for outplacement services for McGoldrick.     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.     MINNTECH CORPORATION           -------------------------------------------------------------------------------- Barbara A. Wrigley Executive Vice President           MCGOLDRICK           -------------------------------------------------------------------------------- Thomas J. McGoldrick 11 -------------------------------------------------------------------------------- QUICKLINKS SEPARATION AND CONSULTING AGREEMENT

Exhibit 10.1 (logo) First Midwest First Midwest Bancorp, Inc. 300 Park Boulevard, Suite 405 PO Box 459 Itasca, Illinois 60143-0459 (630)875-7450   August 28, 2000 First_Name Middle_Name Last_Name Address_Line_1 Address_Line_2 Address_Line_3 City, State Zip_Code RE: Grant of Director Options - Letter Agreement (Option_Date) Dear First_Name: I am pleased to confirm to you the grant on Option_Date (the "Date of Grant") of a nonqualified stock option (the "Director Option") under the First Midwest Bancorp, Inc. Non-Employee Directors' 1997 Stock Option Plan (the "Directors' Plan"). The Director Option provides you with the opportunity to purchase for Option_Price per share up to Shares_Granted shares of the Company's Common Stock. The Director Option is subject to the terms and conditions of the Directors' Plan, including any Amendments thereto, which are incorporated herein by reference, and to the following: (1) Vesting and Exercisability: Subject to paragraph (11) below, in general, the Director Option will become fully vested and exercisable on Vest_Date_Period_1. In the event of your death or disability, or of a Change-in-Control as defined in the Company's 1989 Omnibus Stock and Incentive Plan, as Amended (the "Omnibus Plan"), the Director Option will become fully vested and exercisable. (2) Expiration: If you cease to be a director for any reason other than death or disability prior to the date the Director Option becomes fully vested, the Director Option will expire on the date your directorship ends. If the Director Option has become fully vested at the time you cease to be a director, the Director Option will expire on the third anniversary of the date you ceased to be a director. In no event, however, may the Director Option be exercised beyond Expiration_Date_Period_1. (3) Procedure for Exercise: Once vested, you may exercise the Director Option at any time by delivering written notice of exercise and payment of the Exercise Price in full either (a) in cash or its equivalent (as described in the Directors' Plan), or (b) by tendering previously-acquired shares of Common Stock having an aggregate fair market value equal to the total Exercise Price that have been owned by you for six (6) months or more, or (c) by a combination of the (a) and (b). You may deliver an affirmation of ownership of Common Stock having the required fair market value in lieu of physically tendering such shares. In the event you have made an election under the Company's Nonqualified Stock Option Gain Deferral Plan, you may only make payment with shares of Common Stock in accordance with clause (b) above. Further information regarding exercise procedures will be provided to you. (4) Limited Transferability; Beneficiary Designation: The Director Option is personal to you and may not be sold, transferred, pledged, assigned or otherwise alienated, other than as provided herein. The Director Option shall be exercisable during your lifetime only by you. Notwithstanding the foregoing, you may transfer the Director Option to:   (a) Your spouse, children or grandchildren ("Immediate Family Members");   (b) A trust or trusts for the exclusive benefit of such Immediate Family Members, or;   (c) A partnership in which such Immediate Family Members are the only partners, provided that:     (i) There may be no consideration for any transfer,     (ii) Subsequent transfers or the transfered Director Option shall be prohibited, except to designated beneficiaries; and     (iii) Such transfer is evidenced by documents acceptable to the Company and filed with the Corporate Secretary.   Following transfer, the Director Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of designating a beneficiary with respect thereto, the transferee shall be entitled to designate the beneficiary. The provisions of this Letter Agreement relating to the period of exerciseability and expiration of the Director Option shall continue to be applied with respect to you and your status as a director, and the Director Option shall be exercisable by the transferee only to the extent, and for the periods, set forth in Paragraphs (1) and (2) above. Transfer of Common Stock purchased by your transferee upon exercise of the Director Option may also be subject to the restrictions and limitations described in Paragraph (5) below.   Kindly designate a beneficiary or beneficiaries with respect to the Director Option by completing and returning the attached Beneficiary Designation Form. (5) Securities Law Restrictions: You understand and acknowledge that applicable securities laws govern and may restrict your right to offer, sell or otherwise dispose of any Common Stock purchased upon exercise of the Director Option. In addition, because of your status as a director of the Company, prior to exercise of the Director Option or sale of any shares acquired upon exercise, you should consult with the Company's Corporate Secretary with respect to the implications of Section 16(a) and (b) of the Securities Exchange Act of 1934 on such exercise or sale. Additional information regarding these rules will be provided to you, on request, from the Company's Corporate Secretary. (6) Reload Provisions: As described more fully in Appendix B, "General information Regarding Reload Stock Options" of the "Summary Description" of the Directors' Plan, the Board of Directors of First Midwest Bancorp, Inc. has approved the grant of reload stock options upon certain exercises of the Director Options. Accordingly, a reload stock option will be granted upon any exercise of the Director Option by you while you are a director and upon which you tender previously-owned Common Stock (Common Stock which has been held for at least six (6) months) in payment of the exercise price. A Reload Option Letter Agreement will be issued to you to evidence the grant of a reload stock option. (7) Continuing Participant Agreement: For purposes of this Director Option, your directorship will not be deemed to have terminated, and instead will be deemed to be continuing, during any period during which you are a party to a Continuing Participant Agreement with the Company; provided such Continuing Participant Agreement was approved by the Board of Directors of the Company. (8) Tax Consequences: Director Options are in the form of nonqualified stock options which are not intended to fall under the provisions of Internal Revenue Code Section 422. No federal or state income taxes or FICA/Medicare taxes will be withheld by the Company upon exercise. Information regarding the tax consequences of the Director Option will be provided to you. (9) Miscellaneous: Nothing in this Letter Agreement confers any right on you to continue as a director of the Company. This Letter Agreement will be binding upon, and insure to the benefit of, your and the Company's successors and assigns. (10) Conformity with Directors' Plan: The Director Option is intended to conform to the Directors' Plan in all respects. Inconsistencies between this Letter Agreement and the Directors' Plan shall be resolved in accordance with the terms of the Directors' Plan. By executing and returning the enclosed Confirmation of Acceptance of this Letter Agreement you agree to be bound by the terms hereof and of the Directors' Plan. Except as otherwise expressly provided herein, all definitions stated in the Directors' Plan shall be applicable to this Letter Agreement. (11) Effect of Certain Accounting Rules: In the event the Board of Directors determines it is to be in the best interests of the Company to account for a business combination under the pooling-of-interests method and, in the written opinion of the accounting firm then serving as the Company's independent auditors, the grant of this Director Option or any of the terms of this Director Option, makes such business combination ineligible for pooling-of-interests accounting, that but for the grant of this Director Option or such terms and/or the grant of other Director Options with similar provisions, would otherwise be eligible for such accounting treatment, then this Director Option or such terms may be rescinded or the terms modified to the extent the Board of Directors determines to be necessary to enable the business combination to so qualify for pooling-of-interests accounting treatment. To confirm your understanding and acceptance of the Director Option granted to you by this Letter Agreement, kindly execute and return to the Company's Corporate Secretary in the enclosed envelope the following documents: (a) the "Confirmation of Acceptance" endorsement, and (b) the Beneficiary Designation Form. If you have any questions, please do not hesitate to contact the Corporate Secretary.   Very truly yours, First Midwest Bancorp, Inc. Robert P. O'Meara Chairman and Chief Executive Officer First Midwest Bancorp, Inc.       CONFIRMATION OF ACCEPTANCE I acknowledge receipt of a copy of the Directors' Plan, that I have reviewed this Letter Agreement and the Directors' Plan, and I agree to be bound by all provisions of this Letter Agreement and the Directors' Plan.   RE: Grant of Director Options - Letter Agreement (Option_Date) _______________________________________________ Director's Name (Print)       _______________________________________________ Director's Signitue First_Name Middle_Name Last_Name     _______________________ Date       Non-Employee Directors' 1997 Stock Option Plan BENEFICIARY DESIGNATION FORM This Beneficiary Designation Form applies to Director Option and Reload Option Letter Agreement(s) as follows (fill in the Option Grant Date from the applicable Letter Agreement): ____________________________   ____________________________   ______________________________ ____________________________   ____________________________   ______________________________ ____________________________   ____________________________   ______________________________   All prior Beneficiary Designation Forms applicable to Director Options or Reload Options not listed above will remain in effect as previously submitted. You may designate a primary beneficiary and a secondary beneficiary to whom rights under your Director or Reload Options will pass in the event of your death. You may name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your primary beneficiaries will have equal rights with respect to your Director or Reload Options unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies):         Primary Beneficiary(ies) (give name, address and relationship to you): _________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________         Secondary Beneficiary(ies) (give name, address and relationship to you): _______________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________   I certify that my designation of beneficiary(ies) set forth above is my free act and deed and acknowledge that when effective it will revoke any prior designation I may have made with regard to Director or Reload Option(s) set forth above. ____________________________________ (Signature) First_Name Middle_Name Last_Name ____________________________________ (Date) This Beneficiary Designation Form shall be effective on the day it is received by the Corporate Secretary of the Company. This Form shall be (i) delivered to the Corporate Secretary by personal delivery, facsimile, United States mail or by express courier service, and (ii) deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the Corporate Secretary if by United States mail or express courier service; provided, however, that if this Form is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. RECEIVED AND ACKNOWLEDGED: FIRST MIDWEST BANCORP, INC. BY:__________________________________        (On behalf of the Corporate Secretary) Date:______________________

Exhibit 10.2 Amendment No. 1 to the CIGNA LONG-TERM INCENTIVE PLAN Section 7.2 of Article 7 of the Plan is amended in its entirety, to read as follows: 7.2  Restricted Period. Except as provided below, Restricted Stock shall not be sold, transferred, assigned, pledged or otherwise disposed of by the Participant during the Restricted Period established by the Committee. Restricted Stock may be used to pay the exercise price of Options under Section 5.2. The Committee may establish different Restricted Periods and different restriction terms for shares contained in a single Restricted Stock grant. No more than 5% of the Restricted Stock granted under the Plan shall have a Restricted Period less than three years.

PERSONAL SERVICES AGREEMENT THIS PERSONAL SERVICES AGREEMENT ("Agreement"), made as of this 19th day of October, 2000, is by and between QUENTRA NETWORKS, INC., a Delaware corporation (the "Company"), and JERRY CONRAD (the "Employee"). RECITALS WHEREAS, the Employee is willing to be employed by the Company upon the terms and conditions set forth in this Agreement; and WHEREAS, the provisions of this Agreement are a condition of Employee's being employed by the Company, of Employee's having access to certain of the Company's confidential business and technological information, and Employee's being eligible to receive certain salary, bonuses, perquisites and supplementary benefits at the Company. This Agreement is entered into, and is reasonably necessary to protect confidential information and customer relationships to which the Employee may have access, and to protect the goodwill and other business interests of the Company. NOW, THEREFORE, in order to set forth the terms and conditions of the Employee's employment with the Company and in consideration of the covenants and agreements of the parties herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT SERVICES (a) Subject to the terms and conditions hereinafter set forth, the Company hereby employees the Employee as President of the Company's newly formed e-commerce division commencing on October __, 2000 and ending on the last day of the Term (as defined below). The Employee accepts such employment and agrees to perform all duties in a conscientious, reasonable and competent manner and to devote his reasonable best efforts to perform his duties pursuant to this Agreement and to further the business of the Company, as directed by the Board of Directors. Without further action of the Company, the Employee may engage in other business, consulting, financial and other activities during his employment hereunder subject to fulfilling his duties hereunder and provided that any such activities are insubstantial and do not include any active involvement in the management of any entity, other than Primary Knowledge, Inc., Predictive Data, Inc., HomeAccess MicroWeb, Inc. and HA Technology, Inc. ("HA"), and provided further that except for HA, no such activities involve entities that constitute a Competitive Business (as defined in Section 7). The Employee has disclosed in Schedule 1 attached hereto the names of his other business affiliations as of the date hereof and agrees to promptly notify the Company of any additional affiliations. (b) Employee agrees to comply with the terms and conditions of the standard Company Employee Proprietary Information and Inventions Agreement, which is annexed to this Agreement and referred to as ("Exhibit A") to this Agreement. -1- 2. TERM AND TERMINATION 2.1 TERM Subject to Section 2.2 hereof, the employment of the Employee under this Agreement will commence on October 19, 2000 (the "Effective Date") and continue until the occurrence of the first of the following: (a) October 19, 2005 (i.e., a term of five years); (b) The Employee's death; or (c) The Employee's illness, physical or mental disability or other incapacity resulting in the Employee's inability to effectively perform his duties under this Agreement for an aggregate of thirty (30) days during any period of six (6) consecutive months. The period beginning on the Effective Date and ending on the Termination Date is referred to herein as the "Term." 2.2 TERMINATION The Employee may be terminated prior to the expiration of the Term with or without "Cause" at the sole discretion of the Board of Directors. "Cause" shall include any of the following occurrences: (a) The Employee's conduct involving fraud or moral turpitude or dishonesty involving the Company's business; (b) The Employee's chronic absence from work other than by reason of illness, injury, vacation or business related travel, which continues after the Employee has received a written notice from the Company to halt such chronic absence; (c) Employee is indicted for, or convicted of, or pleads guilty or nolo contendere with respect to, theft, fraud, a crime involving moral turpitude, or a felony under federal or state law; (d) The Employee's conviction of any misdemeanor which is substantially related to the Employee's services hereunder; (e) The Employee's abuse of alcohol (whether or not on the job) after receiving a written notice from the Company to halt such usage or the Employee's conviction of a crime involving alcohol; (f) The Employee's use of illegal drugs or other illegal substance (whether or not on the job) after receiving a written notice from the Company to halt such usage or the Employee's conviction of a crime involving illegal drugs or other illegal substance, which -2- impairs the Employee's ability to perform his duties under this Agreement or has an adverse effect (other than an insignificant effect) on the Company, its business or its relationship with any customer or supplier of the Company; (g) Conduct either within or outside the scope of the Employee's employment which has an adverse effect (other than an insignificant effect) on the Company, its business or its relationship with any customer or supplier of the Company; (h) A breach by the Employee of his obligations under Sections 8, 9 or 10 hereof; and (i) A material breach of any other provision of this Agreement by the Employee, following written notice and failure to cure within a reasonable time (which cure period shall be no less than five days after Employee's receipt of such notice). The Employee may resign and terminate this Agreement on five days prior written notice to the Company for no reason or any reason ("Voluntary Termination"). In addition, the Employee may terminate this Agreement if the Company has materially breached any provision of this Agreement or the Agreement and Plan of Merger and the Company has not cured such breach within a reasonable time (but no less than five days) after receipt of written notice of such breach ("Termination for Good Cause"). 2.3 EFFECT OF TERMINATION (a) If the Employee is terminated for "Cause" as defined above, or the Employee effects a Voluntary Termination, then this Agreement shall terminate and the Employee shall not be entitled to any unearned compensation or benefits under this Agreement as of the date of termination. If the Employee is terminated without "Cause" as defined above, or the Employee effects a Termination for Good Cause, then this Agreement shall terminate and the Employee shall nevertheless be entitled to six months of semi-monthly salary installments as set forth in Section 3.1 and the remaining First Year Bonus, up to a maximum of six months, as set forth in Section 3.2, provided that upon Employee's separation from employment, Company is authorized to deduct from Employee's wages or other monies due Employee any debts, other than debts forgiven in accordance with Section 6.2, or amounts owed to Company by Employee. (b) The Employee hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, files, disks and other media with Company information, blueprints, and other documents, or materials, or copies thereof, and equipment furnished to or prepared by Employee in the course of or incident to Employee's employment, belong to the Company and shall be promptly returned to the Company upon termination of Employee's employment. (c) For two (2) months after termination of Employee's employment, Employee agrees to fully cooperate with the Company in all matters relating to the winding up of pending work on behalf of -3- the Company and the orderly transfer of work to other employees of the Company following any termination of Employee's employment. For two (2) years after termination of Employee's employment, Employee shall also cooperate in the resolution of any dispute, including litigation of any action, involving the Company that relates in any way to Employee's activities while employed by the Company. Such activities and all such activities shall be scheduled for mutually convenient times. (d) The Employee's obligations in Sections 7, 8, 9, 10, 11 and 13.5 hereof shall survive the termination of employment hereunder for any reason. 3. COMPENSATION 3.1 SALARY The Company agrees to pay the Employee for each full fiscal year of the term of this Agreement an annual salary, at a rate equal to $160,000 per year in accordance with the Company's normal payroll schedule, less all applicable tax withholdings for state and federal income taxes, FICA and other deductions as required by law and/or authorized by Employee. 3.2 BONUS Employee shall receive a cash bonus in an amount equal to $500,000, which amount shall be prorated over the first twelve months in accordance with the Company's normal payroll schedule (the "First Year Bonus"). In addition, Employee shall receive an additional bonus in an amount equal to $1,500,000, at such time as the Company has received a license fee or similar payment of at least $7,500,000 from Albertson's, Inc. (the "Albertson Bonus"). The Albertson Bonus shall be payable within fifteen business days after the month end in which the Company receives such payment from Albertsons, Inc. All bonus payments shall be less all applicable tax withholdings for state and federal income taxes, FICA and other deductions as required by law and/or authorized by Employee. 4. REIMBURSEMENT FOR EXPENSES The Company agrees to reimburse the Employee for all reasonable business expenses incurred by him in connection with the performance of his obligations under this Agreement, subject to established reimbursement policies of the Company in effect from time-to-time regarding expense reimbursement, including, without limitation, reasonable travel, entertainment, cell phone, long distance charges and other customary expenses the Employee incurs in the performance of his duties hereunder. 5. BENEFITS The Employee shall be entitled to the following benefits during the term of his employment under this Agreement, and shall be offered any additional benefits typically offered or provided any other executive officers of the Company. -4- 5.1 VACATION The Employee shall be allowed three (3) weeks of vacation per year during the term of this Agreement, with full pay and without loss of any other compensation of benefits, in accordance with established Company policies. The Employee shall coordinate the schedule of his vacations with other executives and the personnel of the Company at its affiliates so as to provide sufficient managerial and executive coverage for the Company's operations. 5.2 OTHER BENEFITS The Employee may receive such other benefits, if any, as the Board of Directors may from time-to-time make available to the Employee in the Board of Directors' sole discretion; provided, however, the Employee shall be eligible for any benefits offered to any other member of the Company's senior executive team on terms no less favorable that those offered to other members of the senior executive team. 5.3 PAYMENTS All cash payments due to the Employee hereunder shall be paid promptly (no later than two business days after the due date) in immediately available funds to the account specified by the Employee or by check made payable to the order of the Employee. 6. LOAN TO EXECUTIVE; FORGIVENESS 6.1 LOAN Concurrent with the Closing (as defined in the Agreement and Plan of Merger), Employee shall borrow from the Company, and Company shall loan to Employee the sum of $2,000,000 (Two Million Dollars) (the "Loan"). The Loan shall be made under the terms and conditions set forth in a promissory note of Employee (the "Promissory Note") and Pledge and Security Agreement of Marine Aircraft, a Nevada corporation, (the "Pledge") in the forms attached hereto as Exhibits B and C, respectively. Execution and delivery of the Promissory Note and the Pledge, and the closing of the transactions contemplated by the Agreement and Plan of Merger, shall be conditions to the Company's obligations to make the Loan to Employee. 6.2 FORGIVENESS As of each of the second, third and fourth anniversaries of the date of the Promissory Note, the Company shall forgive the installment of principal and interest then due under the Promissory Note as and to the extent provided in the Promissory Note. In the event (a) Employee is terminated by the Company without "Cause," (b) Employee terminates his employment hereunder for "Termination for Good Cause," (c) Employee dies prior to the fourth anniversary of the date of the Promissory Note, or (d) the Closing Price is equal to or less than $2 (two dollars) for twenty consecutive trading days, all of the outstanding principal and interest due on the Promissory Note shall be forgiven as set forth in the Promissory Note. -5- 7. DEFINITIONS As used in this Agreement, the following words have the meanings specified: (a) "Affiliate" shall mean the Company and any parent of the Company and any subsidiaries, direct or indirect, and sister corporations. (b) "Agreement and Plan of Merger" shall mean that certain Amended and Restated Agreement and Plan of Merger dated October 5, 2000 among the Company, HomeAccess MicroWeb, Inc., a California corporation, DQE Enterprises, Inc., a Pennsylvania corporation, Barbara Conrad and Employee. (c) "Board" shall mean the board of director of the Company. (d) As used in Sections 8, 9, 10 and 11 only, the term "the Company" shall include the Company and Affiliates. (e) "Competitive Business" means a business that is involved in or relates to any business in which the Company or an Affiliate is currently, or had been during the twelve (12) months prior to Employee's involvement with the subject business, actively engaging in or contemplating engaging in (as evidenced by inclusion in a written business plan or proposal disclosed to Employee). (f) "Confidential Information" means Proprietary Ideas and also information related to the Company's business, whether or not in written or printed form, not generally known in the trade or industry of which the Employee has or will become informed during the period of employment by the Company, which may include but is not limited to product specifications, manufacturing procedures, methods, equipment, compositions, technology, formulas, trade secrets, know-how, research and development programs, sales methods, customer lists, mailing lists, customer usage and requirements, software and other confidential technical or business information and data; provided, however, that Confidential Information shall not include any information which is in the public domain by means other than disclosure by the Employee or which the Employee must disclose by operation of law or legal or administrative process. (g) "Innovations" shall mean all developments, improvements, designs, original works of authorship, formulas, processes, software programs, databases, and trade secrets, whether or not patentable, copyrightable or protectable as trade secrets, that Employee by himself or jointly with others, creates, modifies, develops, or implements during the period of Employee's employment which relate in any way to the Company's business. The term Innovations shall not include Innovations developed entirely on the Company's own time without using the Company's equipment, supplies, facilities or Confidential Information, and which neither relate to the Company's business, nor result from any work performed by or for the Company. (h) "Invention" means inventions, designs, discoveries, improvements and ideas, whether or not patentable, including without limitation, upon the generality of the foregoing, novel or improved -6- products, processes, machines, software, promotional and advertising materials, business data processing programs and systems, and other manufacturing and sales techniques, which either (a) relate to (i) the business of the Company as conducted from time-to-time or (ii) the Company's actual or demonstrably anticipated research or development, or (b) result from any work performed by the Employee for the Company. (i) "Moral Rights" shall mean any rights to claim authorship, to object to or prevent the modification of any such work of authorship, or to withdraw from circulation or control the publication or distribution of any such work of authorship. (j) "Proprietary Ideas" means ideas, suggestions, inventions and work relating in any way to the business and activities of the Company which may be subjects of protection under applicable laws, including common law, respective patents, copyrights, trade secrets, trademarks, service marks or other intellectual property rights. (k) "Termination Date" means the date that Employee's employment with the Company shall cease for any reason as set forth in Section 2 of this Agreement or such other date as determined by the Board. 8. DISCLOSURE AND ASSIGNMENT OF INVENTIONS The Employee agrees to disclose to the Company, and hereby assigns to the Company all of the Employee's rights in and, if requested to do so, provide a written description of, any Inventions conceived or reduced to practice at any time during the Employee's employment by the Company, either solely or jointly with others and whether or not developed on the Employee's own time or with the Company's resources. The Employee agrees that Inventions first reduced to practice within one (1) year after termination of the Employee's employment shall be treated as if conceived during such employment unless the Employee can establish specific events giving rise to the conception which occurred after such employment. Further, the Employee disclaims and will not assert any rights in Inventions as having been made, conceived or acquired prior to employment by the Company except such as are specifically listed at the conclusion of this Agreement. The Employee shall cooperate with the Company and shall execute and deliver such documents and do such other acts and things as the Company may request, at the Company's expense, to obtain and maintain letters patent or registrations covering any Inventions and to vest in the Company all rights therein free of all encumbrances and adverse claims. 9. CONFIDENTIAL INFORMATION (a) The Employee shall not disclose to the Company or induce the Company to use any secret or confidential information belonging to persons not affiliated with the Company, including any former employer of the Employee. In addition to all duties of loyalty imposed on the Employee by law, the Employee shall maintain Confidential Information in strict confidence and secrecy and shall not at any time, during or at any time after termination of employment with the Company, directly or indirectly, use, disclose, copy or duplicate or otherwise permit the use, disclosure or unauthorized copying or duplication of any Confidential Information of the Company, other than in connection with authorized activities conducted in the course of Employee's employment at the -7- Company for the benefit of the Company or with the written consent of the Board. Employee agrees to take all reasonable steps and precautions to prevent any unauthorized disclosure, use, copying or duplication of Confidential Information. The Employee shall carefully preserve any documents, records, tangible data relating to Inventions or Confidential Information coming into the Employee's possession and shall deliver the same and any copies thereof to the Company upon request and, in any event, upon termination of the Employee's employment by the Company. (b) Employee agrees to promptly disclose, in writing, all Innovations to the Company. Employee further agrees to provide all assistance requested by the Company, at its expense, in the preservation of its interests in any Innovations, and hereby assigns and agrees to assign to the Company all rights, title and interest in and to all worldwide patents, patent applications, copyrights, trade secrets and other intellectual property rights or "Moral Rights" in any Innovation. 10. NON-SOLICITATION (a) The Employee agrees that he will not, during the one-year period following termination of his employment with the Company, be connected in any way with the solicitation of any then current or potential (defined as persons or companies with pending quotes to or from the Company) customers or suppliers of the Company if such solicitation is likely to result in a loss of business for the Company. (b) The Employee agrees that he will not, during the one year period following termination of his employment with the Company, solicit for employment, employ or engage as a consultant any person who had been an employee of the Company at any time in the two year period prior to the Employee's termination of employment with the Company. (c) Participate in the inducement of or otherwise encourage Company employees, customers, or vendors to breach, modify, or terminate any agreement or relationship that they have with the Company. (d) Participate voluntarily with or provide assistance or information to any person or entity that is involved in negotiations with the Company involving a contract or services to be rendered by the Company; or a potential or existing business or legal dispute with the Company, including, but not limited to, litigation, except as may be required by law. (e) In the event the covenants set forth in this Section 9 are found to be unenforceable or invalid by reason of being overly broad, the parties hereto intend that such covenants shall be limited to such scope, geographic area and duration as shall make such covenants valid and enforceable. 11. ENFORCEMENT OF SECTION 8, 9 AND 10 Recognizing that compliance with the provisions of Sections 8, 9 and 10 of this Agreement is necessary to protect the goodwill and other proprietary interests of the Company, and that breach of the Employee's agreements thereunder will result in irreparable and continuing damages to the Company for which there will be no adequate remedy at law, the Employee hereby agrees that in the event of any breach of such agreements, the -8- Company shall be entitled to seek injunctive relief and such other and further relief, including damages, as may be proper. 12. LAWS, REGULATIONS AND CONTRACTS The Employee agrees to comply, and to do all things necessary for the Company to comply, with all federal, state, local and foreign laws and regulations which may be applicable to the business and operations of the Company, and with any contractual obligations, including, without limitation, confidentiality obligations, which may be applicable to the Company or Employee under any contracts between the Company and its customers, suppliers or third parties. 13. MISCELLANEOUS 13.1 AMENDMENT AND MODIFICATION The Company (by action of the Board) and the Employee may amend, modify and supplement this Agreement only in such manner as may be agreed upon by the Company and the Employee in writing. 13.2 ENTIRE AGREEMENT This Agreement embodies the entire agreement between the parties hereto with respect to the employment relationship created hereby and supersedes and replaces any prior agreements pertaining to employment between the Employee and the Company. There have been and are no agreements, representations or warranties between the parties other than those set forth or provided for herein relating to such employment relationship. 13.3 ASSIGNMENT This Agreement shall not be assigned by the Employee without the written consent of the Company. Any attempted assignment without such written consent shall be null and void and without legal effect; provided, however, nothing herein shall prevent the Employee from assigning his rights to payment hereunder to any third company in full compliance with all state and federal laws. This Agreement may be assigned by the Company to a successor corporation or a good-faith purchaser of the Company's stock or assets only in connection with a sale of all or substantially all of the Company's assets or as a result of a merger or other business combination involving the Company and any such assignment shall not terminate or modify this Agreement, except that the employing party to which the Employee shall have been transferred shall, for the purposes of this Agreement, be construed as standing in the same place and stead as the Company as of the date of the assignment. 13.4 BINDING Subject to Section 13.3 hereof, this Agreement shall be binding upon and insure to the benefit of the respective parties hereto and their successors, assigns, heirs, executors, administrators and personal representatives. The parties hereto shall be entitled, at their option, to the remedy of -9- specific performance to enforce any of the provisions of this Agreement. 13.5 ARBITRATION (a) The Company and the Employee mutually agree that any controversy or claim arising out of or relating to this Agreement or the breach thereof, or any other dispute between the parties relating in any way to Employee's employment with the Company or the termination of that relationship, including disputes arising under the common law and/or any federal or state statutes, laws or regulations, shall be submitted to mediation before a mutually agreeable mediator, which cost is to be borne equally by the parties. In the event mediation is unsuccessful in resolving the claim or controversy, such claim or controversy shall be resolved exclusively by binding arbitration. The claims covered by this Agreement ("Arbitrable Claims") include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract (limited to this Agreement) or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, religion, national origin, age, marital status, medical condition, or disability); claims for benefits (except where an Employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure different from this one), and claims for violation of any federal, state, or other law, statute, regulation, or ordinance, except claims excluded in the following paragraph. The parties hereby waive any rights they may have to trial by jury in regard to Arbitrable Claims. (b) Claims Employee or the Company may have regarding Workers' Compensation or unemployment compensation benefits and the noncompetition provisions of this Agreement are not covered by the arbitration and mediation provisions of this Agreement. Claims Employee or the Company may have for violation of the proprietary information provisions of this Agreement are not covered by the arbitration and mediation provisions of this Agreement. (c) Arbitration under this Agreement shall be the exclusive remedy for all Arbitrable Claims. The Company and Employee agree that arbitration shall be held in or near Los Angeles, California, and shall be in accordance with the then-current Employment Dispute Resolution Rules of the American Arbitration Association, before an arbitrator licensed to practice law in California. The arbitrator shall have authority to award or grant both legal, equitable, and declaratory relief. Such arbitration shall be final and binding on the parties. The Federal Arbitration Act shall govern the interpretation and enforcement of this Section pertaining to Alternative Dispute Resolution. 13.6 AGREEMENT SEVERABLE; WAIVER This is a severable Agreement and in the event that any part of this Agreement shall be held to be unenforceable, all other parts of this Agreement shall remain valid and fully enforceable as if the unenforceable part or parts had not been included herein. No waiver of any provision of this Agreement shall be binding unless executed in writing by the party to be bound hereby. No waiver of a breach of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of a breach -10- of any other provision of this Agreement, whether or not similar, nor shall such waiver constitute a continuing waiver of such breach unless otherwise expressly provided. No failure or delay in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 13.7 USE OF LIKENESS For so long as Employee is employed by the Company or an Affiliate, Employee authorizes the Company or such affiliate to use, reuse and to reasonably grant others the right to use and reuse without additional compensation, Employee's name, photograph, likeness (including caricature), voice and biographical information and any reproduction or simulation thereof in any media now known or hereafter developed, for valid business purposes of the Company or such Affiliate. 13.8 PROPERTY OF OTHERS Employee will not bring to the Company or use in the performance of his duties any documents or materials of a former employer that are not generally available to the public or that have not been legally transferred to the Company. 13.9 NOTICES For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to EMPLOYEE, to: JERRY CONRAD 9500 Toledo Way Irvine, California 92618-1806 Telephone: (949) 588-5120 Facsimile: (949) 588-5182 If to COMPANY, to: Quentra Networks, Inc. Attn: Timothy G. Atkinson, General Counsel 1640 S. Sepulveda Blvd., Suite 222 Los Angeles, CA 90025 Telephone: Facsimile: or to such other address as either party may have furnished to the other in writing in accordance herewith except that notices of a change of address shall be effective only upon receipt. -11- 13.10 AFFILIATED PARTIES The Employee hereby represents to the Company that he has ownership interests in the companies or entities listed on Schedule 1 attached hereto which may from time to time enter into transactions or other business relationships with the Company. The Employee hereby agrees he will update Schedule 1 immediately if there are changes. No contract, transaction or other business relationship involving the Company and any such company or entity affiliated with Employee as of the date of such proposed contract, transaction or business relationship may be authorized solely by the Employee. 13.11 GOVERNING LAW This Agreement shall be governed and construed under the laws of the State of California. 13.12 INDEMNIFICATION; INSURANCE The Company represents and warrants to the Employee that it has and will maintain adequate directors and officers' liability insurance coverage and that it will indemnify the Employee to the full extent permitted by the General Corporation Law of the State of Delaware, as provided in the Certificate of Incorporation of the Company. 13.13 CORPORATE AUTHORITY; ENFORCEABILITY The Company represents and warrants to the Employee that it is a corporation duly organized and validly existing under the laws of the State of Delaware and that the execution and delivery of this Agreement, and the performance by the Company of its obligations hereunder, have been duly authorized by proper corporate action on the part of the Company. This Agreement is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 13.14 REFORMATION If any provisions of this Agreement should be found by any court of competent jurisdiction to be unreasonable by reason of its being too broad as to the period of time, territory, aspects of business or customers covered or otherwise, then, and in that event, such provision shall nevertheless remain valid and fully effective, but shall be considered to be amended so that any term of the provision found unreasonable shall be limited to the maximum period of time, the largest territory, the most aspects of business and customers covered and/or the broadest other limitations, as the case may be, which would be found reasonable and enforceable by such court and similarly, if any remedy is found to be unenforceable in whole or in part, or to any extent, such provision shall remain in effect only to the extent the remedy or remedies would be enforceable by such court. 13.15 SEVERABILITY AND SURVIVAL Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be -12- prohibited by or invalid under applicable law, such provisions, to the extent of such prohibition or invalidity, shall be deemed not to be part of this Agreement, and shall not invalidate the remainder of such provision or the remaining provisions of this Agreement. Employee specifically agrees that Section 7 (Disclosure and Assignment of Inventions), Section 8 (Confidential Information) and Section 9 (Non-Solicitation) and each of their sub-paragraphs and sub-parts, are independent of and severable from each other, and that these restrictions shall survive and remain in full force and effect for the periods specified after the Termination Date. 13.16 COUNTERPARTS This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and which together shall constitute but one and the same instrument. THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CONSULTED WITH INDEPENDENT COUNSEL AND HAVING READ, EXECUTED AND RECEIVED A COPY OF THIS AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES THAT, WITH RESPECT TO THE SUBJECT MATTER HEREOF, IT CONSTITUTES THE EMPLOYEE'S ENTIRE AGREEMENT WITH THE COMPANY, SUPERSEDING ANY PREVIOUS ORAL OR WRITTEN COMMUNICATIONS, REPRESENTATIONS, UNDERSTANDINGS OR AGREEMENTS WITH THE COMPANY OR ANY OF ITS OFFICIALS OR REPRESENTATIVES. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. QUENTRA NETWORKS, INC. EMPLOYEE: By /s/ James R. McCullough /s/ Jerry Conrad -------------------------- --------------------------- James R. McCullough Jerry Conrad, an Individual Chief Executive Officer -13- SCHEDULE 1 ENTITIES WHICH EMPLOYEE HAS OWNERSHIP INTERESTS IN EXHIBIT A PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT FOR EMPLOYEES I recognize that Quentra Networks, Inc., a Delaware corporation, together with its predecessors, successors, subsidiaries and affiliates (hereinafter collectively called the "Company"), is engaged in a continuous program of research, development and production respecting its business, present and future, relating to the telecommunications (the "Business"). I recognize that these programs represent valuable assets to the Company. In consideration of my employment, the compensation received by me from the Company from time to time, and other good and valuable consideration, the sufficiency of which is hereby acknowledged by my signature below, I hereby agree as follows: 1. As an employee of the Company, I will devote my best efforts to the interests of the Company and to making contributions and inventions of value to the Company. 2. I agree that employment creates a relationship of confidence and trust between the Company and me and, in acknowledgement of this relationship, I will not engage in any activity, investment, interest or association: (a) which is hostile, adverse to or competitive with the Company, or (b) which so occupies my attention as to interfere with the proper and efficient performance of my duties at the Company, or (c) which interferes with the independent exercise of my judgment in the Company's interests. 3. I agree that the Company possesses and will continue to possess information that has been created, discovered, developed or otherwise become known to the Company (including but without limitation, information created, discovered, developed or made known to me during the period of or arising out of my employment by the Company) and/or in which property rights have been assigned or otherwise conveyed to the Company, which information has commercial value in the Business. All the aforementioned information is hereinafter called "Proprietary Information." Proprietary Information, for purposes of this Agreement, includes all information disclosed to me or known by me as a result of my employment with the Company, not generally known to the trade or industry in which the Company is engaged, about the Company's products, processes, machines and services, including research, development, manufacturing, purchasing, finance, data processing, engineering, marketing, merchandising and selling. 4. As used herein, the period of my employment includes any time in which I may be retained by the Company as a consultant or on contract before or after being an employee. 5. All Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents and other rights in connection therewith. I -1- hereby assign to the Company any rights I may have or acquire in such Proprietary Information. At all times, both during my employment by the Company and after its termination, I will keep in confidence and trust all Proprietary Information, and I will not use or disclose any Proprietary Information or anything directly relating to it without the prior written consent of the Company, except as may be necessary in the ordinary course of performing my duties as an employee of the Company. Notwithstanding the foregoing, it is understood that, at all such times, I am free to use information clearly in the public domain and my own knowledge, skills and experience to whatever extent and in whatever way I wish. 6. I agree that all algorithms, flow charts, sketches, schematics, drawings, models, plans, specifications, microcodes, computer programs, source codes, documentation, circuit and logic diagrams, circuit layouts, silkscreens and similar items documenting my work for the Company fall under the category of Work for Hire under the copyright laws of the United States. In consideration of my employment, I agree that programs and other such documentation written or created by me in the general areas of research and development being pursued by or under study by the Company in the Business shall be presumed to be Works for Hire performed for the Company, unless I have notified the Company, in writing, that the particular work is being created outside my employment. Such notification must be made as soon as is practical and with sufficient detail to identify the material in question. I understand that, in the absence of such notification, at the time of creation or immediately after creation, works made in whole or in part by me during my employment by the Company, falling within the scope of the Business of the Company, will be presumed to be Works for Hire. All copyrights to such works shall be the sole and exclusive property of the Company. I also understand that all such works are protected by the copyright laws of the United States from the time of their creation, and that any copying or appropriation of such works by me, for my own use or that of others for purposes not authorized by the Company or in its interests, will be in violation of the copyright laws of the United States and of international copyright conventions. Finally, in consideration of my employment, I agree to cooperate with the Company in performing all necessary steps for securing copyright registration of works created by me in whole or in part. This last obligation shall extend beyond the period of employment, providing that the Company agrees to provide reasonable expenses and compensation for my time, such compensation not to exceed twice the highest hourly rate paid to me during the period of my employment by the Company. 7. In the event of the termination of my employment by me or by the Company for any reason, I will deliver to the Company all documents and data of any nature pertaining to my work with the Company and I will not take with me any documents or data of any description or any reproduction of any description containing or pertaining to any Proprietary Information. 8. I will promptly disclose to the Company, or any persons designated by it, all improvements, inventions, formulae, processes, techniques, skills and data, whether or not patentable, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment which are related to or useful in the Business of the Company, or result from tasks assigned me by the Company or result from the use of premises owned, leased or contracted for the Company (all said improvements, inventions, formulae, processes, techniques, skills and data shall be collectively hereinafter called "Inventions"). -2- 9. I agree that all Inventions shall be the sole property of the Company and its assigns, and that the Company and its assigns shall be the sole owner of all patents and other rights in connection therewith. I hereby assign to the Company any rights I may have or acquire in such Inventions. I further agree as to all such Inventions to assist the Company in every proper way (but at the Company's expense) to obtain and enforce from time to time patents on said Inventions in any and all countries, and to that end I will execute all documents for use in applying for and obtaining such patents thereon and enforcing the same, as the Company may desire, together with any assignments thereof to the Company or persons designated by it. In the event the Company is unable, because of my mental or physical incapacity or for any reason whatsoever, to secure my signature to apply for, or to pursue any application for any United States ("U.S.") or for any foreign patent or copyright covering Inventions assigned to the Company as stated above, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for me and on my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution, issuance and renewal of U.S. and foreign patents and copyrights thereon with the same legal force and effect as if executed by me. My obligation to assist the Company in obtaining and enforcing patents for such Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after such termination for time actually spent by me at the Company's request with such compensation not to exceed twice the highest hourly rate paid to me during the period of my employment by the Company. 10. Any provision in this Agreement requiring me to assign my rights in any Invention does not apply to an Invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on my own time, and (a) which does not relate (i) to the Business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by me for the Company. I also agree to assign to or to assign as directed by the Company all my right, title and interest, in and to any and all Inventions full title to which is required to be in the U.S. by a contract between the Company and the U.S. or any of its agencies. 11. As a matter of record, I have identified on Exhibit A, attached hereto, all Inventions or improvements relevant to the subject matter of my employment by the Company which have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company, which I desire to remove from the operation of this Agreement; and I covenant that such list is complete. If there is no such list on Exhibit A, I represent that there are no such inventions and/or improvements at the time of signing this Agreement. 12. I represent that my performance of all the terms of this Agreement and my employment by the Company does not and will not, to the best of my present knowledge and belief, breach any agreement or duty to keep in confidence Proprietary Information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith. 13. (a) I understand as part of the consideration for the offer of employment extended to me by the Company and my employment or continued employment by the Company, that I have not brought and -3- will not bring with me to the Company or use in the performance of my responsibilities at the Company any materials or documents of a former employer which are not generally available to the public, unless I have obtained written authorization from the former employer for their possession and use. (b) The Company has not induced or solicited the breach of disclosure of any confidential information, trade secrets, agreement, duty, commitment, understanding by me, or other proprietary data of any previous employer of mine. (c) The Company shall not utilize any trade secrets or confidential business or information of any other person, including any previous employer of mine, currently known by me. (d) Accordingly, I advise the Company that the only materials or documents of a former employer which are not generally available to the public that I will bring to the Company or use in my employment are identified in Exhibit A attached hereto, and as to each such item, I represent that I have obtained, prior to the effective date of my employment with the Company, written authorization for their possession and use in my employment with the Company. If there is no such list on Exhibit A, I represent that there are no such materials and/or documents at the time of signing this Agreement. (e) Neither my carrying on the Company's Business as an employee, nor the conduct of the Company's Business as proposed, will conflict with or result in a breach of the terms, conditions or provisions of or constitute a default under any contract, covenant or instrument under which I am now obligated. (f) I am not obligated under any contract, agreement or commitment, or subject to any judgment, decree or order of any court or administrative agency, that would conflict with my obligation to use my best efforts to promote the interests of the Company or that would conflict with the Company's Business now carried on or as proposed to be conducted. 14. This Agreement shall be effective as of the first day of my employment by the Company. By signing this Agreement, I acknowledge receipt of a copy of this Agreement. 15. This Agreement shall be binding upon me, my heirs, executors, assigns, and administrators and shall inure to the benefit of the Company, its successors and assigns. Dated (today's date): _______________ __, _____. CAUTION TO EMPLOYEE: This Agreement affects important rights. Do not sign it unless you have read it carefully, and are satisfied that you understand it completely. -4- --------------------------------------- Name (Please Print) --------------------------------------- Signature --------------------------------------- Title ACCEPTED AND AGREED TO: ------------------------ By _____________________ Name ____________________ Title____________________ -5- EXHIBIT A 1. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by ____________________________ (the "Company") which have been made of conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company: _____ No inventions or improvements _____ See below __________________________________________________________________________ __________________________________________________________________________ _____ Additional sheets attached 2. I propose to bring to my employment the following materials and documents of a former employer which are not generally available to the public, which materials and documents may be used in my employment: _____ No materials _____ See below __________________________________________________________________________ __________________________________________________________________________ _____ Additional sheets attached My signature on this document confirms that my continued possession and use of these materials is authorized. 3. Exceptions to copyright Works for Hire (paragraph 6.) _____ No exceptions _____ See below __________________________________________________________________________ __________________________________________________________________________ _____ Additional sheets attached __________________________________________________________________________ (Please Print Name and Title) __________________________________________________________________________ Representative (Please Print Name and Title)

EXHIBIT 10.5 EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINENTAL AIRLINES, INC., a Delaware corporation ("Company"), and JEFFERY A. SMISEK ("Executive"), and is dated and effective as of July 25, 2000 (the "Effective Date"). W I T N E S S E T H: WHEREAS, Company and Executive are parties to that certain Amended and Restated Employment Agreement dated as of September 16, 1999 (the "Existing Agreement"), which expires on November 21, 2000; and WHEREAS , the Human Resources Committee of the Board of Directors of Company ("HR Committee") has deemed it advisable and in the best interests of Company and its stockholders to assure management continuity for Company and, consistent therewith, has authorized the execution, delivery and performance by Company of this Agreement; WHEREAS, in connection therewith, the parties desire to enter into this Agreement to replace and supersede the Existing Agreement in its entirety, effective as of the Effective Date; NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:   ARTICLE 1: EMPLOYMENT AND DUTIES 1.1 Employment; Effective Date. Company agrees to employ Executive and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article 2 of this Agreement, subject to the terms and conditions of this Agreement. 1.2 Positions. From and after the Effective Date, Company shall employ Executive in the positions of Executive Vice President, General Counsel and Secretary of Company, or in such other positions as the parties mutually may agree. 1.3 Duties and Services. Executive agrees to serve in the positions referred to in paragraph 1.2 and to perform diligently and to the best of his abilities the duties and services appertaining to such offices as set forth in the Bylaws of Company in effect on the Effective Date, as well as such additional duties and services appropriate to such offices which the parties mutually may agree upon from time to time.   ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT 2.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for a five-year period beginning on the Effective Date. Said term of employment shall be extended automatically for an additional successive five-year period as of the fifth anniversary of the Effective Date and as of the last day of each successive five-year period of time thereafter that this Agreement is in effect; provided, however, that if, prior to the date which is six months before the last day of any such five-year term of employment, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the five-year term of employment during which such notice is given. 2.2 Company's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Company, acting pursuant to an express resolution of the Board of Directors of Company (the "Board of Directors"), shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons: (i) upon Executive's death; (ii) upon Executive's becoming incapacitated for a period of at least 180 days by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the material duties and services required of him hereunder on a full-time basis during such period; (iii) if, in carrying out his duties hereunder, Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct resulting in material economic harm to Company; (iv) upon the conviction of Executive for a felony or any crime involving moral turpitude; or (v) for any other reason whatsoever, in the sole discretion of the Board of Directors. 2.3 Executive's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Executive shall have the right to terminate his employment under this Agreement at any time for any of the following reasons: (i) the assignment to Executive by the Board of Directors or other officers or representatives of Company of duties materially inconsistent with the duties associated with the positions described in paragraph 1.2 as such duties are constituted as of the Effective Date, or the failure to elect or reelect Executive to any of the positions described in paragraph 1.2 or the removal of him from any such positions; (ii) a material diminution in the nature or scope of Executive's authority, responsibilities, or titles from those applicable to him as of the Effective Date, including a change in the reporting structure so that Executive reports to someone other than the Chief Executive Officer of Company; (iii) the occurrence of acts or conduct on the part of Company, its Board of Directors, or its officers, representatives or stockholders which prevent Executive from, or substantively hinder Executive in, performing his duties or responsibilities pursuant to this Agreement; (iv) Company requiring Executive to be permanently based anywhere outside a major urban center in Texas; (v) the taking of any action by Company that would materially adversely affect the corporate amenities enjoyed by Executive on the Effective Date; (vi) a material breach by Company of any provision of this Agreement which, if correctable, remains uncorrected for 30 days following written notice of such breach by Executive to Company, it being agreed that any reduction in Executive's then current annual base salary, or any reduction in Executive's annual cash bonus opportunity as a percentage of such base salary from that percentage in effect on the Effective Date (i.e., 0% to 125% of base salary) or any material change in the frequency of payment thereof or the performance factors on which such bonus is based, shall constitute a material breach by Company of this Agreement; or (vii) for any other reason whatsoever, in the sole discretion of Executive. 2.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, it or he shall do so by giving written notice to the other party that it or he has elected to terminate Executive's employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.   ARTICLE 3: COMPENSATION AND BENEFITS 3.1 Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary equal to the greater of (i) $420,000.00 or (ii) such amount as the parties mutually may agree upon from time to time. Executive's annual base salary shall be paid in equal installments in accordance with Company's standard policy regarding payment of compensation to executives but no less frequently than semimonthly. 3.2 Bonus Programs and Restricted Stock Grant. (a) Cash Bonus Programs. Executive shall participate in each cash bonus program maintained by Company on and after the Effective Date (including, without limitation, any such program maintained for the year during which the Effective Date occurs) at a level which is not less than the maximum participation level made available to any Company executive (determined without regard to period of service or other criteria that might otherwise be necessary to entitle Executive to such level of participation); provided that Company shall at all times maintain Executive's annual cash bonus opportunity as a percentage of his base salary in an amount which is at least as great as that in effect on the Effective Date (i.e., 0% to 125% of base salary) and shall not change in any material respect the payment frequency thereof or the performance factors on which such bonus is based. (b) Restricted Stock Grant. On the Effective Date, Company shall make a restricted stock award to Executive of 30,000 shares of Class B common stock of Company under Company's Incentive Plan 2000, which restricted stock award shall vest as to 1/3 of the shares on the first anniversary of the Effective Date, 1/3 of the shares on the second anniversary of the Effective Date, and 1/3 of the shares on the third anniversary of the Effective Date, or otherwise in accordance with the terms of the Incentive Plan 2000 (including any grant document thereunder) and the terms of this Agreement. 3.3 Life Insurance. During the period of this Agreement, Company shall maintain one or more policies of life insurance on the life of Executive providing an aggregate death benefit in an amount not less than the Termination Payment (as such term is defined in paragraph 4.7, and based on a Severance Period of thirty-six months). Executive shall have the right to designate the beneficiary or beneficiaries of the death benefit payable pursuant to such policy or policies up to an aggregate death benefit in an amount equal to the Termination Payment (based on a Severance Period of thirty-six months), and may transfer ownership of such policy or policies (and any rights of Executive under this paragraph 3.3) to any life insurance trust, family trust or other trust. To the extent that Company's purchase of, or payment of premiums with respect to, such policy or policies results in compensation income to Executive, Company shall pay to Executive an additional payment (the "Policy Payment") in an amount such that after payment by Executive of all taxes imposed on Executive with respect to the Policy Payment, Executive retains an amount of the Policy Payment equal to the taxes imposed upon Executive with respect to such purchase or the payment of such premiums. If for any reason Company fails to maintain the full amount of life insurance coverage required pursuant to the preceding provisions of this paragraph 3.3, Company shall, in the event of the death of Executive while employed by Company, pay Executive's designated beneficiary or beneficiaries an amount equal to the sum of (1) the difference between the Termination Payment (based on a Severance Period of thirty-six months) and any death benefit payable to Executive's designated beneficiary or beneficiaries under the policy or policies maintained by Company and (2) such additional amount as shall be required to hold Executive's estate, heirs, and such beneficiary or beneficiaries harmless from any additional tax liability resulting from the failure by Company to maintain the full amount of such required coverage. 3.4 Vacation and Sick Leave. During each year of his employment, Executive shall be entitled to vacation and sick leave benefits equal to the maximum available to any Company executive, determined without regard to the period of service that might otherwise be necessary to entitle Executive to such vacation or sick leave under standard Company policy. 3.5 Supplemental Executive Retirement Plan. (i) Base Benefit. Company agrees to pay Executive the deferred compensation benefits set forth in this paragraph 3.5 as a supplemental retirement plan (the "Plan"). The base retirement benefit under the Plan (the "Base Benefit") shall be in the form of an annual straight life annuity in an amount equal to the product of (a) 2.5% times (b) the number of Executive's credited years of service (as defined below) under the Plan (but not in excess of 26 years) times (c) the Executive's final average compensation (as defined below). For purposes hereof, Executive's credited years of service under the Plan shall be equal to the sum of (1) the number of Executive's years of benefit service with Company, calculated as set forth in the Continental Retirement Plan (the "CARP") beginning at January 1, 1995 ("Actual Years of Service"), (2) an additional two years of service for each one year of service credited to Executive pursuant to clause (1) of this sentence for the period beginning on January 1, 2000 and ending on December 31, 2004, and (3) if the Termination Payment becomes payable to Executive under this Agreement or if Executive's employment is terminated for a reason encompassed by paragraphs 2.2(i) or 2.2(ii), that number of additional years of service as is equal to (X) 18 years minus (Y) three times the number of full calendar years which have occurred during the period beginning January 1, 2000 and ending on the earlier of (i) the date that the Termination Payment under this Agreement first becomes payable to Executive or (ii) December 31, 2004. For purposes hereof, Executive's final average compensation shall be equal to the greater of (A) $420,000.00 or (B) the average of the five highest annual cash compensation amounts (or, if Executive has been employed less than five years by Company, the average over the full years employed by Company) paid to Executive by Company during the consecutive ten calendar years immediately preceding Executive's termination of employment at retirement or otherwise. For purposes hereof, cash compensation shall include base salary plus cash bonuses (including any amounts deferred (other than Stay Bonus amounts described below) pursuant to any deferred compensation plan of the Company), but shall exclude (i) any cash bonus paid on or prior to March 31, 1995, (ii) any Stay Bonus paid to Executive pursuant to that certain Stay Bonus Agreement between Company and Executive dated as of April 14, 1998, (iii) any Termination Payment paid to Executive under this Agreement, (iv) any payments received by Executive under Company's Officer Retention and Incentive Award Program, (v) any proceeds to Executive from any awards under any option, stock incentive or similar plan of Company, and (vi) any cash bonus paid under a long term incentive plan or program adopted by Company. Executive shall be vested immediately with respect to benefits due under the Plan. (ii) Offset for CARP Benefit. Any provisions of the Plan to the contrary notwithstanding, the Base Benefit shall be reduced by the actuarial equivalent (as defined below) of the pension benefit, if any, paid or payable to Executive from the CARP. In making such reduction, the Base Benefit and the benefit paid or payable under the CARP shall be determined under the provisions of each plan as if payable in the form of an annual straight life annuity beginning on the Retirement Date (as defined below). The net benefit payable under this Plan shall then be actuarially adjusted based on the actuarial assumptions set forth in paragraph 3.5(vii) for the actual time and form of payments. (iii) Normal and Early Retirement Benefits. Executive's benefit under the Plan shall be payable in equal monthly installments beginning on the first day of the month following the Retirement Date (the "Normal Retirement Benefit"). For purposes hereof, "Retirement Date" is defined as the later of (a) the date on which Executive attains (or in the event of Executive's earlier death, would have attained) age 60 or (b) the date of Executive's retirement from employment with Company. Notwithstanding the foregoing, if Executive's employment with Company is terminated, for a reason other than death, on or after the date Executive attains age 55 or is credited with 10 Actual Years of Service and prior to the Retirement Date, then Executive shall be entitled to elect to commence to receive Executive's benefit under the Plan as of the first day of any month coinciding with or next following Executive's termination of employment, or as the first day of any subsequent month preceding the Retirement Date (an "Early Retirement Benefit"); provided, however, that (1) written notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, (2) each payment under an Early Retirement Benefit shall be reduced to the extent necessary to cause the value of such Early Retirement Benefit (determined without regard to clause (3) of this proviso) to be the actuarial equivalent of the value of the Normal Retirement Benefit (in each case based on the actuarial assumptions set forth in paragraph 3.5(vii) and adjusted for the actual time and form of payments), and (3) each payment under an Early Retirement Benefit that is made prior to the Retirement Date shall be reduced by an additional 10% of the amount of such payment as initially determined pursuant to clause (2) of this proviso. The HR Committee may, in its sole and absolute discretion, waive all or any part of the reductions contemplated in clauses (2) and/or (3) of the proviso of the preceding sentence. (iv) Form of Retirement Benefit. If Executive is not married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive in the form of a single life annuity for the life of Executive. If Executive is married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive, at the written election of Executive made at least 15 days prior to the first payment of benefits under the Plan, in either (1) the form of a single life annuity for the life of Executive, or (2) the form of a joint and survivor annuity that is actuarially equivalent to the benefit that would have been payable under the Plan to Executive if Executive was not married on such date, with Executive's spouse as of the date benefit payments commence being entitled during such spouse's lifetime after Executive's death to a benefit equal to 50% of the benefit payable to Executive during their joint lifetimes. If Executive fails to make such election, Executive will be deemed to have elected a joint and survivor annuity. (v) Death Benefit. Except as provided in this paragraph 3.5(v), no benefits shall be paid under the Plan if Executive dies prior to the date Executive's benefit commences pursuant to paragraph 3.5(iii). In the event of Executive's death prior to the commencement of Executive's benefit pursuant to paragraph 3.5(iii), Executive's surviving spouse, if Executive is married on the date of Executive's death, will receive a single life annuity consisting of monthly payments for the life of such surviving spouse determined as follows: (a) if Executive dies on or before reaching the Retirement Date, the death benefit such spouse would have received had Executive terminated employment on the earlier of Executive's actual date of termination of employment or Executive's date of death, survived until the Retirement Date, elected a joint and survivor annuity and began to receive Executive's Plan benefit beginning immediately at the Retirement Date, and died on the day after the Retirement Date; or (b) if Executive dies after reaching the Retirement Date, the death benefit such spouse would have received had Executive elected a joint and survivor annuity and begun to receive Executive's Plan benefit beginning on the day prior to Executive's death. Payment of such survivor annuity shall begin on the first day of the month following the later of (1) Executive's date of death or (2) the Retirement Date; provided, however, that if Executive was eligible to elect an Early Retirement Benefit as of the date of Executive's death, then Executive's surviving spouse shall be entitled to elect to commence to receive such survivor annuity as of the first day of the month next following the date of Executive's death, or as the first day of any subsequent month preceding the Retirement Date. Notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, and each payment of such survivor annuity shall be reduced based on the principles used for the reductions described in clauses (2) and (3) of the proviso to the third sentence of paragraph 3.5(iii). (vi) Unfunded Benefit. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation. Further, it is the intention of Company that the Plan be unfunded for purposes of the Internal Revenue Code of 1986, as amended, and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of Company. Executive understands that he must rely upon the general credit of Company for payment of benefits under the Plan. Company shall establish a "rabbi" trust to assist Company in meeting its obligations under the Plan. The trustee of such trust shall be a nationally-recognized and solvent bank or trust company that is not affiliated with Company. Company shall transfer to the trustee money and/or other property determined in the sole discretion of the HR Committee based on the advice of the Actuary (as defined below) on an as-needed basis in order to assure that the benefit payable under the Plan is at all times fully funded. The trustee shall pay Plan benefits to Executive and/or Executive's spouse out of the trust assets if such benefits are not paid by Company. Company shall remain the owner of all assets in the trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) Company ever becomes insolvent. Neither Executive nor any beneficiary of Executive shall have any preferred claim to, any security interest in, or any beneficial ownership interest in any assets of the trust. Company has not and will not in the future set aside assets for security or enter into any other arrangement which will cause the obligation created to be other than a general corporate obligation of Company or will cause Executive to be more than a general creditor of Company. (vii) Actuarial Equivalent. For purposes of the Plan, the terms "actuarial equivalent", or "actuarially equivalent" when used with respect to a specified benefit shall mean the amount of benefit of the referenced different type or payable at the referenced different age that can be provided at the same cost as such specified benefit, as computed by the Actuary and certified to Executive (or, in the case of Executive's death, to his spouse) by the Actuary. The actuarial assumptions used under the Plan to determine equivalencies between different forms and times of payment shall be the same as the actuarial assumptions then used in determining benefits payable under the CARP. The term "Actuary" shall mean the individual actuary or actuarial firm selected by Company to service its pension plans generally or if no such individual or firm has been selected, an individual actuary or actuarial firm appointed by Company and reasonably satisfactory to Executive and/or Executive's spouse. (viii) Medicare Payroll Taxes. Company shall indemnify Executive on a fully grossed-up, after-tax basis for any Medicare payroll taxes (plus any income taxes on such indemnity payments) incurred by Executive in connection with the accrual and/or payment of benefits under the Plan. 3.6 Additional Disability Benefit. If Executive shall begin to receive long-term disability insurance benefits pursuant to a plan maintained by Company and if such benefits cease prior to Executive's attainment of age 65 and while Executive remains disabled, then Company shall immediately pay Executive upon the cessation of such benefits a lump-sum, cash payment in an amount equal to the Termination Payment (based on a Severance Period of thirty-six months). If Executive receives payment of a Termination Payment pursuant to the provisions of Article 4, then the provisions of this paragraph 3.6 shall terminate. If Executive shall be disabled at the time his employment with Company terminates and if Executive shall not be entitled to the payment of a Termination Payment pursuant to the provisions of Article 4 upon such termination, then Executive's right to receive the payment upon the occurrence of the circumstances described in this paragraph 3.6 shall be deemed to have accrued as of the date of such termination and shall survive the termination of this Agreement. 3.7 Other Perquisites. During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment: (i) Automobile - Company will provide an automobile (including replacements therefor) of Executive's choice for Executive's use on the same terms as its current practices relating to the choice and use of automobiles by its Chief Executive Officer. If the automobile is leased, Company agrees to take such actions as may be necessary to permit Executive, at his option, to acquire title to any automobile subject to such a lease at the completion of the lease term by Executive paying the residual payment then owing under the lease. If Executive's employment terminates (other than as a result of the reasons encompassed by paragraphs 2.2 (iii) or (iv)), then Company (1) if the automobile is leased, will continue to make all payments under the lease and permit Executive (or Executive's estate, as applicable) to use the automobile during the remainder of such lease and will, at the conclusion of the lease, cause the title to the automobile to be transferred to Executive (or Executive's estate) without cost to Executive (or Executive's estate), or (2) if the automobile is owned by Company, transfer title to the automobile to Executive (or Executive's estate, as applicable), without cost to Executive (or Executive's estate). (ii) Business and Entertainment Expenses - Subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related purposes, including dues and fees to industry and professional organizations, costs of entertainment and business development, and costs reasonably incurred as a result of Executive's spouse accompanying Executive on business travel. Company shall also pay on behalf of Executive the expenses of one athletic club selected by Executive. (iii) Parking - Company shall provide at no expense to Executive a reserved parking place convenient to Executive's headquarters office and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice. (iv) Other Company Benefits - Executive and, to the extent applicable, Executive's family, dependents and beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly-situated Company employees. Such benefits, plans and programs may include, without limitation, profit sharing plan, thrift plan, annual physical examinations, health insurance or health care plan, life insurance, disability insurance, pension plan, pass privileges on Continental Airlines, Flight Benefits and the like. Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally; provided, however, that Company shall not change, amend or discontinue Executive's Flight Benefits without his prior written consent. ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION 4.1 By Expiration. If Executive's employment hereunder shall terminate upon expiration of the term provided in paragraph 2.1 hereof, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of his employment, except that (A) the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and (B) if such termination shall result from Company's delivery of the written notice described in paragraph 2.1, then Company shall (i) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days after such termination, (ii) cause all Awards made to Executive under Company's Officer Retention and Incentive Award Program ("Retention Program") to vest immediately upon such termination, (iii) cause Company to pay to Executive, at the same time as other Payment Amounts with respect to Awards are paid to other participants under Company's Long Term Incentive Performance Award Program ("LTIP"), all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of a Qualifying Event with respect to Executive in connection with a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (iv) pay Executive on or before the effective date of such termination a lump-sum, cash payment in an amount equal to the Termination Payment, (v) provide Executive with Outplacement, Office and Related Services (as such term is defined in paragraph 4.7 and for the time periods described therein), and (vi) pay any amounts owed but unpaid to Executive under any plan, policy or program of Company as of the date of termination at the time provided by, and in accordance with the terms of, such plan, policy or program. 4.2 By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, and: (i) if such termination shall be for any reason other than those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i); and (ii) if such termination shall be for a reason encompassed by paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days (or such longer period as provided for under the circumstances in applicable option awards) after such termination, (2) cause all Awards made to Executive under the Retention Program to vest immediately upon such termination, (3) cause Company to pay to Executive (or Executive's estate), at the same time as other Payment Amounts with respect to Awards are paid to other participants under the LTIP, all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of Executive's death or Disability after a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (4) provide Executive (or his designated beneficiary or beneficiaries) with the benefits contemplated under paragraph 3.3 or paragraph 3.6, as applicable, and (5) perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i). 4.3 By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and, if such termination shall be pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1. 4.4 Certain Additional Payments by Company. Notwithstanding anything to the contrary in this Agreement, if any payment, distribution or provision of a benefit by Company to or for the benefit of Executive, whether paid or payable, distributed or distributable or provided or to be provided pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to an excise or other special additional tax that would not have been imposed absent such Payment (including, without limitation, any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended), or any interest or penalties with respect to such excise or other additional tax (such excise or other additional tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Taxes imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment (taking into account any similar gross-up payments to Executive under any stock incentive or other benefit plan or program of Company) equal to the Excise Tax imposed upon the Payments. Company and Executive shall make an initial determination as to whether a Gross-up Payment is required and the amount of any such Gross-up Payment. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company and Executive) within ten business days after the receipt of such claim. Company shall notify Executive in writing at least ten business days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with such action and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim or Company determines not to contest such claim, then Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. 4.5 Payment Obligations Absolute. Company's obligation to pay Executive the amounts and to make the arrangements provided in this Article 4 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which Company (including its subsidiaries and affiliates) may have against him or anyone else. All amounts payable by Company shall be paid without notice or demand. Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Article 4, and, except as provided in paragraph 4.7 with respect to Continuation Coverage, the obtaining of any such other employment (or the engagement in any endeavor as an independent contractor, sole proprietor, partner, or joint venturer) shall in no event effect any reduction of Company's obligations to make (or cause to be made) the payments and arrangements required to be made under this Article 4. 4.6 Liquidated Damages. In light of the difficulties in estimating the damages upon termination of this Agreement, Company and Executive hereby agree that the payments and benefits, if any, to be received by Executive pursuant to this Article 4 shall be received by Executive as liquidated damages. Payment of the Termination Payment pursuant to paragraphs 4.1, 4.2 or 4.3 shall be in lieu of any severance benefit Executive may be entitled to under any severance plan or policy maintained by Company. 4.7 Certain Definitions and Additional Terms. As used herein, the following capitalized terms shall have the meanings assigned below: "Annualized Compensation" shall mean an amount equal to the sum of (1) Executive's annual base salary pursuant to paragraph 3.1 in effect immediately prior to Executive's termination of employment hereunder and (2) an amount equal to 125% of the amount described in the foregoing clause (1); "Change in Control" shall have the meaning assigned to such term in Company's Incentive Plan 2000 in effect on May 23, 2000; (iii) "Continuation Coverage" shall mean the continued coverage of Executive and his eligible dependents under Company's welfare benefit plans available to executives of Company who have not terminated employment (or the provision of equivalent benefits), including, without limitation, medical, health, dental, life insurance, disability, vision care, accidental death and dismemberment, and prescription drug, at no greater cost to Executive than that applicable to a similarly situated Company executive who has not terminated employment; provided, however, that the coverage to Executive (or the receipt of equivalent benefits) shall be provided under one or more insurance policies so that reimbursement or payment of benefits to Executive thereunder shall not result in taxable income to Executive, and provided further that the coverage to Executive under a particular welfare benefit plan (or the receipt of equivalent benefits) shall be suspended during any period that Executive receives comparable benefits from a subsequent employer, and shall be reinstated upon Executive ceasing to so receive comparable benefits and notifying Company thereof; (iv) "Flight Benefits" shall mean flight benefits on each airline operated by the Company or any of its affiliates or any successor or successors thereto (the "CO system"), consisting of the highest priority space available flight passes for Executive and Executive's eligible family members (as such eligibility is in effect on May 18, 1999), a Universal Air Travel Plan (UATP) card (or, in the event of discontinuance of the UATP program, a similar charge card permitting the purchase of air travel through direct billing to the Company or any successor or successors thereto (a "Similar Card")) in Executive's name for charging on an annual basis up to the applicable Annual Travel Limit (as hereinafter defined) with respect to such year in value (valued identically to the calculation of imputed income resulting from such flight benefits described below) of flights (in any fare class) on the CO system for Executive, Executive's spouse, Executive's family and significant others as determined by Executive, Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive's spouse's names for use on the CO system, a membership for Executive and Executive's spouse in the Company's President's Club (or any successor program maintained in the CO system) and payment by the Company to Executive of an annual amount (not to exceed in any year the Annual Gross Up Limit (as hereinafter defined) with respect to such year) sufficient to pay, on an after tax basis (i.e., after the payment by Executive of all taxes on such amount), the U.S. federal, state and local income taxes on imputed income resulting from such flights (such imputed income to be calculated during the term of such Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare, or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law) or resulting from any other flight benefits extended to Executive as a result of Executive's service as an executive of the Company; "Outplacement, Office and Related Services" shall mean (1) outplacement services, at Company's cost and for a period of twelve months beginning on the date of Executive's termination of employment, to be rendered by an agency selected by Executive and approved by the Board of Directors or HR Committee (with such approval not to be unreasonably withheld), (2) appropriate and suitable office space at the Company's headquarters (although not on its executive office floor) or at a comparable location in downtown Houston for use by Executive, together with appropriate and suitable secretarial assistance, at Company's cost and for a period of three years beginning on the date of Executive's termination of employment, (3) a reserved parking place convenient to the office so provided and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice, at Company's cost and for as long as Executive retains a residence in Houston, Texas, and (4) other incidental perquisites (such as free or discount air travel, car rental, phone or similar service cards) currently enjoyed by Executive as a result of his position, to the extent then available for use by Executive, for a period of three years beginning on the date of Executive's termination of employment or a shorter period if such perquisites become unavailable to the Company for use by Executive; (vi) "Severance Period" shall mean: (1) in the case of a termination of Executive's employment with Company that occurs within two years after the date upon which a Change in Control occurs, a period commencing on the date of such termination and continuing for thirty-six months; or (2) in the case of a termination of Executive's employment with Company that occurs prior to a Change in Control or after the date which is two years after a Change in Control occurs, a period commencing on the date of such termination and continuing for twenty-four months; and (vii) "Termination Payment" shall mean an amount equal to Executive's Annualized Compensation multiplied by a fraction, the numerator of which is the number of months in the Severance Period and the denominator of which is twelve. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Travel Limit" shall mean an amount (initially $50,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Company's average fare per revenue passenger for its jet operations (excluding regional jets) with respect to the applicable year as reported in its Annual Report on Form 10-K (or, if not so reported, as determined by the Company's independent auditors) (the "Average Fare") for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $50,000 annually (adjusted in accordance with clauses (i) and (ii) above) of flights relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in such flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Travel Limit would be increased by 15% to $57,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Travel Limit described in this paragraph. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Gross Up Limit" shall mean an amount (initially $10,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Average Fare for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $10,000 annually (adjusted in accordance with clauses (i) and (ii) above) of tax gross up relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Gross Up Limit would be increased by 15% to $11,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Gross Up Limit described in this paragraph. As used for purposes of Flight Benefits, a year may consist of twelve consecutive months other than a calendar year, it being the Company's practice as of May 18, 1999 for purposes of Flight Benefits for a year to commence on December 1 and end on the following November 30 (for example, the twelve-month period from December 1, 1998 to November 30, 1999 is considered the year 1999 for purposes of Flight Benefits); provided that all calculations for purposes of clause (i) in the prior two paragraphs shall be with respect to fiscal years of the Company. As used for purposes of Flight Benefits, the term "affiliates" of the Company means any entity controlled by, controlling, or under common control with the Company, it being understood that control of an entity shall require the direct or indirect ownership of a majority of the outstanding capital stock of such entity. No tickets issued on the CO system in connection with the Flight Benefits may be purchased other than directly from the Company or its successor or successors (i.e., no travel agent or other fee or commission based distributor may be used), nor may any such tickets be sold or transferred by Executive or any other person, nor may any such tickets be used by any person other than the person in whose name the ticket is issued. Executive agrees that, after receipt of an invoice or other accounting statement therefor, he will promptly (and in any event within 45 days after receipt of such invoice or other accounting statement) reimburse the Company for all charges on his UATP card (or Similar Card) which are not for flights on the CO system and which are not otherwise reimbursable to Executive under the provisions of paragraph 3.7(ii) hereof, or which are for tickets in excess of the applicable Annual Travel Limit. Executive agrees that the credit availability under Executive's UATP card (or Similar Card) may be suspended if Executive does not timely reimburse the Company as described in the foregoing sentence or if Executive exceeds the applicable Annual Travel Limit with respect to a year; provided, that, immediately upon the Company's receipt of Executive's reimbursement in full (or, in the case of exceeding the applicable Annual Travel Limit, beginning the next following year and after such reimbursement), the credit availability under Executive's UATP card (or Similar Card) will be restored. The sole cost to Executive of flights on the CO system pursuant to use of Executive's Flight Benefits will be the imputed income with respect to flights on the CO system charged on Executive's UATP card (or Similar Card), calculated throughout the term of Executive's Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law, and reported to Executive as required by applicable law. With respect to any period for which the Company is obligated to provide the tax gross up described above, Executive will provide to the Company, upon request, a calculation or other evidence of Executive's marginal tax rate sufficient to permit the Company to calculate accurately the amount to be paid to Executive. Executive will be issued a UATP card (or Similar Card), Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive spouse's names, a membership card in the Company's Presidents Club (or any successor program maintained in the CO system) for Executive and Executive's spouse, and an appropriate flight pass identification card, each valid at all times during the term of Executive's Flight Benefits. ARTICLE 5: MISCELLANEOUS 5.1 Interest and Indemnification. If any payment to Executive provided for in this Agreement is not made by Company when due, Company shall pay to Executive interest on the amount payable from the date that such payment should have been made until such payment is made, which interest shall be calculated at 3% plus the prime or base rate of interest announced by Chase Bank of Texas N.A. (or any successor thereto) at its principal office in Houston, Texas (but not in excess of the highest lawful rate), and such interest rate shall change when and as any such change in such prime or base rate shall be announced by such bank. If Executive shall obtain any money judgment or otherwise prevail with respect to any litigation brought by Executive or Company to enforce or interpret any provision contained herein, Company, to the fullest extent permitted by applicable law, hereby indemnifies Executive for his reasonable attorneys' fees and disbursements incurred in such litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay prejudgment interest on any money judgment obtained by Executive from the earliest date that payment to him should have been made under this Agreement until such judgment shall have been paid in full, which interest shall be calculated at the rate set forth in the preceding sentence. 5.2 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company to : Continental Airlines, Inc. 1600 Smith, Dept. HQSEO Houston, Texas 77002 Attention: General Counsel If to Executive to : Jeffery A. Smisek 5211 Briar Drive Houston, Texas 77056 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 5.3 Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. 5.4 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 5.5 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 5.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 5.7 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally. 5.8 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 5.9 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. 5.10 Successors. This Agreement shall be binding upon and inure to the benefit of Company and any successor of the Company, including without limitation any person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Except as provided in the preceding sentence or in paragraph 3.3 (regarding assignment of life insurance benefits), this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. 5.11 Term. This Agreement has a term co-extensive with the term of employment as set forth in paragraph 2.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to or upon such termination. 5.12 Entire Agreement. Except as provided in (i) the benefits, plans, and programs referenced in paragraph 3.7(iv) and any awards under the Company's stock incentive plans or programs, LTIP, Retention Program, Executive Bonus Performance Award Program or similar plans or programs, and (ii) separate agreements governing Executive's flight benefits relating to other airlines, this Agreement, as of the Effective Date, will constitute the entire agreement of the parties with regard to the subject matter hereof, and will contain all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Effective as of the Effective Date, the Existing Agreement is hereby terminated and without any further force or effect. Any modification of this Agreement shall be effective only if it is in writing and signed by the party to be charged. 5.13 Deemed Resignations. Any termination of Executive's employment shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, and an automatic resignation of Executive from the Board of Directors (if applicable) and from the board of directors of any affiliate of Company and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company's or such affiliate's designee or other representative. 5.14 Certain Change in Control Matters. Executive agrees that any recapitalization, conversion, reclassification or similar transaction involving Class A common stock of Company owned by Northwest Airlines Corporation or its affiliates, or any acquisition by Company of Class A common stock owned by Northwest Airlines Corporation or its affiliates (whether or not involving other outstanding shares of Class A common stock), which results in a person who is an Institutional Investor (as defined in that certain Rights Agreement dated November 20, 1998, as amended by First Amendment to Rights Agreement dated as of February 8, 2000, between Company and Harris Trust and Savings Bank, as in effect on the date hereof) as of the date hereof and as of the date of any such recapitalization, conversion, reclassification, acquisition or similar transaction being or becoming the beneficial owner of securities of Company sufficient to otherwise trigger a Change in Control pursuant to clause (aa) of Section 12 (c) of Company's Incentive Plan 2000, as in effect on the date hereof, shall not constitute a Change in Control for purposes of this Agreement, or for purposes of Company's stock incentive plans or programs, Long Term Incentive Performance Award Program, Officer Retention and Incentive Award Program, Executive Bonus Performance Award Program or similar plans or programs.         *******   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.   CONTINENTAL AIRLINES, INC.     By: Name: Title: "EXECUTIVE"     JEFFERY A. SMISEK     APPROVED:   _______________________________ Thomas J. Barrack, Jr. Chair, Human Resources Committee

-------------------------------------------------------------------------------- EXHIBIT 10.1 ASSET PURCHASE AGREEMENT      ASSET PURCHASE AGREEMENT dated as of June 14, 2000, among Arch Chemicals, Inc., a Virginia corporation (“Parent”), Superior Pool Products, Inc., a Delaware corporation (“Seller”) and a wholly owned subsidiary of Parent, and SCP Pool Corporation, a Delaware corporation (“Purchaser”).      Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, substantially all the assets, properties and business of Seller (the “Business”), upon the terms and subject to the conditions of this Agreement.      Accordingly, the parties hereby agree as follows: ARTICLE I Purchase and Sale of Acquired Assets      SECTION 1.01. Purchase and Sale. (a) On the terms and subject to the conditions of this Agreement, at the Closing (as defined in Section 2.01), Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase from Seller all the right, title and interest as of the Closing of Seller in, to and under the Acquired Assets (as defined in Section 1.02(a)), for (i) an aggregate purchase price equal to the Estimated Net Asset Value (as defined in Section 1.01(b)) plus the Additional Amount (as defined below) (the “Purchase Price”), payable as set forth in Section 2.02, subject to adjustment as set forth in Section 1.05 and provided the Purchase Price may not exceed, before and after any adjustment under Section 1.05, $25 million, and (ii) the assumption of the Assumed Liabilities (as defined in Section 1.03(a)). The purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities is referred to in this Agreement as the “Acquisition”. “Additional Amount” shall mean: (i) if the Estimated Net Asset Value (or Actual Closing Net Asset Value, as the case may be) is $11 million or less, $12 million, (ii) if Estimated Net Asset Value (or Actual Closing Net Asset Value, as the case may be) is equal to or greater than $12 million, $11 million and (iii) if the Estimated Net Asset Value (or Actual Closing Net Asset Value, as the case may be) is greater than $11 million but less than $12 million, $12 million less the amount by which such value exceeds $11 million; provided that for the purposes of determining the Additional Amount only, outstanding uncleared checks of Seller shall be included in liabilities in determining Estimated Net Asset Value and the Actual Closing Net Asset Value as of the date of such values. --------------------------------------------------------------------------------      (b) At least two days prior to the Closing Date, Seller shall provide Purchaser with the estimated Net Asset Value of the Business stated as of the last day of the calendar month immediately preceding the Closing Date (or if the Closing is held before the tenth day of a month, as of the last day of the second preceding month), adjusted for any subsequent extraordinary items and prepared on a basis consistent with the balance sheet set forth as Schedule 1.01(b)(1) (“Sample Balance Sheet”) (the “Estimated Net Asset Value”). “Net Asset Value”, as of any date of determination, shall mean net asset value determined in accordance with generally accepted accounting principles (“GAAP”) applied in a manner consistent with that used in preparing the Sample Balance Sheet. It is understood that in determining the Actual Closing Net Asset Value Customer Rebates for the Final Period and Supplier Rebates for the Final Period shall be included and computed as follows: “Supplier Rebates” shall mean for the Final Period an amount equal to 1.5% of total net sales of Seller occurring in such period and (ii) “Customer Rebates” shall mean for the Final Period 2.88% of gross sales of Seller occurring in such period to (A) customers who qualified for Seller’s V.I.P. program for 1999 and (B) those additional customers who as of the Closing Date Seller reasonably projects for 2000 as tracking towards V.I.P. attainment in 2000 based on 2000 sales occurring prior to the Closing plus an adjustment as set forth in Schedule 1.01(b)(2) and the “Final Period” shall mean January 1, 2000 to and including the Closing Date.      SECTION 1.02. Acquired Assets and Excluded Assets. (a) The term “Acquired Assets” means all the business, properties, assets, goodwill and rights of Seller of whatever kind and nature, real or personal, tangible or intangible, located on or at the Premises (as defined herein), that are owned, leased or licensed by Seller on the Closing Date (as defined in Section 2.01) and used, held for use or intended to be used in the operation or conduct of the Business, including:        (i) all real property, leaseholds and other interests in real property of Seller listed in Schedule 3.06, in each case together with Seller’s right, title and interest in all buildings, improvements and fixtures thereon, all other appurtenances thereto and related easements and rights of way (the “Premises”);        (ii) all finished goods, supplies, parts, spare parts and other inventories of Seller that on the Closing Date are located on the Premises (including in transit, on consignment or in the possession of any third party) on the Closing Date that is used, held for use or intended to be used in the operation or conduct of the Business (collectively, the “Inventory”);        (iii) all other tangible personal property and interests therein, including all machinery, equipment, furniture, furnishings and vehicles, of Seller on the Premises that is used, held for use or intended to be used in the operation or conduct of the Business (the “Personal Property”);        (iv) all accounts receivable and notes receivable of Seller on the Closing Date (the “Receivables”); --------------------------------------------------------------------------------        (v) all servicemarks, trade names, business names, brand names, copyrights, designs, design registrations, and all rights to any of the foregoing (“ Intellectual Property”), of Seller that are used, held for use or intended to be used in the operation or conduct of the Business (such Intellectual Property being the “Assigned Intellectual Property”);        (vi) all trade secrets, confidential information, know-how, procedures, market surveys and marketing know-how of Seller that are used, held for use or intended to be used in the operation or conduct of the Business (the “Technology”);        (vii) all rights existing under contracts, leases, subleases, licenses, indentures, agreements, commitments and all other legally binding arrangements, whether oral or written, to which Seller is a party or by which Seller is bound (“Contracts”) that are listed in Schedule 3.06 or 3.08, and all other Contracts (including purchase orders and sales orders) to which Seller is a party or by which Seller is bound that are used, held for use or intended to be used in, or that arise out of, the operation or conduct of the Business or to which the Acquired Assets are subject (collectively, the “Assigned Contracts”);        (viii) all rights in and to products sold or leased (including products returned after the Closing and rights of rescission, replevin and reclamation) in the operation or conduct of the Business;        (ix) all credits, rebates or adjustments from suppliers, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items that are used, held for use or intended to be used in, or that arise out of, the operation or conduct of the Business;        (x) all books of account, ledgers, general, financial, accounting and personnel records, files, invoices, customers’ and suppliers’ lists, other distribution lists, billing records, sales and promotional literature, manuals, customer and supplier correspondence (in all cases, in any form or medium), of Seller in Seller’s or Parent’s possession that are used, held for use or intended to be used in, or that arise primarily out of, the conduct or operation of the Business (the “Records”);        (xi) to the extent transferable, all permits, licenses, franchises, orders, registrations, certificates, variances, approvals and similar rights obtained from governments and governmental agencies and all data and records pertaining thereto, in each case, that are used, held for use or intended to be used, in the conduct or operation of the Business, and other than those relating to the Excluded Assets or Excluded Liabilities;        (xii) all claims, refunds, credits, causes of action, choses in action, rights of recovery and rights of set-off of every kind and nature that are used, held for use or intended to be used in the Business, other than those arising out of Excluded Assets or the Excluded Liabilities; --------------------------------------------------------------------------------        (xiii) all rights to receive and retain mail and other communications, in each case relating to the Business other than those relating to the Excluded Assets or Excluded Liabilities; and        (xiv) all goodwill generated by or associated with the Business; other than, in each case of the above, the Excluded Assets (as defined in Section 1.02(b)).      (b) The term “Excluded Assets” means:        (i) all assets identified on Schedule 1.02(b);        (ii) all cash and cash equivalents of Parent or Seller (but excluding petty cash of Seller on hand at the Premises on the Closing Date in an aggregate amount not to exceed $7,000);        (iii) all rights, claims and credits of Parent or Seller to the extent relating to any other Excluded Asset or any Excluded Liability (as defined in Section 1.03(b)), including any such items arising under insurance policies and all guarantees, warranties, indemnities, pre-paid taxes, intercompany accounts and similar rights in favor of Seller or Parent in respect of any other Excluded Asset or any Excluded Liability;        (iv) all the assets of the Seller Benefit Plans (as defined in Section 3.16);        (v) all rights of Seller or Parent under this Agreement and the other agreements and instruments executed and delivered in connection with this Agreement, including the promissory note referred to in Section 2.02(b) (collectively, the “Ancillary Agreements”);        (vi) all records and documents, including confidentiality agreements, prepared in connection with the sale of the Business to Purchaser or other potential purchasers (other than those contained in Seller’s data room provided to Purchaser or otherwise provided to Purchaser as a potential purchaser);        (vii) all financial and tax records relating to the Business that form part of Parent’s general ledger;        (viii) all policies of insurance, whether general liability, worker’s compensation, property or other, and rights and obligations thereunder relating to Seller and its Business;        (ix) any intercompany accounts owed by Parent or its affiliate to Seller; and        (x) any Contract to which Parent is a party relating to any corporate-wide items described on Schedule 3.20 in which Seller participates with Parent on an integrated basis with Parent’s other businesses. --------------------------------------------------------------------------------      SECTION 1.03. Assumption of Certain Liabilities. (a) Upon the terms and subject to the conditions of this Agreement, Purchaser shall assume, effective as of the Closing, and from and after the Closing Purchaser shall pay, perform and discharge when due, only the following liabilities, obligations and commitments of Seller (subject to Purchaser’s right to dispute such liabilities and obligations in good faith with parties to whom such obligations are owed provided such right shall not diminish Purchaser’s indemnity obligations under Article VIII) (such liability, obligations and commitments being the “Assumed Liabilities”):        (i) any and all payment and performance liabilities, obligations and commitments of Seller under the Assigned Contracts whether incurred before, on or after the Closing and including all unpaid rebates and refunds to customers;        (ii) all accounts payable and accrued liabilities of Seller arising out of the operation or conduct of the Business prior to the Closing and contained in the Closing Balance Sheet (as defined in Section 1.05(a)), excluding outstanding uncleared checks of Seller;        (iii) any and all Unknown Environmental Liabilities but only to the extent Seller is not required to indemnify an indemnified party under Section 8.01(a)(iv); and        (iv) all other liabilities, obligations and commitments, whether known or unknown, express or implied, absolute, contingent or otherwise, arising out of the operation or conduct of the Business or Acquired Asset after the Closing.      (b) Notwithstanding Section 1.03(a), or any other provision of this Agreement or any Ancillary Agreement, and regardless of any disclosure to Purchaser, Purchaser shall not assume any of the following liabilities, obligations and commitments of Seller (the “Excluded Liabilities”), each of which shall be retained and paid, performed and discharged when due by Seller or Parent (subject to Seller’s and Parent’s right to dispute such liabilities and obligations in good faith with parties to whom such obligations are owed provided such right shall not diminish Seller’s or Parent’s indemnity obligations under Article VIII). The term “Excluded Liability” means:        (i) any liability, obligation or commitment of Seller or Parent arising under the federal lawsuit Pool Water Products and Aqua Tri v. Olin Corporation and Superior Pool Products (the “PWP Case”);        (ii) any liability, obligation or commitment of Seller or Parent, whether express or implied, liquidated, absolute, accrued, contingent or otherwise, or known or unknown, arising out of the operation or conduct by Parent or any of its affiliates of any business other than the Business; --------------------------------------------------------------------------------        (iii) any liability, obligation or commitment of Seller or Parent that (x) relates primarily to, or that arises primarily out of, any Excluded Asset (other than records), or (y) that arises out of the distribution to, or ownership by, Seller or Parent of the Excluded Assets or associated with the realization of the benefits of any Excluded Asset;        (iv) any liability, obligation or commitment for Taxes (as defined in Section 3.14), whether or not accrued, assessed or currently due and payable, (A) of Seller or (B) relating to the operation or ownership of the Business or the assets for any Tax period (or portion thereof) ending on or prior to the Closing Date (for purposes of this clause (iv), all real property Taxes, personal property Taxes and similar ad valorem Taxes or obligations levied with respect to the Acquired Assets for a Tax period that includes (but does not end on) the Closing Date shall be apportioned between Seller and Purchaser based upon the number of days of such Tax period prior to the Closing Date and the number of days of such Tax period after the Closing Date (which period shall include the Closing Date));        (v) except as expressly provided in Section 5.10, any liability, obligation or commitment of Seller or Parent arising under any Seller Benefit Plan (as defined in Section 3.16(a));        (vi) any liability, obligation or commitment of Seller to any of the affiliates of Parent or to Parent (in each case, other than those arising out of purchase orders for inventory, supplies or raw materials and including outstanding uncleared checks of Seller);        (vii) any of Seller’s or Parent’s liabilities or obligations to Purchaser under this Agreement;        (viii) any of Seller’s liabilities or obligations for expenses or fees incident to or arising out of the negotiation, preparation, approval or authorization of this Agreement or the consummation (or preparation for the consummation) of the transactions contemplated hereby (including, without limitation, all attorneys’ and accountants’ fees), to the extent incurred prior to or at Closing and except that Purchaser shall be responsible for all filing fees for any filing made in connection herewith under the HSR Act (as defined in Section 3.03);        (ix) any of Seller’s liabilities or obligations (A) arising by reason of any violation or alleged violation of any federal, state, local or foreign law or any requirement of any governmental authority (including liabilities or obligations arising out of civil litigation brought by any Person), (B) arising by reason of any breach or alleged breach by Seller of any agreement, contract, lease, commitment, instrument, judgment, order or decree (regardless of when any such violation or breach is asserted), or (C) otherwise arising by reason of any active, pending or threatened litigation, in each case relating to facts, circumstances, acts or omissions existing or occurring prior to the Closing (but nothing in this clause (ix) shall include any matter relating to any Environmental Laws as all such matters are covered in clauses (x) and (xi) hereof and clause (iii) of Section 1.03); --------------------------------------------------------------------------------        (x) any and all Known Environmental Liabilities;        (xi) any and all Unknown Environmental Liabilities but only to the extent Seller is required to indemnify an indemnified party pursuant to Section 8.01(a)(iv);        (xii) any of Seller’s liabilities or obligations arising as a result of the failure of Seller to comply with any bulk sales or bulk transfer laws; and        (xiii) any other liabilities or obligations of Seller of any nature whatsoever not expressly assumed by Purchaser under this Agreement that relate to facts, circumstances, acts or omissions existing or occurring prior to the Closing.      (c) Purchaser shall acquire the Acquired Assets free and clear of all liabilities, obligations and commitments of Seller, other than the Assumed Liabilities, and free and clear of all Liens (as defined in Section 3.05), other than Permitted Liens (as defined in Section 3.05).      (d) Seller and Purchaser acknowledge that certain expenses of the Business are paid on a periodic basis. Accordingly, the items listed below, shall be apportioned between Seller and Purchaser, with Seller being responsible for all such expenses attributable to periods on or prior to the Closing Date, and Purchaser being responsible for all expenses attributable to periods after the Closing Date:        (i) prepaid rent, tenant utility payments and all other percentage or additional rent, common area maintenance and sundry charges (including any HVAC charges) and commissions paid by tenants and prepaid equipment maintenance charges;        (ii) utility company charges, including electricity, gas, fuel, water and sewer charges; and        (iii) real estate taxes, general and special assessments and other public or private charges affecting the Premises and other items apportioned as provided in Section 1.03(b)(iv); and        (iv) prepaid premiums and contributions made by Seller, Parent, or Seller’s employees for Seller’s medical plan (excluding employees participating pursuant to COBRA) provided that the consent of CIGNA HealthCare of California, Inc. (“CIGNA”) for the transfer of Seller’s medical plan contract is obtained by Purchaser. To the extent Seller has already paid prior to the Closing any such expenses for which Purchaser shall be responsible, Purchaser shall promptly after the Closing, to the extent not reflected in the Closing Balance Sheet, reimburse Seller in immediately available funds for such expenses. Seller may also present from time to time an additional list of such expenses following the Closing. Seller and Purchaser each agree to pay such expenses to the other as apportioned within 30 days of presentment after the Closing of an itemized list of such expenses. --------------------------------------------------------------------------------            SECTION 1.04. Consents of Third Parties. (a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any asset (excluding purchase orders and sales orders) or any claim or right or any benefit arising under or resulting from such asset if an attempted assignment thereof, without the consent of a third party, would constitute a breach or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such asset, or would in any way adversely affect the rights of Seller or, upon transfer, Purchaser under such asset. If any transfer or assignment by Seller to, or any assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset (other than purchase orders or sales orders) requires the consent of a third party, then such assignment or assumption shall be made subject to such consent being obtained.      (b) If any such consent is not obtained prior to the Closing, Seller and Purchaser shall cooperate (at their own expense) in any lawful and reasonable arrangement reasonably proposed by Purchaser or Seller under which Purchaser shall obtain the economic claims, rights and benefits under the asset, claim or right with respect to which the consent has not been obtained in accordance with this Agreement. Such reasonable arrangement may include (i) the subcontracting, sublicensing or subleasing to Purchaser of any and all rights of Seller against the other party to such third-party agreement arising out of a breach or cancellation thereof by the other party, and (ii) the enforcement by Seller of such rights.      SECTION 1.05 Purchase Price Adjustments. (a) Within twenty (20) business days following the end of the calendar month in which the Closing occurs, Seller shall deliver to Purchaser a statement (“Seller’s Statement”) showing a balance sheet for the Business as of the Closing Date (“Closing Balance Sheet”) and the actual Net Asset Value as of the Closing Date (the “Actual Closing Net Asset Value”) along with the computation of such value and the recalculation of final Purchase Price using the Actual Closing Net Asset Value in lieu of Estimated Net Asset Value and in the determination of the Additional Amount and any necessary resulting adjustment (“Adjustment”) to the Purchase Price amount paid at Closing. The Closing Balance Sheet and the preparation of the Actual Closing Net Asset Value shall be prepared on a basis consistent with the preparation of the Estimated Net Asset Value as set forth in Section 1.01(b). Purchaser shall cooperate with Seller and its representatives in preparing such statement including providing reasonable access to the Records and the assistance of Purchaser’s employees. Such statement shall become final and binding on the parties except to the extent Purchaser notifies Seller on or before the tenth business day after delivery of Seller’s Statement of Purchaser’s disagreement with such statement along with Purchaser’s computation of the Actual Closing Net Asset Value and final Purchase Price in reasonable detail (“Disagreement Notice”); provided that Purchaser shall not notify Seller of any dispute unless there is a reasonable basis for all such disputes to result in an Adjustment in the aggregate in excess of $50,000 (excluding interest) from the Adjustment shown in Seller’s Statement. If Purchaser so notifies Seller, the parties shall negotiate in good faith regarding such disagreement with the computation of the Actual Closing Net Asset Value and final Purchase Price. If the parties fail to agree on the Actual Closing Net Asset Value and final Purchase Price within 30 days of receipt by Seller of the Disagreement Notice, the parties shall go to arbitration on their disagreement as provided in Section 1.05(b). -------------------------------------------------------------------------------- Once the Actual Closing Net Asset Value is final and binding on the parties (whether as a result of arbitration of otherwise), if the Purchase Price paid at closing exceeds the final Purchase Price, the Seller shall pay to Purchaser an amount equal to the difference between the two values and if the final Purchase Price exceeds the Purchase Price paid at Closing, the Purchaser shall pay to Seller an amount equal to the difference between the two values in immediately available funds within 10 days of the Actual Closing Net Asset Value and final Purchase Price becoming final and binding on the parties. In addition, the payor shall pay with such difference in like funds simple interest thereon at a rate of eight percent (8%) per annum accruing from the Closing Date to and including the date of payment.      (b) As called for by Section 1.05(a), the parties shall submit the dispute(s) set forth in the Disagreement Notice regarding the determination of the Actual Closing Net Asset Value and computation of the final Purchase Price to final and binding arbitration by PricewaterhouseCoopers LLP or such other independent “Big Five” accounting firm as may be mutually agreeable to the parties. In the event PricewaterhouseCoopers LLP is unable or unwilling to review Seller’s Statement and in the event Purchaser and Seller are unable to mutually agree on a replacement accounting firm, a “Big Five” accounting firm will be selected by lot after eliminating one firm designated as objectionable by each of Purchaser and Seller (any accounting firm so selected or agreed upon shall be referred to herein as the “Independent Accountant”). Each Purchaser and Seller shall use its reasonable best efforts to cause the Independent Accountant to make a decision regarding the Actual Closing Net Asset Value and final Purchase Price as soon as practicable, but in any event such Independent Accountant shall make a decision within 120 days after the delivery of the Disagreement Notice to Seller. The costs and expenses associated with the Independent Accountant’s arbitration will be divided evenly between Purchaser and Seller, it being understood that each party hereto shall bear its own accountants’  and attorneys’ fees and expenses in connection with the arbitration.      (c) The final Purchase Price resulting from the adjustment shall be the “Adjusted Purchase Price.”  If the Actual Closing Net Asset Value matter goes to arbitration as set forth in Section 1.05(b), the amount determined in the arbitration shall be used to determine the Adjusted Purchase Price for purposes of this Agreement. -------------------------------------------------------------------------------- ARTICLE II The Closing      SECTION 2.01. Closing Date. The closing of the Acquisition (the “Closing”) shall take place at the offices of Arch Chemicals, Inc., 501 Merritt 7, Norwalk, Connecticut 06851, at 10:00 a.m. on a date mutually acceptable to the parties (but not later than 14 days following the satisfaction (or, to the extent permitted, the waiver) of the conditions set forth in Section 6.01, or, if on such day any condition set forth in Section 6.02 or 6.03 has not been satisfied (or, to the extent permitted, waived by the party entitled to the benefit thereof), as soon as practicable after all the conditions set forth in Article VI have been satisfied (or, to the extent permitted, waived by the parties entitled to the benefits thereof). The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.      SECTION 2.02. Transactions To Be Effected at the Closing. At the Closing:      (a) Seller shall deliver to Purchaser (i) such appropriately executed bills of sale, assignments and other instruments of transfer relating to the Acquired Assets in form and substance reasonably satisfactory to Purchaser and its counsel and (ii) such other documents as Purchaser or its counsel may reasonably request to demonstrate satisfaction of the conditions and compliance with the covenants set forth in this Agreement; and      (b) Purchaser shall deliver to Seller (i) payment, by wire transfer to a bank account designated in writing by Seller (such designation to be made at least two business days prior to the Closing Date), immediately available funds in an amount equal to the Purchase Price, (ii) such appropriately executed assumption agreements and other instruments of assumption providing for the assumption of the Assumed Liabilities in form and substance reasonably satisfactory to Seller and its counsel and (iii) such other documents as Seller or its counsel may reasonably request to demonstrate satisfaction of the conditions and compliance with the covenants set forth in this Agreement.      SECTION 2.03. Risk of Loss. Until the Closing, any loss of or damage to the Acquired Assets from fire, casualty or any other occurrence shall be the sole responsibility of Seller. -------------------------------------------------------------------------------- ARTICLE III Representations and Warranties of Seller      Seller represents and warrants to Purchaser, as of the date of this Agreement and as of the Closing Date, as follows:      SECTION 3.01. Organization, Standing and Power. Each of Seller and Parent is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct the Business and its other businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse effect (i) (A) in the case of Seller, on the business and financial condition or results of operations of Seller or of the Business and (B) in the case of Parent, on the business and financial condition or results of operations of Parent or (ii) on the ability of such party to consummate the Acquisition and the other transactions contemplated hereby (clauses (i)(A) and (ii) being a “Seller Material Adverse Effect” and clauses (i)(B) and (ii) being a “Parent Material Adverse Effect”). Each of Seller and Parent is duly qualified to do business as a foreign corporation in each jurisdiction where the character of the Acquired Assets held by it or the nature of the Business make such qualification necessary for it to conduct the Business as currently conducted by it or the failure to so qualify has had or could reasonably be expected to have a Seller Material Adverse Effect.      SECTION 3.02. Authority; Execution and Delivery; Enforceability. Each of Seller and Parent has full power and authority to execute this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution and delivery by each of Seller and Parent of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and the consummation by each of Seller and Parent of the Acquisition and the other transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. Each of Seller and Parent has duly executed and delivered this Agreement and prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid and binding obligation. --------------------------------------------------------------------------------      SECTION 3.03. No Conflicts; Consents. The execution and delivery by Seller and Parent of this Agreement do not, the execution and delivery by Seller and Parent of each Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the Acquisition and the other transactions contemplated hereby and thereby and compliance by Seller and Parent with the terms hereof and thereof will not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Seller under, any provision of (i) the certificate of incorporation or bylaws of Seller or Parent, (ii) any Contract to which Seller or Parent is a party or by which any of their respective properties or assets is bound or (iii) any judgment, order or decree (“Judgment”) or statute, law, ordinance, rule or regulation (“Applicable Law”) applicable to Seller or Parent or their respective properties or assets, other than (A) in the case of clauses (ii) and (iii) above, (1) any such items applicable to Seller (excluding purchase orders, sales orders and those Contracts listed on Schedule 3.08) that, individually or in the aggregate, have not had and could not reasonably be expected to have a Seller Material Adverse Effect, (2) any such items applicable to Parent that individually or in the aggregate, have not had and could not reasonably be expected to have a Parent Material Adverse Effect, and (B) those Contracts listed on Schedule 3.08 as noted therein as requiring consent. No consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing with, any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a “Governmental Entity”), is required to be obtained or made by or with respect to Seller or Parent in connection with the execution, delivery and performance of this Agreement or any Ancillary Agreement or the consummation of the Acquisition or the other transactions contemplated hereby and thereby, other than (I) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), (II) compliance with and filings under Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), (III) compliance with and filings and notifications under applicable environmental laws, and (IV) those that may be required solely by reason of Purchaser’s (as opposed to any other third party’s) participation in the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements.      SECTION 3.04. Financial Statements. Schedule 3.04 sets forth the balance sheets and income statements (the “Financial Statements”) provided by Seller to Purchaser (the most recent balance sheet included in the Financial Statements being the “Balance Sheet”). The Financial Statements have been prepared in conformity with GAAP consistently applied except in each case, they exclude any statements of cash flows, changes in equity, omit footnotes, and do not include any allocation of certain compensation and benefit related costs for certain employees, and on that basis fairly present (subject, in the case of any interim statements, to normal, recurring year-end adjustments) the financial condition and results of operations of the Business as of the respective dates thereof and for the respective periods indicated from the books and records of Seller and Parent relating to the Business and fairly present the financial condition and results of operation of the Business as of the dates and for the periods indicated. --------------------------------------------------------------------------------      SECTION 3.05. Assets Other than Real Property Interests. (a) Seller has good and valid title to all the Acquired Assets, in each case free and clear of all mortgages, liens, security interests, charges, easements, leases, subleases, covenants, rights of way, options, claims, restrictions or encumbrances of any kind (collectively, “Liens”), except (i) such as are set forth in Schedule 3.05, (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and liens for Taxes that are not due and payable or that may thereafter be paid without penalty, and (iii) other imperfections of title or encumbrances, if any, that individually or in the aggregate, do not materially impair, and could not reasonably be expected to impair, the continued use and operation of the assets to which they relate in the conduct of the Business as presently conducted (the Liens described in clauses (i), (ii) and (iii) above, together with the Liens referred to in clauses (ii) through (vi) of Section 3.06, are referred to collectively as “Permitted Liens”).      (b) This Section 3.05 does not relate to real property or interests in real property, such items being the subject of Section 3.06, or to Intellectual Property, such items being the subject of Section 3.07.      SECTION 3.06. Real Property. There are no real property and interests in real property owned in fee by Seller and used, held for use or intended to be used in the operation or conduct of the Business, other than any such property or interest constituting an Excluded Asset. Schedule 3.06 sets forth a complete list of all real property and interests in real property leased by Seller and used, held for use or intended to be used in the operation or conduct of the Business, other than any such property or interest constituting an Excluded Asset (individually, a “Leased Property”). Seller has good and valid title to the leasehold estates in all Leased Property, in each case free and clear of all Liens, except (i) Liens described in clause (ii) or (iii) of Section 3.05(a), (ii) such as are set forth in Schedule 3.06, (iii) leases, subleases and similar agreements set forth in Schedule 3.08, (iv) easements, covenants, rights-of-way and other similar restrictions of record, (v) any conditions that may be shown by a current, accurate survey or physical inspection of any Leased Property made prior to Closing and (vi) (A) zoning, building and other similar restrictions, (B) Liens that have been placed by any developer, landlord or other third party on property over which Seller has easement rights or on any Leased Property and subordination or similar agreements relating thereto and (C) unrecorded easements, covenants, rights-of-way and other similar restrictions. None of the items set forth in clause (vi) above, individually or in the aggregate, materially impairs, or could reasonably be expected materially to impair, the continued use and operation of the Leased Property to which they relate in the conduct of the Business as presently conducted. --------------------------------------------------------------------------------      SECTION 3.07. Intellectual Property. Seller owns or has licensed to it all Intellectual Property currently used in the operation or conduct of the Business, other than unregistered designs and copyrights that, individually and in the aggregate, are not material to the conduct of the Business as presently conducted.      SECTION 3.08. Contracts. (a) Except as set forth in Schedule 3.08 and except for Contracts relating solely to Excluded Assets or Excluded Liabilities, Seller is not a party to or bound by any Contract that is used, held for use or intended for use in, or that arises out of, the operation or conduct of the Business and that is:        (i) a written employment agreement or employment contract that has an aggregate future liability in excess of $20,000 and is not terminable by Seller by notice of not more than 60 days for a cost of less than $20,000;        (ii) a collective bargaining agreement or other Contract with any labor organization, union or association;        (iii) a covenant not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar agreement and listed on Schedule 3.06 or 3.08) that limits the conduct of the Business as presently conducted;        (iv) a Contract with (A) any shareholder or affiliate of Seller or (B) any current or former officer, director or employee of Seller or any of its affiliates (other than employment agreements covered by clause (i) above and purchase orders for supplies, raw materials and inventory bought from Parent and its affiliates);        (v) a lease, sublease or similar Contract with any person under which Seller is a lessor or sublessor of, or makes available for use to any person, (A) any Leased Property or (B) any portion of any premises otherwise occupied by Seller;        (vi) a lease, sublease or similar Contract with any person under which (A) Seller is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any person or (B) Seller is a lessor or sublessor of, or makes available for use by any person, any tangible personal property owned or leased by Seller, that in any such case has an aggregate future liability or receivable, as the case may be, in excess of $10,000 and is not terminable by Seller by notice of not more than 60 days for a cost of less than $10,000; --------------------------------------------------------------------------------        (vii) (A) a continuing Contract for the future purchase of materials, supplies or equipment (other than purchase orders for inventory in the ordinary course of business consistent with past practice), (B) a management, service, consulting or other similar Contract or (C) an advertising agreement or arrangement, in any such case that has an aggregate future liability to any person in excess of $15,000 and is not terminable by Seller by notice of not more than 60 days for a cost of less than $15,000;        (viii) a license, sublicense, option or other Contract relating in whole or in part to the Assigned Intellectual Property (including any license or other Contract under which Seller is licensee or licensor of any Assigned Intellectual Property) or to any Technology (excluding shrink wrap license entered into in the ordinary course of business);        (ix) (A) a Contract under which Seller has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any person (other than Parent) or (B) any other note, bond, debenture or other evidence of indebtedness issued to any person (other than Parent), in any such case that, individually, is in excess of $10,000;        (x) a Contract (including any so-called take-or-pay or keepwell agreement) under which (A) any person has directly or indirectly guaranteed indebtedness, liabilities or obligations of Seller or (B) Seller has directly or indirectly guaranteed indebtedness, liabilities or obligations of any other person (in each case other than endorsements for the purpose of collection in the ordinary course of business), in any such case that, individually, is in excess of $10,000;        (xi) a Contract under which Seller has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any person (other than Parent and other than extensions of trade credit in the ordinary course of the Business), in any such case that, individually, is in excess of $10,000 (except those made to Parent or any of its affiliates);        (xii) a Contract granting a Lien (other than Permitted Liens) upon any Leased Property or any other Acquired Asset;        (xiii) a Contract providing for indemnification of any person with respect to material liabilities relating to any current or former business of Seller or any predecessor person;        (xiv) a power of attorney (other than a power of attorney given in the ordinary course of the Business with respect to routine tax matters);        (xv) a Contract not made in the ordinary course of the Business;        (xvi) a confidentiality agreement; --------------------------------------------------------------------------------        (xvii) a Contract (including a purchase order), involving payment by Seller of more than $100,000 or extending for a term more than 180 days from the date of this Agreement (unless terminable without payment or penalty upon no more than 60 days’ notice), other than purchase orders entered into in the ordinary course of the Business after the date of this Agreement and not in violation of this Agreement;        (xviii) a Contract (including a sales order) involving the obligation of Seller to deliver products or services for payment of more than $20,000 or extending for a term more than 180 days from the date of this Agreement (unless terminable without payment or penalty upon no more than 60 days’ notice), other than sales orders entered into in the ordinary course of the Business after the date of this Agreement and not in violation of this Agreement;        (xix) a Contract for the sale of any Acquired Asset (other than inventory sales in the ordinary course of business) or the grant of any preferential rights to purchase any Acquired Asset or requiring the consent of any party to the transfer thereof;        (xx) a Contract with or license or Permit by or from any Governmental Entity;        (xxi) a currency exchange, interest rate exchange, commodity exchange or similar Contract to which Seller is a party;        (xxii) a Contract for any joint venture, partnership or similar arrangement to which Seller is a party;        (xxiii) a Contract providing for the services of any dealer, distributor, sales representative, franchisee or similar representative involving the payment or receipt over the life of such Contract in excess of $20,000 by Seller;        (xxiv) a Contract providing for the provision of advertising services and involving the payment or receipt over the life of such Contract in excess of $20,000 by Seller;        (xxv) other Contract that has an aggregate future liability to any person (other than Seller) in excess of $50,000 and is not terminable by Seller by notice of not more than 60 days for a cost of less than $50,000 (other than purchase orders and sales orders); or        (xxvi) a Contract other than as set forth above to which Seller is a party or by which it or any of its assets or businesses is bound or subject that is material to the Business or the use or operation of the Acquired Assets. -------------------------------------------------------------------------------- The aggregate expected liability of Seller under all Assigned Contracts other than Contracts listed on Schedule 3.06 or 3.08 and other than those Contracts entered into the ordinary course of business does not exceed $50,000. For purposes of clauses (i), (vi), (vii), (ix), (x), (xi), (xvii), (xviii), (xxiii), (xxiv) and (xxv) of this Section 3.8(a), the dollar materiality thresholds shall include the aggregate amounts of any similar agreements with the same or related parties but excluded from this sentence are those Contracts with customers or suppliers (including purchase orders).      (b) Except as set forth in Schedule 3.08, all Contracts listed in such Schedule are valid, binding and in full force and effect and are enforceable by Seller, in accordance with their terms, except for such failures to be valid, binding, in full force and effect or enforceable that, individually or in the aggregate, have not had and could not reasonably be expected to have a Seller Material Adverse Effect. Except as set forth in Schedule 3.08, Seller has performed all material obligations required to be performed by it to date under the Assigned Contracts, and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder and, to the knowledge of Seller, no other party to any Assigned Contract is (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder , except, in each case, for such noncompliance, breaches and defaults that, individually or in the aggregate, have not had and could not reasonably be expected to have a Seller Material Adverse Effect. Seller has not, except as disclosed in the applicable Schedule, received any notice of the intention of any party to terminate any Assigned Contract listed in any Schedule. Complete and correct copies of all Contracts listed in the Schedules, together with all modifications and amendments thereto, have been made available to Purchaser. Notwithstanding anything in this Agreement to the contrary, Seller makes no representation or warranty with respect to Seller’s obligations to make rebates or refunds to customers and Seller’s rights to receive rebates or refunds from suppliers (other than providing Purchaser with true and correct copies of Seller’s customer rebate program as in effect for 2000 and copies of Seller’s supplier rebate programs in Seller’s possession).      (c) Schedule 3.08 sets forth for each Assigned Contract whether or not the Consent of the other party or parties thereto must be obtained by virtue of the execution and delivery of this Agreement or the consummation of the Acquisition to avoid the invalidity of the transfer of such Assigned Contract, the termination thereof, a breach, violation or default thereunder or any other change or modification to the terms thereof, other than such Assigned Contracts the termination of which by any party thereto, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect. --------------------------------------------------------------------------------      SECTION 3.09. Inventory. Except to the extent of reserves required by GAAP, the Inventory is generally of a quality and quantity usable and salable at customary gross margins and with customary markdowns consistent in all material respects with past practice in the ordinary course of business and is reflected on the Balance Sheet and in the books and records of the Business in accordance with GAAP. Except as set forth in Schedule 3.09, since the date of the Balance Sheet, there have not been any write-downs of the value of, or establishment of any reserves against, any inventory of the Business, except for write-downs and reserves in the ordinary course of business and consistent with past practice.      SECTION 3.10. Personal Property. Schedule 3.10 sets forth a brief description of each item of Personal Property with an original cost in excess of $10,000, indicating, in each case, the purchase price thereof and the accumulated book depreciation. Each material item of Personal Property is in good working order (ordinary wear and tear excepted), is free from any material defect and has been maintained in all material respects in accordance with the past practice of the Business and generally accepted industry practice, and no repairs, replacements or regularly scheduled maintenance relating to any such item has been deferred. All leased personal property of the Business is in all material respects in the condition required of such property by the terms of the lease applicable thereto.      SECTION 3.11. Receivables. All the Receivables (a) represent actual indebtedness incurred by the applicable account debtors, (b) have arisen from bona fide transactions in the ordinary course of the Business and (c) are not subject to any deduction, setoff or similar right, except for customer rebates in accordance with Seller’s policies, except to the extent of reserves required by GAAP, and except which if exercised would not have a Seller Material Adverse Effect. Since the date of the Balance Sheet, there have not been any write-offs as uncollectible of any receivables, except for write-offs in the ordinary course of the Business and consistent with past practice.      SECTION 3.12. Permits. (a) Schedule 3.12 sets forth all material certificates, licenses, permits, authorizations and approvals (“Permits”) issued or granted to Seller by Governmental Entities that are used or held for use in the operation or conduct of the Business. Except as set forth in Schedule 3.12, (i) all such Permits are validly held by Seller, and Seller has complied in all material respects with all terms and conditions thereof, (ii) since January 1, 1999, Seller has not received notice of any Proceedings relating to the revocation or modification of any such Permits the loss of which, individually or in the aggregate, has had and could reasonably be expected to have a Seller Material Adverse Effect, and (iii) to the knowledge of Seller, none of such Permits will be subject to suspension, modification, revocation or nonrenewal as a result of the execution and delivery of this Agreement or the consummation of the Acquisition, however, Seller makes no representation and warranty as to the assignability or transferability of the Permits to Purchaser. --------------------------------------------------------------------------------      (b) Seller possesses all material Permits to own or hold under lease and operate the Acquired Assets and to conduct the Business as currently conducted, other than such Permits the absence of which, individually or in the aggregate, has not had and could not reasonably be expected to have a Seller Material Adverse Effect.      SECTION 3.13. Sufficiency of Acquired Assets. The Acquired Assets (together with the Excluded Assets specified in Section 1.02(b)), comprise all the assets employed by Seller in connection with the Business. Assuming transfer to Purchaser of all Acquired Assets at the Closing, the Acquired Assets are sufficient for the conduct of Business immediately following the Closing in substantially the same manner as currently conducted.      SECTION 3.14. Taxes. (a) For purposes of this Agreement:      “Tax” or “Taxes” means all Federal, state, local, foreign and other governmental taxes, fees, levies, duties, or similar assessments or charges (including, sales, use, ad valorem, value added, transfer, license, withholding tax on amounts paid, payroll, employment, excise, severance, stamp, occupation, property, environmental or windfall profit tax, premium, custom, duty or other tax), together with any interest, penalty, addition to tax or additional amount due, imposed by the Governmental Entity (domestic or foreign) responsible for the imposition of any such tax (a “Taxing Authority”).      “Code” means the Internal Revenue Code of 1986, as amended.      (b) Except as set forth in Schedule 3.14, (i) Seller and/or Parent have filed or caused to be filed in a timely manner (within any applicable extension periods) all material Tax returns, reports and forms required to be filed by the Code or by applicable state, local or foreign Tax laws, (ii) all Taxes shown to be due on such returns, reports and forms have been timely paid in full or will be timely paid in full by the due date thereof, and (iii) no material Tax Liens have been filed and no material claims are being asserted in writing with respect to any Taxes and Seller has no knowledge that any such claim shall be made.      (c) Except as set forth in Schedule 3.14, (i) neither Parent nor any of its affiliates has made with respect to Seller, or any assets of the Business, any consent under Section 341 of the Code, (ii) none of the Acquired Assets is “tax exempt use property” within the meaning of Section 168(h) of the Code, and (iii) none of the Acquired Assets is a lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 and (iv) there are no Liens for Taxes (other than current Taxes not yet due and payable) on any of the Acquired Assets.      (d) Seller is not a “foreign person” within the meaning of Section 1445 of the Code. --------------------------------------------------------------------------------      SECTION 3.15. Proceedings. Except for the PWP Case, Schedule 3.15 sets forth a list as of the date of this Agreement of each pending or, to the knowledge of Seller, threatened Proceeding or claims with respect to which Seller has been contacted orally or in writing by counsel for the plaintiff or claimant, arising out of the conduct of the Business or against any Acquired Asset and that (a) relates to or involve more than $20,000 (in excess of available insurance coverage), (b) seek any material injunctive relief or (c) may give rise to any legal restraint on or prohibition against the transactions contemplated by this Agreement. Except as set forth in Schedule 3.15, none of the Proceedings or claims listed in Schedule 3.15 as to which there is at least a reasonable possibility of adverse determination would have, if so determined, individually or in the aggregate, a Seller Material Adverse Effect. Except as set forth in Schedule 3.15, to the knowledge of Seller, there are no unasserted claims of the type that would be required to be disclosed in Schedule 3.15 if counsel for the claimant had contacted Seller that if asserted would have at least a reasonable possibility of an adverse determination. Except as set forth in Schedule 3.15, Seller is not a party or subject to or in default under any Judgment applicable to the conduct of the Business or any Acquired Asset or Assumed Liability. Except as set forth in Schedule 3.15, there is not any Proceeding or claim by Seller pending, or which Seller intends to initiate, against any other Person arising out of the conduct of the Business. Except as set forth in Schedule 3.15, there is no pending, or to the knowledge of Seller, threatened investigation of the conduct of the Business or any Acquired Asset or Assumed Liability of which Seller has been given notice.      SECTION 3.16. Benefit Plans. (a) Schedule 3.16(a) contains a list of all “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), maintained or contributed to by Seller for the benefit of any officers or employees of the Business (“Seller Pension Plans”) and all “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase, deferred compensation plans or arrangements and other employee fringe benefit plans maintained, or contributed to, by Seller or any of its affiliates for the benefit of any officers or employees of the Business (all the foregoing, including Seller Pension Plans, being herein called “Seller Benefit Plans”). Seller has made available to Purchaser true, complete and correct copies of each Seller Benefit Plan (or, in the case of any unwritten Seller Benefit Plans, descriptions thereof).      (b) Except as set forth in Schedule 3.16(b), no employee of the Business will become entitled to any bonus, retirement, severance, job security or similar benefit or any enhanced benefit solely as a result of the sale of the Acquired Assets by Seller at the Closing. --------------------------------------------------------------------------------      (c) The Seller Pension Plans (i) comply in form and in operation in all material respects with the applicable requirements of law except to the extent such compliance with form is not required under Applicable Law as in effect on the Closing Date and except for instances of noncompliance that, individual or in the aggregate, would not have a Parent Material Adverse Effect, (ii) if any Seller Pension Plan is intended to be qualified under Section 401(a) of the Code, such Plan has received a favorable determination letter from the Internal Revenue Service that it is qualified and, to Seller’s knowledge, no event has occurred and no condition exists which could reasonably be expected to result in the revocation of any such favorable determination letter (except for amendments required to be made prior to the end of 2000 as a result of changes required by Applicable Law), and (iii) all contributions or premium payments which are due on or before the Closing Date by Parent or Seller or any of its affiliates with respect to each Seller Benefit Plan will be timely paid in full and all contributions and premium payments which are not due for all periods ending on the Closing Date will be adequately accrued in the financial records of Parent or Seller.      (d) Seller has complied in all material respects with the requirements of Section 4980B of the Code and Sections 601 et seq. of ERISA (“COBRA”). Seller does not have any obligation or liability to provide post-employment welfare benefits to any current or former employee of the Business (other than as required by COBRA and other than possibly to persons who retire on or after age 55 under Seller Pension Plans).      (e) None of the Acquired Assets of Seller are subject to any Lien in favor of or asserted by the Internal Revenue Service, the Pension Benefit Guaranty Corporation, the Department of Labor or any other governmental authority, agency, department or government-owned corporation.      (f) Neither Seller nor any member of Seller’s controlled group, as defined in Section 414 of the Code, maintains, has maintained or contributed to a “multiemployer plan” (as defined in Section 3(37) of ERISA) which could result in liability to Seller or Purchaser.      (g) Schedule 3.16(g) lists the employees of Seller who are on short term disability leave as of the date hereof.      SECTION 3.17. Absence of Changes or Events. Except as set forth in Schedule 3.17, from the date of the Balance Sheet to the date of this Agreement, there has not been any material adverse change in the business, financial condition or results of operations of the Business, taken as a whole, other than changes relating to United States or foreign economies in general or the industries in which the Business operates and not specifically relating to the Business. Purchaser acknowledges that there may have been disruption to the Business as a result of the announcement by Seller of its intention to sell the Business (and there may be disruption to the Business as a result of the execution of this Agreement and the consummation of the transactions contemplated hereby), and Purchaser acknowledges that such disruptions do not and shall not constitute a breach of this Section 3.17. Except as set forth in Schedule 3.17, from the date of the Balance Sheet to the date of this Agreement, Seller has caused the Business to be conducted in the ordinary course and in substantially the same manner as previously conducted and has made all reasonable efforts consistent with past practices to preserve the relationships of the Business with customers, suppliers and others with whom the Business deals. Except as set forth in Schedule 3.17 or other Schedules hereto, since the date of the Balance Sheet to the date of this Agreement, neither Seller nor Parent has taken any action that, if taken after the date of this Agreement, would constitute a breach of Section 5.01. --------------------------------------------------------------------------------      SECTION 3.18. Compliance with Applicable Laws. (a) Except as set forth in Schedule 3.18, the Business is in compliance in all material respects with all Applicable Laws, including those relating to occupational health and safety or the environment, except for instances of noncompliance that, individually or in the aggregate, have not had and could not reasonably be expected to have a Seller Material Adverse Effect. Except as set forth in Schedule 3.18, none of Seller and Parent has received any written communication in the 24-month period prior to the date hereof from a Governmental Entity that alleges that the Business is not in compliance in any material respect with any Applicable Law. This Section 3.18(a) does not relate to matters with respect to Taxes, which are the subject of Section 3.14, or to environmental matters, which are the subject of Section 3.18(b).      (b) Except as set forth in Schedule 3.18, (i) in the 24-month period prior to the date hereof, Seller has not received any written communication from a Governmental Entity that alleges that the Business is not in compliance in any material respect with any Environmental Law, (ii) Seller holds, and is in compliance with, all material Permits required to conduct the Business under the Environmental Laws (as defined below), and is in compliance with all Environmental Laws, except, in each case, for any instances of noncompliance that, individually or in the aggregate, have not had and could not reasonably be expected to have a Seller Material Adverse Effect and (iii) in connection with the conduct of the Business in the 24-month period prior to the date hereof, Seller has not entered into or agreed to any court decree or order and are not subject to any Judgment relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Materials (as defined below) under any Environmental Law. Seller has no contingent liabilities in respect of the Business in connection with any Hazardous Materials that, individually or in the aggregate, have had or could reasonably be expected to have a Seller Material Adverse Effect. -------------------------------------------------------------------------------- The term “Environmental Laws” means any and all Applicable Laws, Judgments and Permits issued, promulgated or entered into by any Governmental Entity, relating to the environment, preservation or reclamation of natural resources, or to the management, Release (as such term is defined below) or threatened Release of Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. sub-section 9601 et seq. (“CERCLA”), the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. sub-section 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C. sub-section 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. sub-section 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. sub-section 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. sub-section 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. sub-section 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. sub-section 1801 et seq., and any similar or implementing state or local law, and all amendments or regulations promulgated thereunder. The term “Hazardous Materials” means all explosive or regulated radioactive materials or substances, hazardous or toxic substances, wastes or chemicals, petroleum (including crude oil or any fraction thereof) or petroleum distillates, asbestos or asbestos containing materials, and all other materials or chemicals regulated pursuant to any Environmental Law, including materials listed in 49 C.F.R. section 172.101 and materials defined as hazardous pursuant to sub-section 101(14) of CERCLA. The term “Release” means any spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, emanation or migration of any Hazardous Materials in, into, onto, or through the environment (including ambient air, surface water, ground water, soils, land surface, subsurface strata or workplace).      SECTION 3.19. Employee and Labor Matters. (a) Except as set forth in Schedule 3.19: (i) there is not any, and in the 24-month period prior to the date hereof, there has not been any, labor strike, dispute, work stoppage or lockout pending, or, to the knowledge of Seller, threatened, against the Business; (ii) to the knowledge of Seller (which, for purposes of this clause (ii) only, “knowledge of Seller” includes the conscious awareness of its employees who are branch managers and above), no union organizational campaign is in progress with respect to the employees of the Business and no question concerning representation of such employees exists; (iii) neither Seller nor Parent is engaged in any unfair labor practice in connection with the conduct of the Business; (iv) there are not any unfair labor practice charges or complaints against Seller pending, or, to the knowledge of Seller, threatened, before the National Labor Relations Board in connection with the conduct of the Business; (v) there are not any pending, or, to the knowledge of Seller, threatened, union grievances against Seller in connection with the conduct of the Business as to which there is a reasonable possibility of adverse determination and that, if so determined, individually or in the aggregate, could reasonably be expected to have a Seller Material Adverse Effect; (vi) there are not any pending, or, to the knowledge of Seller, threatened, charges in connection with the conduct of the Business against Seller or any current or former employee of the Business before the Equal Employment Opportunity Commission or any state or local agency responsible for the prevention of unlawful employment practices; and (vii) neither Seller nor Parent has received written notice in the 24-month period prior to the date hereof of the intent of any Governmental Entity responsible for the enforcement of labor or employment laws to conduct an investigation of the Business and, to the knowledge of Seller, no such investigation is in progress. --------------------------------------------------------------------------------      (b) Seller has supplied Purchaser with a list setting forth the name and current base salary of each employee of the Business as of January 20, 2000, together with the current job title or relationship to the Business.      (c) No employee of the Business is, to the knowledge of Seller, a party to or bound by any Contract, or subject to any Judgment that may interfere with the use of such person’s best efforts to promote the interests of the Business, may conflict with the Business or the transactions contemplated hereby or that has had or could reasonably be expected to have a Material Adverse Effect. To the knowledge of Seller, no activity of any employee of the Business as or while an employee of the Business has caused a violation of any employment contract, confidentiality agreement, patent disclosure agreement or other Contract to which such employee was a party. To the knowledge of Seller, neither the execution and delivery of this Agreement, nor the conduct of the Business by the employees of the Business, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract, under which any such employee is now obligated.      SECTION 3.20. Transactions with Affiliates. Except as set forth in Schedule 3.20, none of the Contracts set forth in Schedule 3.08 between the Business, on the one hand, and Seller or any of its affiliates, on the other hand, will continue in effect subsequent to the Closing. Except as set forth in Schedule 3.20, after the Closing none of Seller’s affiliates (other than Seller) will have any material interest in any property (real or personal, tangible or intangible) or Contract used in or pertaining to the Business. Except as set forth in Schedule 3.20, neither Parent nor Seller provides any material services to the Business.      SECTION 3.21. Suppliers. Except as set forth in Schedule 3.21, between the date of the Balance Sheet and the date of this Agreement, in the conduct of the Business Seller has not entered into or made any contract or commitment for the purchase of merchandise other than in the ordinary course of business consistent with past practice. Set forth on Schedule 3.21 are the top ten suppliers in terms of dollars spent, of goods or services purchased by the Business during its most recent full fiscal year. Except as set forth in Schedule 3.21, since the date of the Balance Sheet there has not been (i) any material adverse change in the business relationship of the Business with any supplier of merchandise named in Schedule 3.21 or (ii) any change in any material term (including credit terms) of the supply agreements or related arrangements with any such supplier. --------------------------------------------------------------------------------      SECTION 3.22. Subsidiaries; Investments. Seller does not own or control (directly or indirectly), hold or have any right or options to subscribe for, purchase or acquire any shares of stock, partnership interest, joint venture interest, equity participation or any other security or interest in any other person. Seller does not have and has never had any subsidiaries.      SECTION 3.23. Absence of Undisclosed Known Liabilities. To Seller’s knowledge, Seller has no obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when or by whom asserted) and there is no basis for any proceeding, hearing, investigation, charge, complaint or claim with respect to any obligations or liabilities except (a) obligations under contracts or commitments described in Schedule 3.06 or Schedule 3.08 hereto or under contracts and commitments entered into in the ordinary course of business which are not required to be disclosed thereon, (b) the Excluded Liabilities, (c) liabilities reflected on the liability side of the Balance Sheet, (d) liabilities which have arisen after the date of the Balance Sheet in the ordinary course of business or otherwise in accordance with the terms and conditions of this Agreement, (e) such liabilities which in the aggregate would not have a Seller Material Adverse Effect and (f) liabilities otherwise expressly set forth in Schedule 3.23 or other schedules to this Agreement.      SECTION 3.24. Officers and Directors. Schedule 3.24 attached hereto lists all officers and directors of Seller.      SECTION 3.25. Product Warranty. Each product sold or delivered by Seller has been in conformity with all applicable contractual commitments and all express and implied warranties made by Seller except in each case to the extent such lack of conformity would not have a Seller Material Adverse Effect. Seller has not altered any product from that produced by the manufacturer and has no Liability for express or implied warranties (other than express warranties provided by the manufacturer of a product). Liability for replacement, repair or refunds of products or services sold by Seller for which Seller has not been or is not entitled to reimbursement by the manufacturer in connection with Seller’s informal return policy has not since January 1, 2000 exceeded, in the aggregate, 0.1% of Seller’s 1999 annual sales. Except for products sold or delivered in the ordinary course of its business, no product sold or delivered by Seller is subject to any guaranty, warranty or other indemnity.      SECTION 3.26. Product Liability. Except as set forth in Schedule 3.26 and except for those liabilities which would not have a Seller Material Adverse Effect, Seller has no liabilities that have not been satisfied (and to the knowledge of Seller, there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against Seller giving rise to any liability) arising out of any injury to individuals or property as a result of any defective product manufactured, sold or delivered by Seller. --------------------------------------------------------------------------------      SECTION 3.27. Names and Locations. Except as set forth on Schedule 3.27, during the five-year period prior to the execution and delivery of this Agreement, Seller has not used any names or names under which it has invoiced account debtors, maintained records concerning its assets or otherwise conducted its business. ARTICLE IV Representations and Warranties of Purchaser      Purchaser hereby represents and warrants to Seller, as of the date of this Agreement and as of the Closing Date, as follows:      SECTION 4.01. Organization, Standing and Power. Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse effect on the ability of Purchaser to consummate the Acquisition and the other transactions contemplated hereby (a “Purchaser Material Adverse Effect”).      SECTION 4.02. Authority; Execution and Delivery; and Enforceability. Purchaser has full power and authority to execute this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and the consummation by Purchaser of the Acquisition and the other transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. Purchaser has duly executed and delivered this Agreement and prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid and binding obligation.      SECTION 4.03. No Conflicts; Consents. The execution and delivery by Purchaser of this Agreement do not, the execution and delivery by Purchaser of each Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the Acquisition and the other transactions contemplated hereby and thereby and compliance by Purchaser with the terms hereof and thereof will not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Purchaser or any of its subsidiaries under, any provision of (i) the certificate of incorporation or by-laws of the Purchaser or any of its subsidiaries, (ii) any Contract to which Purchaser or any of its subsidiaries is a party or by which any of their respective properties or assets is bound or (iii) any Judgment or Applicable Law applicable to Purchaser or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably be expected to have a Purchaser Material Adverse Effect. No Consent of or registration, declaration or filing with any Governmental Entity is required to be obtained or made by or with respect to Purchaser or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or any Ancillary Agreement or the consummation of the Acquisition or the other transactions contemplated hereby and thereby, other than (A) compliance with and filings under the HSR Act, (B) compliance with and filings under Section 13(a) of the Exchange Act, if any, (C) compliance with and filings and notifications under applicable environmental laws, and (D) those that may be required solely by reason of the participation of Seller and Parent (as opposed to any other third party) in the Acquisition and other transactions contemplated hereby and by the Ancillary Agreements). --------------------------------------------------------------------------------      SECTION 4.04. Litigation. There are not any (a) outstanding Judgments against Purchaser or any of its subsidiaries, (b) Proceedings pending or, to the knowledge of Purchaser, threatened against Purchaser or any of its subsidiaries or (c) investigations by any Governmental Entity that are, to the knowledge of Purchaser, pending or threatened against Purchaser or any of its subsidiaries that, in any case, individually or in the aggregate, have had or could reasonably be expected to have a Purchaser Material Adverse Effect.      SECTION 4.05. Availability of Funds. Purchaser has cash available or has existing borrowing facilities that together are sufficient to enable it to consummate the Acquisition. The financing required to consummate the Acquisition is referred to in this Agreement as the “Financing”. As of the date of this Agreement, Purchaser does not have any reason to believe that any of the conditions to the Financing will not be satisfied or that the Financing will not be available to Purchaser on a timely basis to consummate the Acquisition.      SECTION 4.06. No Knowledge of Misrepresentation or Omission. As of the date of this Agreement, Purchaser does not have any knowledge that the representations and warranties of Seller and Parent made in this Agreement qualified as to materiality are not true and correct, or that those not so qualified are not true and correct in any material respect. Purchaser does not have any knowledge of any material errors in, or material omissions from, any Schedule, except in each case for items discovered by Purchaser after the date of this Agreement of which Purchaser gives the Seller prompt notice.      SECTION 4.07. Purchaser Plans. Purchaser has provided Seller with a true and correct summary description of each of Purchaser’s welfare benefit and 401(k) plans that are to be offered to the Continuing Employees following the Closing to the extent and as provided in Section 5.10. -------------------------------------------------------------------------------- ARTICLE V Covenants      SECTION 5.01. Covenants of Seller and Parent Relating to Conduct of Business. (a) Except for matters set forth in Schedule 5.01 or otherwise expressly permitted by the terms of this Agreement, from the date of this Agreement to the Closing Seller shall conduct the Business in the usual, regular and ordinary course in substantially the same manner as previously conducted (including with respect to research and development efforts, advertising, promotions, capital expenditures and inventory levels) and, to the extent consistent therewith, use all reasonable efforts to keep intact the Business, keep available the services of the current employees of the Business and preserve the relationships of the Business with customers, suppliers, licensors, licensees, distributors and others with whom the Business deals to the end that the Business shall be unimpaired at the Closing. Prior to the Closing, Seller shall not take any action that would, or that could reasonably be expected to, result in any of the conditions to the purchase and sale of the Acquired Assets set forth in Article VI not being satisfied. In addition (and without limiting the generality of the foregoing), except as set forth in Schedule 5.01 or otherwise expressly permitted or required by the terms of this Agreement, Seller shall not do any of the following in connection with the Business without the prior written consent of Purchaser:        (i) (A) adopt or amend in any material respect any Seller Benefit Plan (or any plan that would be a Seller Benefit Plan if adopted) or enter into, adopt, extend (beyond the Closing Date), renew or amend any collective bargaining agreement or other Contract with any labor organization, union or association, except in each case as required by Applicable Law or except in each case for amendments applicable to all of Parent’s employees generally and except to conform the Seller Benefit Plans to Purchaser’s;        (ii) grant to any executive officer or employee of Seller any increase in compensation or benefits, except in the ordinary course of business and consistent with past practice or as may be required under existing agreements and except for any increases for which Seller shall be solely obligated;        (iii) incur or assume any liabilities, obligations or indebtedness for borrowed money or guarantee any such liabilities, obligations or indebtedness, other than in the ordinary course of business and consistent with past practice; provided, however, that in no event shall the Business incur or assume any long-term indebtedness for borrowed money;        (iv) permit, allow or suffer any Acquired Asset to become subjected to any Lien of any nature whatsoever that would have been required to be set forth in Schedule 3.05, 3.06 or 3.14 if existing on the date of this Agreement except in the ordinary course of business; --------------------------------------------------------------------------------        (v) cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value except for indebtedness owed to Parent or its affiliates;        (vi) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets (other than inventory) that are material, individually or in the aggregate, to the Business;        (vii) make or incur any capital expenditure that is not currently approved in writing or budgeted or otherwise not in the ordinary course of business;        (viii) sell, lease, license or otherwise dispose of any of its assets that are material, individually or in the aggregate, to the Business, except (A) inventory and obsolete or excess equipment sold or disposed of in the ordinary course of business and consistent with past practice and (B) any Excluded Asset described in Section 1.02(b);        (ix) enter into any lease of real property, except any renewals or replacement of existing leases in the ordinary course of business; or        (x) authorize any of, or commit or agree to take, whether in writing or otherwise, to do any of, the foregoing actions.      (b) Advise of Changes. Seller shall promptly advise Purchaser in writing of the occurrence of any matter or event that is material to the business, financial condition, liabilities or results of operations of the Business.      (c) Affirmative Covenants. Until the Closing, Seller shall:         (i) maintain the Acquired Assets in the ordinary course of business in good operating order and condition, reasonable wear and tear excepted;         (ii) upon any damage, destruction or loss to any material Acquired Asset, apply any and all insurance proceeds received with respect thereto to the prompt repair, replacement and restoration thereof to the condition of such Acquired Asset before such event or, if required, to such other (better) condition as may be required by Applicable Law; and         (iii) maintain the level and quality of Inventory and supplies, and spare parts in the ordinary course in a manner consistent with its past practices.      SECTION 5.02 [Intentionally left blank.] --------------------------------------------------------------------------------      SECTION 5.03. Access to Information. Seller shall afford to Purchaser and its accountants, counsel and other representatives reasonable access, upon reasonable notice during normal business hours during the period prior to the Closing, to all the personnel, properties, books, contracts, commitments, Tax returns and records of the Business (other than the Excluded Assets), in each case in Seller’s or Parent’s possession, and during such period shall furnish promptly to Purchaser any information concerning the Business as Purchaser may reasonably request; provided, however, that such access does not unreasonably disrupt the normal operations of Seller or the Business.      SECTION 5.04. Confidentiality. (a) Purchaser acknowledges that the information being provided to it in connection with the Acquisition and the consummation of the other transactions contemplated hereby is subject to the terms of a confidentiality agreement between Purchaser and Seller (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only upon, the Closing, the Confidentiality Agreement shall terminate with respect to information relating solely to the Business; provided, however, that Purchaser acknowledges that any and all other information provided to it by Seller or Parent or their representatives concerning Seller or Parent in connection with this Agreement prior to, on or after the Closing shall be deemed “Evaluation Material” under the Confidentiality Agreement and shall be subject to the terms and conditions of the Confidentiality Agreement after the Closing Date.      (b) Seller and Parent shall each keep confidential, and cause its affiliates and its and their officers, directors, employees and advisors to keep confidential, all information relating to the Business, except as required by law or administrative process and except for information that is available to the public on the Closing Date, or thereafter becomes available to the public other than as a result of a breach of this Section 5.04(b). The covenant set forth in this Section 5.04(b) shall terminate one year after the Closing Date.      SECTION 5.05. Reasonable Efforts. (a) On the terms and subject to the conditions of this Agreement, each party shall use its reasonable efforts to cause the Closing to occur, including taking all reasonable actions necessary to comply promptly with all legal requirements that may be imposed on it or any of its affiliates with respect to the Closing.      (b) Each of Seller and Purchaser shall as promptly as practicable, but in no event later than seven business days following the execution and delivery of this Agreement, file with the United States Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”) the notification and report form, if any, required for the transactions contemplated hereby and any supplemental information requested in connection therewith pursuant to the HSR Act. Any such notification and report form and supplemental information shall be in substantial compliance with the requirements of the HSR Act. Each of Purchaser and Seller shall furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission that is necessary under the HSR Act. Seller and Purchaser shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from, the FTC and the DOJ and shall comply promptly with any such inquiry or request. Each of Seller and Purchaser shall use its reasonable efforts to obtain any clearance required under the HSR Act for the consummation of the transactions contemplated by this Agreement; provided that Purchaser shall not be required to accept any conditions that may be imposed by the FTC or the DOJ in connection with such filings that would require the divestiture of any Purchaser assets or otherwise have a material adverse effect on Purchaser’s financial condition, results of operations, business or prospects. --------------------------------------------------------------------------------      (c) Prior to the Closing and for a period of 12 months thereafter, each party shall, and shall cause its affiliates to, use its reasonable efforts at its own expense to obtain, and to cooperate in obtaining, all consents from third parties necessary or appropriate to permit the transfer of the Acquired Assets to, and the assumption of the Assumed Liabilities by, Purchaser; provided, however, that the parties shall not be required to pay or commit to pay any amount to (or incur any obligation in favor of) any person from whom any such consent may be required (other than nominal filing or application fees).      SECTION 5.06. Expenses; Transfer Taxes. (a) Whether or not the Closing takes place, and except as set forth in Sections 5.12 and 9.03 and Article VIII, all costs and expenses incurred in connection with this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such expense, including all costs and expenses incurred pursuant to Section 5.05.      (b) All Transfer Taxes applicable to the conveyance and transfer from Seller to Purchaser of the Acquired Assets and any other transfer or documentary Taxes or any filing or recording fees applicable to such conveyance and transfer shall be paid by Purchaser. Each party shall use reasonable efforts to avail itself of any available exemptions from any such Taxes or fees, and to cooperate with the other parties in providing any information and documentation that may be necessary to obtain such exemptions. For purposes of this Agreement, “Transfer Taxes” means any transfer, sales, use, value-added, excise or similar tax and related amounts, including penalties, interest and additions imposed with respect to such amounts, incurred with respect to the transfer of the Acquired Assets.      SECTION 5.07. Brokers or Finders. Each of Purchaser and Seller represent, as to itself and its affiliates, that no agent, broker, investment banker or other firm or person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. --------------------------------------------------------------------------------      SECTION 5.08. Collection of Receivables. From and after the Closing, Purchaser shall have the right and authority to collect for its own account all Receivables and other related items that are included in the Acquired Assets and to endorse with the name of Seller, any checks or drafts received with respect to any Receivables or such other related items. Seller shall promptly deliver to Purchaser any cash or other property received directly or indirectly by it with respect to the Receivables and such other related items, including any amounts payable as interest.      SECTION 5.09. Employee Matters. Purchaser shall take all steps necessary and appropriate so that at and immediately after the Closing all individuals who are employed by the Seller, including those on vacation, sick leave, personal absence, holiday, jury duty or short term disability, shall be employed by Purchaser at the same base salary, commission rate, and bonus opportunity, as in effect prior to the Closing (such employees being the “Continuing Employees”) except with respect to the compensation arrangements that shall be offered by Purchaser to David Chess. Purchaser shall not be required to employ any individual who is receiving benefits under Seller’s long term disability plan at the time of Closing and such individuals shall remain the responsibility of Seller. Seller shall reasonably cooperate with Purchaser to support Purchaser’s efforts to hire the Continuing Employees, it being understood such cooperation shall not be at any additional cost to Seller or its affiliates and shall not require Seller or its affiliates to take any actions which it deems ill advised or interferes with Seller’s unfettered discretion in handling the employer-employee relationship including its benefit and compensation programs.      SECTION 5.10. Benefit Plan Matters. (a) Benefit Liabilities. (i) Unless otherwise specifically set forth in this Agreement to the contrary, Seller shall retain and be fully responsible for all liabilities, obligations and commitments relating to all wages, salaries and other forms of compensation and related expenses (other than bonuses) incurred or accrued on or prior to the Closing Date and all employee pension (retirement) benefits incurred or accrued under any and all plans, programs or arrangements maintained or contributed to by Seller or any affiliate on or prior to the Closing Date except for unpaid vacation pay for Continuing Employees. Unpaid vacation pay and Anticipated Bonuses (as defined below) for Continuing Employees will be accrued as a compensation expense on the Closing Balance Sheet. “Anticipated Bonuses” means the prorata portion of bonuses expected by Continuing Employees pursuant to SPPI Bonus Programs. Seller shall be responsible for worker compensation claims based on injuries occurring prior to the Closing Date and Purchaser shall be responsible for those based on injuries occurring on and after the Closing Date. --------------------------------------------------------------------------------         (ii) Effective as of the Closing Date, the Continuing Employees shall cease to participate in any non-pension benefit arrangements (the “Welfare Benefit Plans”) and in all pension benefit arrangements of Seller or Parent. Seller shall retain responsibility under all Welfare Benefit Plans and in all pension benefit arrangements for all costs of coverage and all amounts payable by reason of claims incurred by Continuing Employees on or prior to the Closing Date, including claims that are not submitted until after the Closing Date except for any unpaid vacation pay for Continuing Employees and subject to paragraph (iv) below. A claim shall be deemed to have been incurred on the date of occurrence of (A) death or dismemberment in the case of claims under life insurance and accidental death and dismemberment benefits, (B) the date the employee became entitled to receive disability in the case of claims under disability benefits, or (C) the date on which the charges or expense giving rise to such claim is incurred in the case of all other claims. Purchaser shall provide for workers compensation coverage following the Closing for injuries occurring on or after the Closing Date.         (iii) Seller shall remain responsible for all record keeping and welfare benefits with respect to any employees or former employees of Seller who are, as of the Closing Date on long term disability leave and covered under Seller’s or Parent’s welfare benefit plans.         (iv) Purchaser shall be fully responsible for all such liabilities, obligations and commitments and employee benefits with respect to the Continuing Employees under Purchaser’s employee benefit plans, programs and arrangements for the period after the Closing Date. Notwithstanding the foregoing, with respect to employees of Seller who are on short term disability leave as of the Closing Date (“Potential Claimants”), Purchaser will continue Seller’s short term disability policy and agrees to assume the responsibility of Seller with respect to benefits that may be due to Potential Claimants while they are on short term disability leave and had they remained employees of Seller pursuant to, and will provide the same coverage as under, the terms of Seller’s Long Term Disability Plan.         (v) Purchaser shall not be liable for any acts of Seller or its employees or agents with respect to any employee benefit plan maintained by Seller or any affiliate of Seller. Seller shall not be responsible for any acts of Purchaser or its employees or agents with respect to any employee benefit plan maintained by Purchaser after the Closing.      (b) Post-Closing Benefit Plans. (i) Effective as of the Closing Date, the Continuing Employees shall cease to participate under the employee benefit plans of Seller and Parent, and shall be eligible to participate under the employee benefit plans maintained or established by Purchaser in which similarly situated employees of Purchaser are generally eligible to participate and as set forth on Schedule 5.10, except if the consent of CIGNA is obtained to the assignment of Seller’s medical plan contract, Purchaser shall adopt and maintain Seller’s existing medical plan as in effect at Closing for the Continuing Employees, including waiting periods and employee copay, contribution and premium rates, through December 31, 2000 (except for such changes required by law, if any) and Purchaser will give credit to Continuing Employees for amounts applied to deductibles, copay and stop loss prior to the Closing for 2000; provided that nothing herein shall prevent Purchaser from terminating the employment of any Continuing Employee or modifying or terminating such plans (other than the medical plan for 2000) from time to time. --------------------------------------------------------------------------------         (ii) Purchaser shall also provide to each Continuing Employee who is terminated by Purchaser (other than for cause or nonperformance) within one year of the Closing severance benefits on terms that are no less favorable than the benefits provided by Seller under Seller’s severance plan referred to in Section 3.16(a), as in effect on the date of this Agreement; provided that no severance benefits shall be paid to any Continuing Employee with respect to a termination that would not have been covered under Seller’s severance plan; provided further that the amount of severance paid to the terminated employee who is entitled to severance hereunder shall not be less than the amount which would have been paid under Seller’s plan had the employee been employed by Seller at time of termination.         (iii) For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any Purchaser benefit plan for which a Continuing Employee may be eligible after the Closing (including for the purpose of computing benefits under Seller’s severance plan), Purchaser shall ensure that service by any such Continuing Employee with Seller, Parent and Olin Corporation and their respective affiliates pursuant to the personnel records provided by Seller or Parent shall be deemed to be service with Purchaser.         (iv) Continuing Employees who participate in Seller’s medical Flexible Spending Account (“FSA”) program will be offered the opportunity by Seller to continue their medical FSA under COBRA, provided such employee’s maximum available benefit under the medical FSA for the remainder of the plan year exceeds the amount that the medical FSA can charge such employee for COBRA continuation coverage for the remainder of the plan year. Dependent care contribution to FSA will cease at closing.         (v) Continuing Employees who participate in the Seller’s dental insurance plan will be offered the opportunity by Seller to continue their dental insurance under COBRA. If the transfer of the sponsorship of Seller’s medical plan to Purchaser effective as of the Closing, has not been approved within 30 days of the Closing by the respective insurance company, HMO or other provider, Seller will offer the Continuing Employee the opportunity to continue their medical insurance under COBRA. --------------------------------------------------------------------------------      (c) 401(k) Plan. With respect to the Contributing Employee Ownership Plan in which Seller’s employees participate (the “Savings Plan”), Seller or Parent agrees that it shall be solely responsible to the Continuing Employees with respect to benefits accrued thereunder as of the Closing Date. To the extent required under the Savings Plan, Seller shall contribute to the Savings Plan, in accordance with the terms of said plan, all amounts attributable to the Continuing Employees which are owed to or under the Savings Plan as of the Closing Date. Seller shall permit the Continuing Employees to elect a distribution and rollover (including loans) of their account balance from the Savings Plan in accordance with the requirements of Section 401(k)(10) of the Code and the terms of such plan.      (d) Compensation. Seller shall pay to its employees promptly following the Closing all wages and salaries for all periods up to the Closing Date, shall pay all payroll taxes with respect to all amounts due to Seller’s employees for all periods up to the Closing Date and shall provide fringe benefits to Seller’s employees up to the Closing Date in accordance with Seller’s established policies and procedures.      (e) Severance Plan. Seller shall be responsible for any severance benefits or other liabilities incurred pursuant to any severance plan of Seller or any affiliated company that may arise with respect to, or as a result of the severance of the employment of the Continuing Employees with Seller or any such affiliated company in connection with the Closing; provided Purchaser pays the Continuing Employees at the same rate of pay or greater following the Closing and if not, then Purchaser shall be responsible for any such severance to such Continuing Employee.      (f) Following the Closing, Seller will continue to be responsible for all benefits for Seller’s employees (including former employees) who are receiving long term disability payments from Seller on or prior to the Closing Date.      (g) Stock-based awards granted on or prior to Closing under Parent’s Long Term Incentive Plan shall be the responsibility of Seller or Parent.      (h) The SPII Bonus Program for 2000 for Continuing Employees shall be assumed by and the responsibility of Purchaser. Purchaser shall adopt and maintain such program in effect for 2000 for Continuing Employees who participate in the program on the date hereof; provided Purchaser may increase the benefits after Closing if it elects to do.      (i) The amounts set forth on Schedule 3.16(b) shall be the responsibility of Seller. --------------------------------------------------------------------------------      SECTION 5.11. Supplemental Disclosure. (a) Seller and Parent shall have the continuing obligation until the Closing promptly to supplement or amend the Schedules with respect to any matter hereafter arising or discovered that, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules; provided, however, that for the purpose of the rights and obligations of the parties hereunder and subject to the provisions of Section 6.05, any such supplemental or amended Schedule shall not be deemed to have been disclosed as of the date of this Agreement unless so agreed in writing by Purchaser.      (b) Purchaser shall promptly notify Seller of, and furnish Seller any information it may reasonably request with respect to, the occurrence to Purchaser’s knowledge of any event or condition or the existence to Purchaser’s knowledge of any fact that would cause any of the conditions to Seller’s obligation to consummate the Acquisition not to be fulfilled.      SECTION 5.12. Post-Closing Cooperation. (a) Purchaser and Seller shall cooperate with each other, and shall cause their officers, employees, agents, auditors and representatives to cooperate with each other, for a period of 180 days after the Closing to ensure the orderly transition of the Business from Seller to Purchaser and to minimize any disruption to the Business and the other respective businesses of Seller and Purchaser that might result from the transactions contemplated hereby. After the Closing, upon reasonable written notice, Purchaser, Parent and Seller shall furnish or cause to be furnished to each other and the employees, counsel, auditors and representatives of Parent, Seller and Purchaser access, during normal business hours, to such information and assistance relating to the Business (to the extent within the control of such party) as is reasonably necessary for financial reporting and accounting matters and as is necessary or desirable in connection with the defense or settlement of the PWP Case by Seller, Olin Corporation or Parent or its designee.      (b) After the Closing, upon reasonable written notice, Purchaser, Parent and Seller shall furnish or cause to be furnished to each other, as promptly as practicable, such information and assistance (to the extent within the control of such party) relating to the Acquired Assets (including, access to books and records) as is reasonably necessary for the filing of all Tax returns, and making of any election related to Taxes, the preparation for any audit by any Taxing Authority, and the prosecution or defense of any claim, suit or proceeding related to any Tax return. Seller and Purchaser shall cooperate with each other in the conduct of any audit or other proceeding relating to Taxes involving the Business. Purchaser shall retain the books and records of Seller included in the Acquired Assets for a period of ten years after the Closing. After the end of such ten-year period, before disposing of such books or records, Purchaser shall give notice to such effect to Seller and Parent and to give Seller and Parent, at Seller’s or Parent’s cost and expense, an opportunity to remove and retain all or any part of such books or records as Seller or Parent may select. --------------------------------------------------------------------------------      (c) Each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 5.12. Neither party shall be required by this Section 5.12 to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations (or, in the case of Purchaser, the Business).      SECTION 5.13. Publicity. From the date hereof and through the Closing, no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior consent of the other parties (which consent shall not be unreasonably withheld), except as such release or announcement may be required by law or the rules or regulations of the Securities Exchange Commission, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance; provided, however, that each of Seller and Purchaser may make internal announcements to their respective employees that are consistent with the parties’prior public disclosures regarding the transactions contemplated hereby after reasonable prior notice to and consultation with the other and each of Parent and Purchaser may make such communications regarding the Acquisition to security analysts and the financial community as its determines is appropriate.      SECTION 5.14. Records. Purchaser recognizes that certain Records may contain incidental information relating primarily to subsidiaries or divisions of Parent other than the Business and that Seller and Parent may retain copies of the relevant portions thereof.      SECTION 5.15. Agreement Not To Compete. (a) Each of Seller and Parent understands that Purchaser shall be entitled to protect and preserve the going concern value of the Business to the extent permitted by law and that Purchaser would not have entered into this Agreement absent the provisions of this Section 5.15 and, therefore, for a period of four years from the Closing, Parent shall not, and shall cause each of its affiliates not to, directly or indirectly: --------------------------------------------------------------------------------         (i) operate, own or control a business engaged in the wholesale distribution of any residential pool products through a network of small distribution, branch warehouses located in any of the States of California, Nevada and Arizona (“Competitive Activities”), except that the Parent and its affiliates may distribute any residential pool products through up to five shipping points owned or leased by Parent or any of its affiliates and located in any of these three states. For purposes of this paragraph “residential pool products” shall include, but not be limited to, pool chemicals, pool accessories, and pool equipment such as pumps, motors, filters and heaters. Nothing contained herein shall prohibit Parent or its affiliates from distributing in such states or elsewhere, pool products or chemicals manufactured, blended or marketed at any time by Parent or any of its affiliates provided such distribution is not in connection with a business prohibited under the previous sentence, however, it is understood that Parent’s current business (other than the Business) conducted by Parent and its affiliates (other than Seller) will continue after the Closing and is not prohibited by this Section 5.15. In addition, nothing herein shall prohibit Parent or its affiliates from taking a security interest in assets of third parties engaged in the wholesale distribution of a complete line of pool products to secure debts owed by such third parties to Parent or its affiliates or from taking possession of such pledged assets and operating such a business upon a bona fide default by such third party; provided that such pledged assets and related business shall be sold within one year from the date Parent or any affiliate takes possession or begins operations, whichever is earlier and         (ii) solicit, recruit or hire any employee of the Business who at the time is paid by Purchaser or any of its affiliates more than $40,000 in annual base salary, while such employee is employed in the Business or employed by Purchaser or any of its affiliates; provided the foregoing shall not prohibit Parent and its affiliates from making general solicitation or advertising for employees in any media or through any required governmental employment program or listing.      (b) Section 5.15(a) shall be deemed not breached as a result of the ownership by Parent or any of its affiliates of: (i) less than an aggregate of 10% of any class of stock of a person engaged, directly or indirectly, in Competitive Activities; (ii) less than 10% in value of any instrument of indebtedness of a person engaged, directly or indirectly, in Competitive Activities; (iii) a person that engages, directly or indirectly, in Competitive Activities if such Competitive Activities account for less than 15% of such person’s consolidated annual revenues and less than $50 million in sales of such person; or (iv) a person that engages directly or indirectly in Competitive Activities if such Competitive Activities account for more than 15% but less than 50% provided in such case of this clause (iv), Parent disposes of such Competitive Activities within one year of acquisition.      (c) Notwithstanding any other provision of this Agreement, it is understood and agreed that the remedy of indemnity payments pursuant to Article VIII and other remedies at law would be inadequate in the case of any breach of the covenants contained in Section 5.15(a). Purchaser shall be entitled to seek equitable relief, including the remedy of specific performance, with respect to any breach or attempted breach of such covenants.      SECTION 5.16. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Acquired Assets to Purchaser; provided that such waiver shall not affect the obligation of Seller under Section 8.01 to indemnify Purchaser for the Excluded Liabilities. --------------------------------------------------------------------------------      SECTION 5.17. Further Assurances. From time to time, as and when requested by any party, each party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions (subject to Section 5.05), as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement, including, in the case of Seller, executing and delivering to Purchaser such assignments, bills of sale, consents and other instruments as Purchaser or its counsel may reasonably request as necessary or desirable for such purpose.      SECTION 5.18. Purchase Price Allocation. Seller and Purchaser shall allocate the Adjusted Purchase Price for tax purposes among the Acquired Assets in accordance with an allocation statement (the “Allocation Statement”), which shall be agreed to by the Purchaser and Seller as soon as reasonably possible after the Closing Date, and which the parties acknowledge will be in accordance with Section 1060 of the Code. Seller and Purchaser shall each prepare and file on a timely basis Internal Revenue Service Form 8594, setting forth an allocation of such Purchase Price among the Acquired Assets in accordance with the Allocation Statement. Not less than ten (10) days prior to the filing of their respective forms 8594 relating to this transaction, each party shall deliver to the other party a copy of its Form 8594. Purchaser and Seller further agree to report this transaction for federal income Tax purposes in accordance with the Allocation Statement and both Purchaser and Seller agree to act in accordance with such Allocation Statement in the course of any Tax audit, Tax review or Tax litigation. If Seller and Purchaser are unable to agree on such allocation of the Adjusted Purchase Price among the Acquired Assets, Seller and Purchaser shall elect an independent appraisal firm to determine such allocations. The conclusions of such appraisal firm shall be conclusive and binding. The fees and expenses of such appraisal firm shall be shared equally by Seller and Purchaser.      SECTION 5.19. Supplies. Purchaser shall not use stationery, purchase order forms or other similar paper goods or supplies (collectively, the “Supplies”), that state or otherwise indicate thereon that the Business is a subsidiary, affiliate, division or unit of Parent more than 30 days after the Closing Date without first crossing out or marking over such statement or indication or otherwise clearly indicating on such Supplies that the Business is no longer a subsidiary, affiliate, division or unit of Parent. Purchaser shall not reorder any Supplies which state or otherwise indicate thereon that the Business is a subsidiary, affiliate, division or unit of Parent.      SECTION 5.20. Names Following Closing. Promptly following the Closing, Seller shall amend or terminate any certificate of assumed name or d/b/a filings so as to eliminate its right to use the names Superior Pool Products, or any name that, in the reasonable judgment of Purchaser, is similar to any such name, and neither Seller nor Parent shall thereafter use those names or other names acquired by Purchaser hereunder or names confusingly similar thereto. Within 30 days of Closing, Seller shall also amend its certificate of incorporation to change its name to name not including or similar to any of the names or words “Superior Pool Products.” --------------------------------------------------------------------------------      SECTION 5.21. Environmental Study. On or prior to the date hereof, Purchaser shall commission at its own expense a Phase I Environmental Study on the properties listed on Schedule 5.21 (“Studied Properties”) and shall complete such study and receive a written report of the study results within 30 days of the date hereof. Within five days of receipt of the report, Purchaser shall give a copy to Seller. Such report shall be deemed “Evaluation Material” within the meaning of the Confidentiality Agreement.      SECTION 5.22 Insurance. Purchaser understands and acknowledges that upon Closing all insurance and indemnity coverage under programs and policies which Seller participates in with respect to the Business will cease and Purchaser will be responsible for obtaining such coverage for the Business effective with the Closing. ARTICLE VI Conditions Precedent      SECTION 6.01. Conditions to Each Party’s Obligation. The obligation of Purchaser to purchase and pay for the Acquired Assets and the obligation of Seller to sell the Acquired Assets to Purchaser is subject to the satisfaction or waiver on or prior to the Closing of the following conditions:      (a) Governmental Approvals. The waiting period under the HSR Act, if applicable to the consummation of the Acquisition, shall have expired or been terminated. All other authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity necessary for the consummation of the Acquisition shall have been obtained or filed or shall have occurred.      (b) No Injunctions or Restraints. No Applicable Law or Injunction enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the Acquisition shall be in effect.      (c) Environmental Study. The results of the Phase I environmental study on the Studied Properties are reasonably satisfactory to both Purchaser and Parent.      SECTION 6.02. Conditions to Obligation of Purchaser. The obligation of Purchaser to purchase and pay for the Acquired Assets is subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the following conditions: --------------------------------------------------------------------------------      (a) Representations and Warranties. The representations and warranties of Seller in this Agreement and the Ancillary Agreements that are qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the date hereof and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date). Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect.      (b) Performance of Obligations of Seller and Parent. Each of Seller and Parent shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing, and Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect.      (c) Absence of Proceedings. There shall not be pending or threatened any Proceeding (i) challenging or seeking to restrain or prohibit the Acquisition or any other transaction contemplated by this Agreement or the Ancillary Agreements or seeking to obtain from Purchaser or any of its subsidiaries in connection with the Acquisition any damages that are material in relation to Purchaser, (ii) seeking to prohibit or limit the ownership or operation by Purchaser or any of its subsidiaries of any material portion of the business or assets of Purchaser (including the Business) or any of its subsidiaries, or to compel Purchaser or any of its subsidiaries to dispose of or hold separate any material portion of the business or assets of Purchaser (including the Business) or any of its subsidiaries, in each case as a result of the Acquisition or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on ability of Purchaser to acquire or hold, or exercise full rights of ownership of, the Acquired Assets or (iv) seeking to prohibit Purchaser or any of its subsidiaries from effectively controlling in any material respect the Business; provided, however, that this condition shall be deemed to be waived by Purchaser as to any suit, action or proceeding (except for any suit, action or proceeding by any Governmental Entity) if Seller provides to Purchaser indemnification in form and substance reasonably satisfactory to Purchaser and its counsel with respect to any such suit, action or proceeding.      (d) Consents. Purchaser shall have received written consents from all third parties necessary or appropriate to effect the Acquisition, other than those required with respect to the assignment of purchase orders and sales orders and other than such consents the absence of which, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect.      SECTION 6.03. Conditions to Obligation of Seller. The obligation of Seller to sell, assign, convey, and deliver the Acquired Assets is subject to the satisfaction (or waiver by Parent) on or prior to the Closing Date of the following conditions: --------------------------------------------------------------------------------      (a) Representations and Warranties. The representations and warranties of Purchaser made in this Agreement and the Ancillary Agreement qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the date hereof and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date). Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.      (b) Performance of Obligations of Purchaser. Purchaser shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser by the time of the Closing, and Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.      (c) Absence of Proceedings. There shall not be pending or threatened any Proceeding challenging or seeking to restrain or prohibit the Acquisition or any other transaction contemplated by this Agreement or the Ancillary Agreements or seeking to obtain from Parent or any of its subsidiaries in connection with the Acquisition any damages that are material in relation to Seller or Parent.      SECTION 6.04. Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article VI to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its reasonable efforts to cause the Closing to occur, as required by Section 5.05.      SECTION 6.05. Effect of Certain Waivers of Closing Conditions. If prior to the Closing any party (the “waiving party”) has knowledge of any breach by any other party of any representation, warranty or covenant contained in this Agreement or any Ancillary Agreement, the effect of such breach is a failure of any condition to the waiving party’s obligations set forth in this Article VI and the waiving party proceeds with the Closing, the waiving party shall be deemed to have waived such breach and the waiving party and its successors, assigns and affiliates shall not be entitled to be indemnified pursuant to Article VIII, to sue for damages or to assert any other right or remedy for any losses arising from any matters relating to such condition or breach, notwithstanding anything to the contrary contained herein or in any certificate delivered pursuant hereto. -------------------------------------------------------------------------------- ARTICLE VII Termination, Amendment and Waiver      SECTION 7.01. Termination. (a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Acquisition and the other transactions contemplated by this Agreement abandoned at any time prior to the Closing:         (i) by mutual written consent of Parent and Purchaser;         (ii) by Parent if any of the conditions set forth in Sections 6.01 or 6.03 shall have become incapable of fulfillment, and shall not have been waived by Parent;         (iii) by Purchaser if any of the conditions set forth in Sections 6.01 or 6.02 shall have become incapable of fulfillment, and shall not have been waived by Purchaser; or         (iv) by Parent or Purchaser, if the Closing does not occur on or prior to August 31, 2000; or         (v) by Parent or Purchaser if it reasonably determines that the other has made a material misrepresentation with respect to the representations and warranties contained in Article III when made; provided, however, that the party seeking termination pursuant to clause (ii), (iii), (iv) or (v) is not then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement.      (b) In the event of termination by Seller, Parent or Purchaser pursuant to this Section 7.01, written notice thereof shall forthwith be given to the other and the transactions contemplated by this Agreement shall be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein:         (i) Purchaser shall return all documents and other material received from Seller or Parent relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to Parent; and         (ii) all confidential information received by Purchaser with respect to the businesses of Seller or Parent shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement. --------------------------------------------------------------------------------      SECTION 7.02. Effect of Termination. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section 7.01, this Agreement shall become null and void and of no further force and effect, except for the provisions of (i) Section 5.04 relating to the obligation of Purchaser to keep confidential certain information and data obtained by it from Seller or Parent, (ii) Section 5.06 relating to certain expenses, (iii) Section 5.07 relating to finder’s fees and broker’s fees, (iv) Section 7.01 and this Section 7.02 and (v) Section 5.13 relating to publicity. Nothing in this Section 7.02 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement.      SECTION 7.03. Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing Purchaser, on the one hand, or Parent, on the other hand, may waive compliance by the other parties with any term or provision of this Agreement that such other party was or is obligated to comply with or perform. ARTICLE VIII Indemnification      SECTION 8.01. Indemnification by Seller and Parent. (a) From and after the Closing, Seller and Parent, jointly and severally, shall indemnify Purchaser and its affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives against, and hold them harmless from, any loss, liability, claim, damage or expense (including reasonable legal fees and expenses) (“Losses”), as incurred (payable promptly upon written request), for or on account of or arising from or in connection with or otherwise with respect to:         (i) any breach of any representation or warranty of Seller or Parent that survives the Closing and is contained in this Agreement or in any Ancillary Agreement;         (ii) any breach of any covenant of Seller or Parent contained in this Agreement or in any Ancillary Agreement requiring performance after the Closing Date;         (iii) any Excluded Liability (other than Unknown Environmental Liabilities);         (iv) any Unknown Environmental Liabilities but only as follows: for Losses relating thereto incurred prior to the fifth anniversary of the Closing, 100% of such Losses so incurred prior to such date and for such Losses incurred thereafter, 0%; and --------------------------------------------------------------------------------         (v) any fees, expenses or other payments incurred or owed by Seller or Parent to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transactions contemplated by this Agreement.      (b) Seller and Parent shall not be required to indemnify any person, and shall not have any liability:         (i) under clauses (i) and (ii) of Section 8.01(a) (but excluding breaches for failure to make any payments required by Seller under Section 1.05 or Section 1.03(d)) unless the aggregate of all Losses for which Seller or Parent would, but for this clause (i), be liable exceeds on a cumulative basis an amount equal to $125,000, and then only to the extent of any such excess;         (ii) under clauses (i) and (ii) of Section 8.01(a) (but excluding breaches for failure to make any payments required by Seller under Section 1.05 or Section 1.03(d)) for any individual items where the Loss relating thereto is less than $20,000 and such items shall not be aggregated for purposes of clause (i) of this Section 8.01(b); and         (iii) under clauses (i) and (ii) of Section 8.01(a) in excess of the Adjusted Purchase Price (except that this clause (iii) shall not apply to any willful breach of any covenant by Seller or Parent).      (c) In the absence of common law fraud and except for injunctive relief sought for breaches of covenants, this Section VIII shall serve as the sole and exclusive remedy for damages of Purchaser, on the one hand, and Parent and Seller, on the other hand, for Losses and for any other claims in any way related to this Agreement to the exclusion of all other statutory or common law remedies (including rights under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended or any other Environmental Law) whether based on contract, tort, strict liability or otherwise.      SECTION 8.02. Indemnification by Purchaser. (a) From and after the Closing, Purchaser shall indemnify Seller, Parent, their affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives against, and agrees to hold them harmless from, any Loss, as incurred (payable promptly upon written request), for or on account of or arising from or in connection with or otherwise with respect to (i) any breach of any representation or warranty of Purchaser that survives the Closing and is contained in this Agreement or in any Ancillary Agreement, (ii) any breach of any covenant of Purchaser contained in this Agreement or in any Ancillary Agreement requiring performance after the Closing Date, (iii) any Assumed Liability or (iv) any fees, expenses or other payments incurred or owed by Purchaser to any brokers, financial advisors or other comparable persons retained or employed by it in connection with the transactions contemplated by this Agreement or by any Ancillary Agreement.      (b) Purchaser shall not be required to indemnify any person, and shall not have any liability: --------------------------------------------------------------------------------         (i) under clauses (i) and (ii) of Section 8.02(a) (but excluding breaches for failure to make any payments required by Purchaser under Section 1.05 or Section 1.03(d)) unless the aggregate of all Losses for which Purchaser would, but for this clause (i), be liable exceeds on a cumulative basis an amount equal to $125,000, and then only to the extent of any such excess;         (ii) under clauses (i) and (ii) of Section 8.02(a) (but excluding breaches for failure to make any payments required by Purchaser under Section 1.05 or Section 1.03(d)) for any individual items where the Loss relating thereto is less than $20,000 and such items shall not be aggregated for purposes of clause (i) of this Section 8.02(b); and         (iii) under clauses (i) and (ii) of Section 8.02(a) in excess of the Adjusted Purchase Price (except that this clause (iii) shall not apply to any willful breach of any covenant by Purchaser).      (c) In the absence of common law fraud and except for injunctive relief sought for breaches of covenants, this Section VIII shall serve as the sole and exclusive remedy for damages of Seller and Parent, on the one hand, and Purchaser, on the other hand, for Losses and for any other claims in any way related to this Agreement to the exclusion of all other statutory or common law remedies (including rights under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended or any other Environmental Law) whether based on contract, tort, strict liability or otherwise.      SECTION 8.03. Calculation of Losses. The amount of any Loss for which indemnification is provided under this Article VIII shall be net of any amounts actually recovered by the indemnified party under insurance policies with respect to such Loss and shall be (i) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnity payments hereunder (grossed up for such increase) and (ii) reduced to take account of any net Tax benefit realized by the indemnified party arising from the incurrence or payment of any such Loss. In computing the amount of any such Tax cost or Tax benefit, the indemnified party shall be deemed to recognize all other items of income, gain, loss deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Loss. An indemnified party shall use all reasonable efforts to first recover against its insurance carriers for any Loss for which indemnification is provided under this Article VIII. --------------------------------------------------------------------------------      SECTION 8.04. Termination of Indemnification. The obligations to indemnify and hold harmless any party, (i) pursuant to Section 8.01 (a)(i) or (ii) or 8.02(i) or (ii), shall terminate when the applicable representation or warranty or covenant terminates pursuant to Section 8.06, (ii) pursuant to Section 8.01(a)(iv), shall terminate in accordance with the terms of that Section and (iii) pursuant to the other clauses of Sections 8.01 and 8.02 shall not terminate; provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the person to be indemnified shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) pursuant to Section 8.05 to the party to be providing the indemnification; provided further however, that with respect to claims under Section 8.01(a)(iv), the party shall have incurred the Losses in the periods specified in such Section 8.01(a)(iv).      SECTION 8.05. Procedures. (a) Third Party Claims. In order for a party (the “indemnified party”), to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim made by any person against the indemnified party (a “Third Party Claim”), such indemnified party must notify the indemnifying party in writing (and in reasonable detail) of the Third Party Claim promptly following receipt by such indemnified party of notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure (except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, promptly following the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim.      (b) Assumption. If a Third Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, however, that such counsel is not reasonably objected to by the indemnified party. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel (reasonably satisfactory to by the indemnifying party), at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof (other than during any period in which the indemnified party shall have failed to give notice of the Third Party Claim as provided above). If the indemnifying party chooses to defend or prosecute a Third Party Claim, all the indemnified parties shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party assumes the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld). If the indemnifying party assumes the defense of a Third Party Claim, the indemnified party shall agree to any settlement, compromise or discharge of a Third Party Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim, which releases the indemnified party completely in connection with such Third Party Claim. --------------------------------------------------------------------------------      (c) Other Claims. In the event any indemnified party should have a claim against any indemnifying party under Section 8.01 or 8.02 that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. Subject to Sections 8.04 and 8.06, the failure by any indemnified party so to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to such indemnified party under Section 8.01 or 8.02, except to the extent that the indemnifying party demonstrates that it has been prejudiced by such failure. If the indemnifying party does not notify the indemnified party within 60 calendar days following its receipt of such notice that the indemnifying party disputes its liability to the indemnified party under Section 8.01 or 8.02, such claim specified by the indemnified party in such notice shall be conclusively deemed a liability of the indemnifying party under Section 8.01 or 8.02 and the indemnifying party shall pay the amount of such liability to the indemnified party on demand or, in the case of any notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of such claim (or such portion thereof) becomes finally determined.      (d) Mitigation. Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder, including by making commercially reasonably efforts to mitigate or resolve any such claim or liability; provided, however, that such party shall not be required to make such efforts if they would be detrimental in any material respect to such party. --------------------------------------------------------------------------------      SECTION 8.06. Survival of Representations. The representations, warranties, covenants and agreements contained in this Agreement and in any document delivered in connection herewith shall survive the Closing solely for purposes of Article VIII and shall terminate at the close of business one year following the Closing Date except as expressly set forth in a Section and except the following Sections shall survive for the following periods after Closing: Section 1.03 for indefinitely, Section 3.14 for six years after Closing, Section 3.16(e) for six years after Closing, Section 3.05 but only with respect to title to the physical assets constituting the Acquired Assets indefinitely, Section 5.03 for ten years after Closing, Section 5.06 for ten years after Closing, Section 5.07 for six years after Closing, Section 5.08 for two years after Closing, Section 5.10 for indefinitely, Section 5.12 for indefinitely, Section 5.16 for six years after Closing, Section 5.17 for indefinitely, and Section 5.19 for indefinitely after Closing. Nothing in this Section 8.06 shall be construed as a waiver or extension of any applicable statute of limitations.      SECTION 8.07. No Additional Representations. Purchaser acknowledges that it and its representatives have been permitted full and complete access to the books and records, facilities, equipment, non-income tax returns, contracts, insurance policies (or summaries thereof) and other properties and assets of the Business that it and its representatives have desired or requested to see or review, and that it and its representatives have had a full opportunity to meet with the officers and employees of Seller and Parent to discuss the Business. Purchaser acknowledges that none of Seller, Parent or any other person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding the Business furnished or made available to Purchaser and its representatives, except as expressly set forth in this Agreement, the Ancillary Agreements or the Schedules, and none of Seller, Parent or any other person shall have or be subject to any liability to Purchaser or any other person resulting from the distribution to Purchaser, or Purchaser’s use of, any such information, including the Confidential Memorandum prepared by Parent dated December 22 ,1999 and any information, documents or material made available to Purchaser in any “data rooms”, management presentations or in any other form in expectation of the transactions contemplated hereby. PURCHASER ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, PURCHASER SHALL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IN AN “AS IS” CONDITION AND ON A “WHERE IS” BASIS, EXCEPT AS OTHERWISE EXPRESSLY REPRESENTED OR WARRANTED IN THIS AGREEMENT AND THE ANCILLARY AGREEMENTS. --------------------------------------------------------------------------------      SECTION 8.08. Arbitration. Except for matters relating to Sections 1.01 (to the extent it relates to Section 1.05), 1.05, 5.15 and 5.18 (which sections are subject to separate arbitration procedures), in the event of any dispute, claim or disagreement involving a matter for which indemnification is sought under Section 8.01 or 8.02 by either Purchaser or Seller following the Closing, the parties shall in good faith attempt to resolve the matter in 90 days. If such matter is not resolved in that time period, such matter, upon notice by one party to the other, shall be submitted to and settled by arbitration administered by the American Arbitration Association (“AAA”) in arbitration proceedings held in New York, New York in accordance with the AAA’s applicable rules. The decision of the arbitrators shall be final and binding on the parties and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. ARTICLE IX General Provisions      SECTION 9.01. Assignment. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by Purchaser, Seller or Parent without the prior written consent of the other parties hereto except (i) Seller may assign any and all of its obligations at any time after the Closing to Parent without the consent of Purchaser and (ii) Purchaser may assign prior to Closing any and all of its obligations to a wholly-owned subsidiary of Purchaser provided Purchaser and such subsidiary shall be jointly and severally liable for such obligations so assigned. If consent to an assignment is not required hereunder, the party assigning the obligations shall give prompt notice to the other parties hereto. Any attempted assignment in violation of this Section 9.01 shall be void.      SECTION 9.02. No Third-Party Beneficiaries. Except as provided in Article VIII, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.      SECTION 9.03. Attorney Fees. Except as expressly provided in this Agreement, a party in breach of this Agreement shall, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled. --------------------------------------------------------------------------------      SECTION 9.04. Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand or facsimile, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: (i) if to Purchaser, SCP Pool Corporation 109 Northpark Boulevard, 4th Floor Covington, LA 70433-5001 Attention: President      with a copy to: Jones Walker Waechter Poitevent   Carrere & Denegre L.L.P. 201 St. Charles Avenue New Orleans, LA 70170-5100 Attention: Lisa M. Buchanan, Esq.; and (ii) if to Seller or Parent, Arch Chemicals, Inc. 501 Merritt 7 Norwalk, CT 06851 Attention: Vice President-Strategic Development Fax No.: (203) 229-2880      with a copy to: Arch Chemicals, Inc. 501 Merritt 7 Norwalk, CT 06851 Attention: Vice President, General Counsel and Secretary Fax No.: (203) 229-2613 --------------------------------------------------------------------------------      SECTION 9.05. Interpretation; Exhibits and Schedules; Certain Definitions. (a) The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any matter set forth in any provision, subprovision, section or subsection of any Schedule shall, unless the context otherwise manifestly requires, be deemed set forth for all purposes of the Schedules. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning as defined in this Agreement. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.      (b) For all purposes hereof:      “affiliate” of any person means at the time of determination another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.      “Environmental Liabilities” means any and all obligations and liabilities (whether investigatory, corrective, remedial or otherwise) arising under the Environmental Laws as in effect from time to time.      “including” means including, without limitation.      “person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.      “Known Environmental Liabilities”  means those Environmental Liabilities that (i) arise at any time under Environmental Laws out of a physical condition existing prior to the Closing and arising out of the operation or conduct of the Business prior to the Closing and (ii) are either (A) known to Seller as being an actual, potential, fixed, liquidated, unliquidated, contingent or conditional liability of the Business as a result of written notice received by Seller prior to the Closing from a Governmental Entity or a third party or (B) known to Seller at or prior to Closing as being potential or contingent liabilities after the Closing as a result of action or inaction by Seller occurring prior to the Closing.      “Known to Seller,” “to Seller’s Knowledge,” or “to the knowledge of Seller” or similar phrases means in the conscious awareness of any of the following persons: David Chess, Paul Craney, Steven Giuliano, Robert Koroshetz, Robert Mulholland, Ashley Rushton or Randy Williams. --------------------------------------------------------------------------------      “Known to Purchaser”, “to Purchaser’s knowledge,” or “to the knowledge of Purchaser” or similar phrases mean for purposes of Section 4.06, 5.11 and 6.05 in the conscious awareness of Lisa Buchanan, Manuel Perez de la Mesa, Craig Hubbard, Don Meyer, Pat Finger and W. B. Sexton.      “subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such person.      “Unknown Environmental Liabilities” means Environmental Liabilities that arise (i) following the Closing under Environmental Laws out of a physical condition existing prior to Closing and arising out of the operation or conduct of the Business prior to the Closing and (ii) are not Known Environmental Liabilities.      SECTION 9.06. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.      SECTION 9.07. Entire Agreement. This Agreement, the Ancillary Agreements and the Confidentiality Agreement, along with the Schedules and Exhibits thereto, contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein or in the Ancillary Agreements or the Confidentiality Agreement.      SECTION 9.08. Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.      SECTION 9.09. Consent to Jurisdiction. Each party irrevocably submits to the jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, any Ancillary Agreement or any transaction contemplated hereby or thereby. Each of Purchaser, Seller and Parent further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 9.09. Each of Purchaser, Parent and Seller irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement or the transactions contemplated hereby and thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. --------------------------------------------------------------------------------      SECTION 9.10. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.      SECTION 9.11. Waiver of Jury Trial. Each party hereby waives to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement, any Ancillary Agreement or any transaction contemplated hereby or thereby. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the Ancillary Agreements, as applicable, by, among other things, the mutual waivers and certifications in this Section 9.11.      IN WITNESS WHEREOF, Seller, Parent and Purchaser have duly executed this Agreement as of the date first written above.   ARCH CHEMICALS, INC.,   by    /s/ Paul J. Craney   Name: Paul J. Craney   Title: Vice President, Strategic Development   SUPERIOR POOL PRODUCTS, INC.   by    /s/ Sarah A. O’Connor   Name: Sarah A. O’Connor   Title: Vice President   SCP POOL CORPORATION   by   /s/ Manuel J. Perez de la Mesa   Name: Manuel J. Perez de la Mesa   Title: President -------------------------------------------------------------------------------- INDEX TO SCHEDULES Schedule 1.01 (b)(1) – Sample Balance Sheet Schedule 1.01 (b)(2) – Customer Rebates Accrual Schedule 1.02 (b) – Excluded Assets Schedule 3.04 – Financial Statements Schedule 3.05 – Liens Schedule 3.06 – Real Property Schedule 3.08 – Contracts Schedule 3.09 – Inventory Schedule 3.10 – Fixed Asset Listing Schedule 3.12 – Permits Schedule 3.14 – Taxes Schedule 3.15 – Proceedings Schedule 3.16 (a) – Pension/Benefit Plans Schedule 3.16 (b) – Benefits Paid on Sale of Business Schedule 3.16 (g) – Short Term Disabled Schedule 3.17 – Absence of Changes or Events Schedule 3.18 – Compliance with Applicable Laws Schedule 3.19 – Employee and Labor Matters Schedule 3.20 – Transactions with Affiliates Schedule 3.21 – Top Ten Suppliers Schedule 3.23 – Absence of Undisclosed Liabilities Schedule 3.24 – Officers and Directors Schedule 3.26 – Product Liability Schedule 3.27 – Names and Locations Schedule 5.01 – Covenants of Seller and Parent Relating to Conduct of Business Schedule 5.10 – Benefit Plan Matters Schedule 5.21 – Environment Study -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 1 of 3 SCHEDULE 1.01 (B)(1)            Dr. (Cr.) SPPI G/L @ 3/31/00 -------------------------------------------------------------------------------- Adjustments Per Contract -------------------------------------------------------------------------------- Final as of 3/31/00 --------------------------------------------------------------------------------      ASSETS         Petty Cash  6,600     6,600   Cash-Wachovia  (2,471,284 ) 2,471,284 (A) —   Cash-Bank of America  481,979   (481,979 )(1) —   A/R Gross  5,254,563     5,254,563   A/R Reserves  (111,692 )   (111,692 ) Other A/R  121,980     121,980   Vendor Rebates  (71,394 )   (71,394 ) Vendor Receivables  39,104     39,104   Inventory, Gross  13,482,685     13,482,685   Inventory, Reserves  (503,465 )   (503,465 ) Prepaid, Insurance  1,360     1,360   Prepaid, Other  13,911     13,911   Office Supplies  6,711     6,711   PP&E, Gross  1,258,561     1,258,561   Allowance For Depreciation   (1,106,034 )   (1,106,034 )         O.N.C. Assets*  63,833     63,833   --------------------------------------------------------------------------------         Total Assets  16,467,418     18,456,723   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules     Page 2 of 3 SCHEDULE 1.01 (B)(1) (CONTINUED)            Dr. (Cr.) SPPI G/L @ 3/31/00 -------------------------------------------------------------------------------- Adjustments Per Contract -------------------------------------------------------------------------------- Final as of 3/31/00 --------------------------------------------------------------------------------       LIABILITIES         Accrued Inventory  160,415     160,415   A/P Trade  6,378,926     6,378,926   Special Order Deposit  21,246     21,246   VIP Customer Rebates  172,188     172,188   A/P, Other  36,457     36,457   Accrued Salaries/Wages  42,356   (42,356 )(2) —   Accrued Commissions  5,992   (5,992 )(2) —   Accrued Bonus Incentives  26,927   10,000 (7) 36,927   Accrued Vacation  —   200,000 (5) 200,000   Accrued Workers Comp  113,158   (113,158 )(4) —   Accrued Business Insurance  52,020     52,020   Accrued Property Taxes*  15,501     15,501   Accrued Medical Insurance*  (33,794 )   (33,794 ) SPEC Payable  462     462   Accrued Expense - A/P  120,239     120,239   Accrued Expense-Advertising  (160,398 )   (160,398 ) Sun 5% TL Accrual  16,205     16,205   Other Advertising Accrual  156     156   Accrued Federal Income Tax  10,277   (10,277 )(3) —   California mil Tax Payments  8,195   (8,195 )(3) —   Accrued Sales & Use Taxes  336,118   (336,118 )(3) —   I/C Rec. Arch  (8,457,795 ) 8,457,795 (6) —   --------------------------------------------------------------------------------                                   Total Liabilities  (1,135,149 )   7,016,550   -------------------------------------------------------------------------------- Net Asset Value  $17,602,567     $11,440,173   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules      Page 3 of 3 SCHEDULE 1.01 (B)(1) (CONTINUED) Footnotes * Per Section 1.03(d): Amounts represent expenses/prepayments that will be apportioned between purchaser and seller. To the extent such adjustments apportionments are made, an equal adjustment shall be made to the final “net asset value”. (A) Outstanding checks (negative cash) represent an “excluded liability”. However, for purposes of calculating the Additional Amount, such outstanding checks will be included in the calculation of net assets. (1) Per 1.02(b); Cash is an “excluded asset”. (2) Per 5.10; Seller is responsible for all liabilities for wages and salaries prior to the closing date, represents an “excluded liability”. (3) Per 1.03(b)(iv); Seller is responsible for all “taxes”prior to the closing, represents an “excluded liability”. (4) Per 5.10; Seller is responsible for all workers compensation claims incurred prior to the closing, represents an “excluded liability”. (5) Per 5.10; Purchaser is responsible for unpaid vacation pay as of closing date, represents an “assumed liability”. Represents an estimate as of March 31, 2000. (6) Per 1.02(b)(ix); Intercompany accounts with Parent are “excluded assets”. (7) Per 5.10 (h); Purchaser is responsible for Dave Chess Bonus as of closing date, represents an “assumed liability”. Represents an estimate as of March 31, 2000. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 1.01 (B)(2) CUSTOMER REBATES ACCRUAL EXCEPTIONS TO ACCRUAL (ADJUSTMENTS - ADDED) CUSTOMER # CUSTOMER NAME CALCULATION                     54-24580       Mission Valley   Gross Sales x 2.0% = Adjustment           56-32301      Shaffer Pools, Inc.   Gross Sales x 6.5% = Adjustment  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 1.02 (B) EXCLUDED ASSETS None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.04 FINANCIAL STATEMENTS SUPERIOR POOL PRODUCTS, INC. 1) Balance Sheet (Consolidated SPPI) as of December 31, 1998 and 1999 2) Statement of Operations (Consolidated SPPI) for the Years ended December 31, 1999, 1998 and 1997 -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.05 LIENS FINANCING STATEMENTS              LIEN HOLDER         EQUIPMENT      SERIAL NUMBER             Nissan Motor Acceptance Corp.   1996 Nissan Forklift   C30KLP, S/N 903187   Nissan Motor Acceptance Corp.   1996 Nissan Forklift  P30KLP, S/N 901043  Nissan Motor Acceptance Corp.   1996 Nissan Forklift  C30KLP, S/N 903188  Material Handling Supply, Inc.   Nissan Forklift  P-30KLP, S/N 900949, 900962  Nissan Motor Acceptance Corp.   Nissan Forklift  P-30KLP, S/N 901276  Nissan Motor Acceptance Corp.   Nissan Forklift  JP-30KLP, S/N 9G0173  Associate Leasing, Inc.   Nissan Forklift  JP-30LP, S/N 9G0317  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 1 of 3 SCHEDULE 3.06 REAL PROPERTY LEASES            LOCATION --------------------------------------------------------------------------------                       LESSOR --------------------------------------------------------------------------------       TERM OF LEASE --------------------------------------------------------------------------------   1.      San Diego                  Building   Mission Gorge Development*   7/1/1999 - 6/30/2004            4737 Old Cliffs Road           San Diego, CA              2.      Van Nuys             Building & Land  Harry Selvin and Gerelda Selvin*  1/1/1999 - 12/31/2003           14768 Raymer Street           Van Nuys, CA              3.      Canoga Park             Building  Howard Gluck and Marilynn Gluck*  3/1/2000 - 2/29/2005           8039 Deering Avenue           Canoga Park, CA              4.      Cerritos             Office & Warehouse  JMB Income Properties, Ltd.*  8/31/1996-12/31/2000           16708 S. Parkside Avenue           Cerritos, CA              5.      Monrovia             Building & Land  Sealco Air Controls, Inc.*  7/1/1999 - 6/30/2004           509 Fig Avenue           Monrovia, CA              6.      San Diego             Building  Gregory K. Wilson and Harold Stephens*  3/1/1998 - 12/31/2002           5805 Fairmount Extension           San Diego, CA              7.      Palm Springs             Warehouse (2)  David and Geraldine Lyons  Month-to-Month           507 Sunny Dunes Road           Palm Springs, CA  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 2 of 3 SCHEDULE 3.06 (CONTINUED) REAL PROPERTY            LOCATION --------------------------------------------------------------------------------                       LESSOR --------------------------------------------------------------------------------       TERM OF LEASE --------------------------------------------------------------------------------   8.        Escondido                    Building & Land  Clarence & Phyllis Smith*  1/1/1996 - 12/31/2000             1916 Commercial Street            Escondido, CA               9.        El Cajon               Office & Warehouse  John W. Gibson*  6/1/1999 - 5/31/2002             349 South Marshall Avenue             El Cajon, CA              10.     Ontario, CA               Industrial Building  Stubblefield Pacific,  6/1/1999 - 5/31/2004             1410 Cucamonga Avenue  a JV of Royal Pacific Developers and             Ontario, CA  Stubblefield Construction*              11.     Grand Terrace               Building  C-Y Development Co.*  7/1/1997 - 5/30/2002             2060 Commerce Way             Grand Terrace, CA              12.     Cathedral City               Building  Hetzner Family Trust*  3/1/1999 - 1/31/2002             68370 Commercial Road             Cathedral City, CA              13.     Palm Desert               Industrial Suite  Robert L. Green, Jon Terence Green,  10/1/1999 - 9/30/2004             75-100 Mayfair Drive  Estate of Herschel B. Green and the             Palm Desert, CA  Mildred M. Green Trust*              14.     Newbury Park               Building  1200 Lawrence Drive, Ltd.*  5/1/1998 - 4/30/2001             1200 Lawrence Drive            Unit 400             Newbury Park, CA  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 3 of 3 SCHEDULE 3.06 (CONTINUED) REAL PROPERTY            LOCATION --------------------------------------------------------------------------------                       LESSOR --------------------------------------------------------------------------------       TERM OF LEASE --------------------------------------------------------------------------------   15.       Anaheim                      Building  Catellus Development Corp.*  5/1/1997 - 4/30/2002               4900 Landon Drive               Anaheim, CA              16.       Las Vegas                 Building  Schuster Street Office/Warehouse, LLC*  8/1/1998 - 7/31/2001               6500 South Schuster St               Las Vegas, NV              17.       Phoenix                 Storeroom & Parking  Gene Tang Investments, Ltd.*  4/1/1998 - 3/31/2001                    Areas               6036 North 16th Street               Phoenix, AZ              18.       Tucson                 Building  Keenan Investment Co.*  4/1/99 - 3/31/2003               2801 N. Flowing Wells Road              Tucson, AZ                              19.       Scottsdale                 Office  Kertam Corporation*  5/1/2000 - 4/30/2003               7800 Pierce Street              Scottsdale, AZ              20.       Deer Valley                 Office  Trustees of the Estate of James Campbell*  8/1/1997- 7/31/2002               18201 North 25th Avenue              Suite A                Phoenix, AZ  *REQUIRES CONSENT TO ASSIGN -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 1 of 3 SCHEDULE 3.08 CONTRACTS Lessor --------------------------------------------------------------------------------   Year --------------------------------------------------------------------------------   Make --------------------------------------------------------------------------------   Vehicle ID# -------------------------------------------------------------------------------- SPPI Location -------------------------------------------------------------------------------- Ryder Truck Rental, Inc.*   1998   Mack   1M1AA12Y5WW095736   California   Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K3W003860  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K6W7003822  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K8W7003868  California  Ryder Truck Rental, Inc.*  1998   INT’L  LHTSCABM1WH57727  Nevada  Ryder Truck Rental, Inc.*  1999   ISUZU  JALC4B142X7010625  Nevada  Ryder Truck Rental, Inc.*  1998   ISU  JALL4B1K5W7003939  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1KXW7003905  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K9W7003720  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K0W7003752  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K8W7003790  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K7W7003778  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K1W7003758  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K3W7003714  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K3W7003700  California  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM2WH575719  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K8W7003725  California  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM3WH575728  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1KXW7003869  California  Ryder Truck Rental, Inc.*  1998   ISU  JALC4B1K7W7003893  California  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM7WM566733  Arizona  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM0WH586752  Arizona  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM9WH586751  Arizona  Ryder Truck Rental, Inc.*  1999   INT’L  1HTSCABM2XH586754  Arizona  Ryder Truck Rental, Inc.*  1998   INT’L  1HTSCABM2WH586753  Arizona  Ford Motor Credit Co. *  1999   Ford  1FTNF20L9XED35278  California  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 2 of 3 SCHEDULE 3.08 (CONTINUED) CONTRACTS Lessor --------------------------------------------------------------------------------   Year --------------------------------------------------------------------------------   Make --------------------------------------------------------------------------------   Vehicle ID# -------------------------------------------------------------------------------- SPPI Location -------------------------------------------------------------------------------- Ford Motor Credit Co.*   1999   Ford   1FTNF20L2XEC97991   California   Ford Motor Credit Co.*  1999   Ford  1FTNF20L9XEE20105  California  Ford Motor Credit Co.*  1999   Ford  1FTNF20L0XEE41618  California  Ford Motor Credit Co.*  1999   Ford  1FTNF20L0XEE37441  California  Ford Motor Credit Co.*  1999   Ford  1FTNF20L8XEC90639  California  Ford Motor Credit Co.*  2000   Ford  1FTN20L3YEA09719  California  Ford Motor Credit Co.*  2000   Ford  1FTNF20L4YEB08226  Arizona  Ford Motor Credit Co.*  1999   Ford  1FTNF20L3XED61648  Nevada  * REQUIRES CONSENT TO ASSIGN -------------------------------------------------------------------------------- CONTRACT HOLDER -------------------------------------------------------------------------------- TYPE OF CONTRACT --------------------------------------------------------------------------------   CIGNA*   Fully Insured HMO/PPO     Robert T. Dorris & Associates  Employee Assistance Program    Assured Transportation & Delivery, Inc.**  Personnel Services Agreement    The Santa Cruz Operation, Inc. ***  Computer Software License Agreement    * Requires Consent to Assign    ** Contract Cannot be Assigned    *** Consent Required unless certain procedures are followed  -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 3 of 3 SCHEDULE 3.08 (CONTINUED) CONTRACTS LESSOR -------------------------------------------------------------------------------- TYPE -------------------------------------------------------------------------------- TERM -------------------------------------------------------------------------------- Cannon Financial Services, Inc.*   Copier Lease   Dated, 1/10/97 - 60 Mos.   AT & T Capital Corp.*  Telephone  Dated, 9/1/98 - 24 Mos.   AT & T Capital Corp.*  Telephone  Dated, 6/11/97 - 48 Mos.   AT & T Credit Corp.*  Telephone  Dated, 6/11/97 - 48 Mos.   AT & T Capital Corp.*  Telephone  Dated, 1/19/98 - 48 Mos.   AT & T Capital Corp.*  Telephone  Dated, 4/25/97 - 48 Mos.   Lucent Technologies, Inc.*  Telephone  Dated, 2/2/99 - 48 Mos.   Lucent Technologies, Inc.*  Telephone  Dated, 9/22/97 - 48 Mos.   AT & T Capital Corp.*  Telephone  Dated, 5/8/98 - 48 Mos.   AT & T Capital Corp.*  Telephone  Dated, 1/15/99 - 24 Mos.   Lucent Technologies, Inc.*  Telephone  Dated, 1/28/00 - 48 Mos.   *REQUIRES CONSENT TO ASSIGN ALL PURCHASE ORDERS AND SALES ORDERS ARE NOT ASSIGNABLE. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.09 INVENTORY Not applicable. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.10 FIXED ASSET LISTING ($10,000 OR MORE) Asset No. --------------------------------------------------------------------------------                       Description -------------------------------------------------------------------------------- Date of Purchase -------------------------------------------------------------------------------- Purchase Price -------------------------------------------------------------------------------- Accumulated Depreciation -------------------------------------------------------------------------------- Net Value -------------------------------------------------------------------------------- 1-40127A   48' 1989 MONO TRAILER   7/97   12,607   6,303   6,303   01-10025A  FORKLIFT P3000  6/82   13,693   13,693   —   01-40027A  RACK SYSTEM - B & G ENTER  11/78   22,554   22,554   —   50-60110A  1981 DATSUN FORKLIFT  8/81   11,872   11,872   —   55-60100A  1980 DATSUN FORKLIFT P2000  6/80   10,497   10,497   —   69-60185A  TOYOTA FORKLIFT  4/94   11,583   11,583   —   58-60098A  1980 DATSUN FORKLIFT P2000  3/80   11,253   11,253   —   03-10015A  FORKLIFT DATSUN P2700  1/83   12,365   12,365   —   03-40003A  WAREHOUSE RACKS  2/79   11,253   11,253   —   01-10036A  FORKLIFT P5000  11/83   18,278   18,278   —   01-10026A  FORKLIFT P 3000  4/82   13,605   13,605   —   68-60184A  NISSAN FORKLIFT  3/94   15,272   15,272   —   01-030578  ELECTRONIC MAIL SYSTEM  10/96   11,418   6,661   4,758   01-30019A  MISC INTERIOR DESIGN (PORTRAITS)  1/79   28,148   28,148   —   01-30185A  EDP SYSTEM UPGRADE EQPT  1/89   65,487   65,487   —   01-30548A  CANNON COPIER  7/94   13,994   13,994   —   01-30552A  COMPUTER SYSTEM  7/94   18,547   18,547   0   01-30604A  UPGRADE FOR PHONE AND VOICE MAIL  10/99   11,309   377   10,932   01-30605A  UPGRADE BRANCH OPERATING SYS  10/99   18,509   617   17,892   59-30597A  STORAGE RACKS/BIN BOX  6/97   15,342   7,526   7,816   61-03602A  STORAGE RACKS/SHELVING  3/99   11,836   1,973   9,864   63-03601A  STORAGE RACKS/SHELVING  2/99   12,095   2,016   10,079   68-30543A  STORAGE RACKS/SHELVING  4/94   13,842   13,842   —   67-30529A  STORAGE RACKS - BINS  2/92   10,722   10,722   —   68-30541A  SHELVING  3/94   15,896   15,896   —   01-20116A&B  CHLORINE STORAGE ROOM  12/91   102,963   102,963   —   02-20114A  TENANT IMPROVEMENTS 4/91  5/91   15,000   15,000   —   58-20115A  TENANT IMPROVEMENT-CHLR RM  5/91   25,000   25,000   —   63-20144A  TENANT IMPROVEMENTS  2/99   17,835   7,431   10,404   64-20091A  3 SWAMP COOLERS  6/86   11,573   11,573   —   65-20143A  HAZARDOUS MAT’L STORAGE RM  8/98   35,316   16,677   18,639   68-20129A  TENANT IMPROVMENTS  6/94   22,392   22,392   —   -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 1 of 5 SCHEDULE 3.12 PERMITS HAZARDOUS WASTE PERMITS 1. Canoga Park - Hazardous Waste and Hazardous Materials Management Program 2. Cerritos - Los Angeles County Fire Dept. Hazardous Materials Storage 3. Monrovia - Los Angeles County Fire Dept. Hazardous Materials Disclosure Program 4. Palm Springs - County of Riverside Hazardous Materials Certificate 5. Escondido - County of San Diego Dept. Hazardous Materials Handling 6. El Cajon - County of San Diego Hazardous Materials Handling 7. Ontario - San Bernardino County Fire Dept. Hazardous Materials Storage 8. Ontario - Fire Safety Control Bureau Hazardous Materials Storage 9. Grand Terrace - San Bernardino County Fire Dept. Hazardous Materials Storage 10. Cathedral City - County of Riverside Hazardous Materials 11. Palm Desert - County of Riverside Hazardous Materials Handling 12. Las Vegas - Nevada Hazardous Materials Storage 13. Newbury Park - County of Ventura Hazardous Materials Handling 14. Anaheim - U. S. Dept. of Transportation Hazardous Materials Registration 15. San Diego - County of San Diego Hazardous Materials Certificate 16. Anaheim - California Highway Patrol Hazardous Materials Transportation License -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 2 of 5 SCHEDULE 3.12 (CONTINUED) PERMITS BUSINESS PERMITS 1. California State Board of Equalization - Van Nuys Seller’s Permit 2. California State Board of Equalization - Canoga Park Seller’s Permit 3. California State Board of Equalization - Palm Springs Seller’s Permit 4. California State Board of Equalization - Escondido Seller’s Permit 5. California State Board of Equalization - El Cajon Seller’s Permit 6. California State Board of Equalization - Cerritos Seller’s Permit 7. California State Board of Equalization - San Diego Seller’s Permit 8. California State Board of Equalization - Ontario Seller’s Permit 9. California State Board of Equalization - Cathedral City Seller’s Permit 10. California State Board of Equalization - Newbury Park Seller’s Permit 11. California State Board of Equalization - Anaheim Seller’s Permit 12. California State Board of Equalization - Monrovia Seller’s Permit 13. California State Board of Equalization - Grand Terrace Seller’s Permit 14. California State Board of Equalization - Palm Desert Seller’s Permit -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 3 of 5 SCHEDULE 3.12 (CONTINUED) PERMITS BUSINESS LICENSES 1. City of Los Angeles - 1999 Van Nuys Annual Tax Renewal Form 2. City of Los Angeles - 1999 Van Nuys Fire Permit, 558977-35 3. City of Los Angeles - 2000 Van Nuys Security Alarm Permit 4. City of Los Angeles - 1999 Canoga Park Fire Permit, 559111-97 5. City of Los Angeles - 2000 Canoga Park Security Alarm Permit 6. City of Los Angeles - Canoga Park Business Tax Certificate 7. City of Los Angeles - 1999 Canoga Park Annual Tax Renewal Form 8. City of Palm Springs - 2000 Business License 9. City of Palm Springs - Palm Springs Sign Permit, #1082 10. City of Escondido - Business License, #082861 11. City of Escondido - Security Alarm Permit 12. City of El Cajon - 2000 Business License, #81696 13. City of El Cajon - Security Alarm Permit 14. City of Cerritos - Business License, #014453 15. City of Stanton - Notice of Business License Due, #1866 16. City of Buena Park - Annual Business Tax 17. City of Fountain Valley - Business License 18. City of Buena Park - Annual Business Tax 19. City of Fountain Valley - Business License, #66443 20. City of Covina - 2000 Monrovia Business License -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 4 of 5 SCHEDULE 3.12 (CONTINUED) PERMITS BUSINESS LICENSES 21. City of Monrovia - 2000 Business License, #BA019870 22. City of Alhambra - 2000 Monrovia Business Tax #714721 23. City of La Mesa - 2000 San Diego Business License, #001322 24. City of San Diego - Business Tax, #93003435 25. City of Ontario - 2000 Business License 26. City of Rancho Cucamonga - 2000 Business Certificate 27. City of Riverside - 1998 Business Tax 28. City of Grand Terrace - 2000 Business Tax 29. City of Banning - 2000 Grand Terrace Business Tax 30. City of Riverside - 2000 Grand Terrace Business Tax 31. City of Phoenix - 2000 Privilege License, #86028085 32. State of Arizona - Phoenix Tax License 33. City of Tucson - 2000 Annual Sign Permit Invoice 34. City of Tucson - 2000 Occupational Business License 35. City of Scottsdale - 2000 Privilege Tax License, #109891 36. City of Cathedral City - 1999 Business License, #003187 37. City of Palm Desert - 2000 Business License 38. Clark County - Application for Renewal of Gross Revenue License 39. City of Thousand Oaks - 2000 Newbury Park Business Tax, #03364 40. City of Anaheim - 1999 Business Tax Certificate -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 5 of 5 SCHEDULE 3.12 (CONTINUED) PERMITS BUSINESS LICENSES 42. City of Phoenix - 2000 Deer Park Privilege License #94002849 43. Arizona Dept. of Revenue City of Phoenix - Privilege Tax License, #07-332701 44. City of Las Vegas, State of Nevada - 2000 Las Vegas Pesticide Certificate of Registration 45. City of Las Vegas, Clark County - Certificate of Occupancy #001816 46. Anaheim, California Dept. of Motor Vehicles - Anaheim Motor Carrier Permit , 0001927 -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.14 TAXES None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.15 PROCEEDINGS Pool Water Products, et al v. Olin Corporation, et al. (SA CV 92-563AHS) OPEN WORKERS’ COMPENSATION CLAIMS Blakely, Gregory Delazzer, David DePalma, Isadore Lavioletta, Troy Schoeffling, Thomas Scott, David E. Zander, Ward NOTICE OF CRIMINAL COMPLAINT FILING Letter from the Office of the City Attorney, Los Angeles, California, dated June 6, 2000, charging Superior Pool Products, Inc. with a violation of Vehicle Code Section 34506(b), a misdemeanor, arising out of an incident on June 9, 1999 relating to the transportation of hazardous materials. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.16 (A) PENSION/BENEFIT PLANS SELLER PENSION PLANS Olin Contributing Employee Ownership Plan Arch Employees Pension Plan Arch Supplementary and Deferral Benefit Pension Plan SELLER BENEFIT PLANS Medical Benefits - Cigna HMO/PPO Arch Employees Dental Plan - Delta Dental Arch Life Insurance Plan - Metropolitan Life Insurance Arch Accidental Death and Dismemberment Plan - The Hartford Arch Disability Plans (Short Term and Long Term Disability) - Liberty Mutual Group Universal Life Insurance Plan - Metropolitan METPAY (Group Homeowners and Automobile Insurance) - Metropolitan Employee Assistance Plan - R.T. Dorris & Associates Arch Flexible Spending Account - The TPA Key Executive Life Insurance Plans - Pacific Life (W. Lynch and Associates) Tuition Aid Program SPPI Severance Plan SPPI Vacation Policy Arch Travel Accident Plan Arch Workers Compensation Plan Arch Chemicals, Inc. Employee Deferral Plan Arch Chemicals, Inc. Long Term Incentive Plan SPPI Bonus Programs -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.16 (B) BENEFITS PAID ON SALE OF BUSINESS The following bonuses are to be paid as a result of the sale of the Superior Pool Products Business if certain conditions are met: Employee Name   Bonus Amount   David Chess   $100,000 + % of Final Net Sale Price   Randy Williams  $50,000   Bob Mulholland  $45,000   Larry Lamers  $45,000   Barbara Belyea  $30,000   These bonuses are separate from the Superior’s 2000 bonus plan. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.16 (G) SHORT TERM DISABLED Timothy O’Connell Shelly Zeck Diane Saunders -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.17 ABSENCE OF CHANGES OR EVENTS None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.18 COMPLIANCE WITH APPLICABLE LAWS 1. August 11, 1999 Citation and Notification of Penalty issued by the State of California Division of Occupational Safety and Health Inspection Site: 1200 Lawrence Drive, Newbury Park, CA 91320 Violation: Employer did not include in their injury and illness prevention program written documentation and training on employee exposure to vehicle traffic in the parking lot. Certification signed by David Chess, President, Superior Pool Products, Inc., dated August 16, 1999 that all unsafe conditions listed in the Division’s citation, dated August 11, 1999 have been corrected. Additional fine of $110.00 paid to CAL/OSHA. 2. NOTICE OF CRIMINAL COMPLAINT FILING Letter from the Office of the City Attorney, Los Angeles, California, dated June 6, 2000, charging Superior Pool Products, Inc. with a violation of Vehicle Code Section 34506(b), a misdemeanor, arising out of an incident on June 9, 1999 relating to the transportation of hazardous materials. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.19 EMPLOYEE AND LABOR MATTERS 1. Nadine West v. Superior Pool Products, Inc. (DFHE# E-9798-K-1326-00f) Letter dated May 7, 1998 from the California Department of Fair Employment and Housing enclosing a copy of the complaint in which plaintiff alleged that her position was eliminated while she was on medical leave in violation of the California Family Rights Act. Case settled June 10, 1998. 2. Laura A. Dell Amico v. Superior Pool Products, Inc., (Case No. 13-20332-001) Suit in which plaintiff alleged she did not receive overtime wages earned from January 4, 1996 to September 1, 1997 was filed with the California Labor Commissioner of the State of California, dated June 16, 1999, and served on Superior Pool Products, Inc. The Commissioner awarded plaintiff wages and interest in the amount of $1,992.25. A check was issued in the same amount and mailed to plaintiff on July 2, 1999. 3. Notice of Claim and Conference, dated June 2, 2000 from the Labor Commissioner, State of California, Department of Industrial Relations. A former employee, Daniel Ingraham alleges non payment of six days of accrued vacation pay in the amount of $146.17 as well as additional wages accrued pursuant to Labor Code Section 203 as a penalty, at the rate of $146.17 per day until paid, but not to exceed thirty days. -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.20 TRANSACTIONS WITH AFFILIATES SERVICES PROVIDED BY ARCH CHEMICALS, INC. HUMAN RELATIONS/PAYROLL - The payroll and human resource management functions are processed through Arch’s contract with Olin using Peoplesoft. It is administered locally. RISK MANAGEMENT      ALL INSURANCE COVERAGE IS UNDER ARCH’S POLICIES TREASURY FUNCTION - Bank accounts and cash management are managed by the Arch Treasury department. MEDICAL RECORDS - All medical records are maintained at Arch’s Medical department. MIS - E-MAIL/MICROSOFT OFFICE/TELECOMMUNICATIONS - The local e-mail system is currently linked through Arch’s e-mail exchange. The Microsoft Office software 2000 program is licensed to Arch. Long distance telephone service is supplied through Arch/ATT contract. LEGAL - Arch provides legal support. PRODUCT PURCHASED FROM ARCH THE FOLLOWING WAS THE SALES VALUE OF THE PRODUCTS PURCHASED FROM ARCH DURING 1999: HTH Brand Products $61,006 -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.21 TOP TEN SUPPLIERS SUPPLIER --------------------------------------------------------------------------------   PURCHASES ($000) -------------------------------------------------------------------------------- PAC FAC, INC. WEST   18,384   HAYWARD POOL PRODUCTS  7,256   AQUA CLEAR INDUSTRIES  6,571   WATERPIC TECHNOLOGIES  4,922   HASA, INC  4,570   STA-RITE INDUSTRIES  2,571   RAYPAK INC  2,022   UNICEL - MEISSNER  1,914   POLARIS POOL SYSTEMS  1,529   A.O. SMITH CORP  1,134   -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.23 ABSENCE OF UNDISCLOSED LIABILITIES None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.24 OFFICERS AND DIRECTORS OFFICERS James A. Rushton, Chairman of the Board and Chief Executive Officer David A. Chess, President Sarah A. O’Connor, Vice President and Assistant Secretary Joseph P. Lacerenza, Secretary W. Paul Bush, Treasurer Phyllis K. Hartford, Assistant Treasurer Randy Williams, Assistant Treasurer Carl G. Seefried, Jr., Assistant Secretary BOARD OF DIRECTORS James A. Rushton, Director David A. Chess, Director Louis S. Massimo, Director -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 3.26 PRODUCT LIABILITY None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 1 of 2 SCHEDULE 3.27 NAMES AND LOCATIONS - C A L I F O R N I A - CORPORATE OFFICE 4900 E. Landon Drive Anaheim, CA 92807 (714) 693-8035 (714) 693-8048 Fax SYEA 30-673306-0012-OHB #01 WAREHOUSE 4900 E Landon Dr Dept W Anaheim, CA 92807 (714) 693-8035 (714) 693-8720 Fax SYEA 30-673306-0012-OHB #50 VAN NUYS 14768 Raymer Street Van Nuys, CA 91406 (818) 782-2721 (818) 782-4808 Fax SYAC 30-673306-0001-OHB #51 CANOGA PARK 8039 Deering Avenue Canoga Park, CA 91304 (818) 340-7624 (818) 340-0119 Fax SYAC 30-673306-002-OHB #52 CERRITOS 16708 S. Parkside Ave Cerritos, CA 90703 (714) 523-8312 (562) 404-9909 (562) 921-5030 Fax SYAD 30-673306-0003-OHB #53 MONROVIA 509 Fig Street Monrovia, CA 91016 (626) 358-4426 (626) 359-0396 Fax SYAP 30-673306-0004-OHB #54 SAN DIEGO 5805 Fairmount Extension San Diego, CA 92120 #54 SAN DIEGO -Current 4737 Old Cliffs Road San Diego, CA 92120 (619) 283-2066 (619) 282-8067 Fax SYFH 30-673306-0013-OHB #55 PALM SPRINGS 507 Sunny Dunes Road Palm Springs, CA 92264 (760) 325-6555 (760) 323-1798 Fax SYEHC303-673306-0005-OHB #56 ESCONDIDO 1916 Commercial Street Escondido, CA 92029 (760) 489-0255 (760) 489-1608 Fax SYAP 30-673306-0006-OHB #57 EL CAJON 349 S. Marshall Avenue El Cajon, CA 92020 (619) 447-2466 (619) 447-2381 Fax SYFH 30-673306-0007-OHB #58 ONTARIO 1410 S. Cucamonga Avenue Ontario, CA 91761 (909) 923-3600 (909) 923-3604 Fax SYEHA-673306-0008-OHB #59 GRAND TERRACE 22060 Commerce Way Grand Terrace, CA 92313 (909) 825-3500 (909) 825-3888 Fax SY0HB 306773306-00015-EH #63 CATHEDRAL CITY 68370 Commercial Road Cathedral City, CA 92234 (760) 321-6005 (760) 321-2294 Fax SY0HB 306773306-00016-EH #64 PALM DESERT 75100 B Mayfair Drive Palm Desert, CA 92211 (760) 568-9661 (760) 773-5975 Fax SYEHC30-673306-0009-OHB #66 NEWBURY PARK 1200 Lawrence Dr, #400 Newbury Park, CA 91320 (805) 498-9945 (805) 499-3574 Fax SYAR 30-673306-0011-OHB #67 ANAHEIM 4900 E Landon Dr, Dept B Anaheim, CA 92807 (714) 693-3600 (714) 693-8720 Fax SYEA 30-673306-0012-OHB #69 HARBOR CITY 24040 S. Frampton Ave. Harbor City, CA 90710 SYEA 30-6773306-0014-OHB - N E V A D A - #65 LAS VEGAS 6595 S. Schuster Street Las Vegas, NV 89118 (702) 914-7444 (702) 914-1969 Fax 56 3062272 - A R I Z O N A - #60 PHOENIX 1530 E. Bethany Home Rd Phoenix, AZ 85014 (602) 263-1130 (602) 265-6868 Fax 07-332701-C #61 TUCSON 30 E. Alturas Road Tucson, AZ 85705 -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules Page 2 of 2 SCHEDULE 3.27 (CONTINUED) NAMES AND LOCATIONS - A R I Z O N A (CONT) #61 TUCSON - Current 2801 N. Flowing Wells Rd. Tucson, AZ 85705 (520) 884-9010 (520) 624-3411 07-332701-C #62 SCOTTSDALE 7800 E. Pierce Street Scottsdale, AZ 85257 (602) 994-8640 (602) 994-0097 Fax 07-332701-C #68 DEER VALLEY 18201 N. 25th Avenue, Ste. A Phoenix, AZ 85023 (602) 789-8200 (602) 789-8180 Fax 07-332701-C -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 5.01 COVENANTS OF SELLER AND PARENT RELATING TO CONDUCT OF BUSINESS None -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 5.10 BENEFIT PLAN MATTERS PURCHASER PENSION BENEFIT PLANS SCP Savings and Retirement Fund SCP Profit Sharing Employee Stock Purchase Plan PURCHASER BENEFIT PLANS Medical Benefits Dental Plans Life Insurance/AD&DPlan Voluntary Term Life Plan Short Term Disability (Plus State Disability in Certain States) Long Term Disability Tuition Aid Program Vacation Plan Workers Compensation Plan Personal Time/Jury Duty/Sick Pay/Military Leave Plan Purchaser Holiday Schedule Relocation Plan Purchaser Incentive Plan OTHER BENEFITS Family Medical Leave Act COBRA Automobile Allowances/Company Automobile -------------------------------------------------------------------------------- Asset Purchase Agreement Schedules SCHEDULE 5.21 ENVIRONMENT STUDY STUDIED PROPERTIES Leased property located at 68370 Commercial Road, Cathedral City, CA

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Avocent Employment Services Co. (formerly known as Polycon Investments, Inc.), a Texas corporation ("Employer"), Avocent Corporation, a Delaware corporation, and Gary R. Johnson (the "Employee"). RECITALS     WHEREAS, the Employer is a direct or indirect subsidiary of Avocent Corporation engaged in the business of leasing employees to Avocent Corporation and its affiliates, including Apex Inc. ("Apex") and Cybex Computer Products Corporation ("Cybex");     WHEREAS, Avocent Corporation and its affiliates (collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/ KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee, Employer, and Cybex entered into that certain Employment and Noncompetition Agreement dated July 1, 1999 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, Cybex, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as its Senior Vice President of Sales, the Americas, and Employer agrees to employ the Employee and lease the Employee to Avocent to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of Senior Vice President of Sales, the Americas. The Employee shall report to the President of the Employer, Cybex, and Avocent Corporation and to the Boards of Directors of the Employer, Cybex, and Avocent Corporation, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of Sales, the Americas, of Avocent Corporation.     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or -------------------------------------------------------------------------------- by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which 2 -------------------------------------------------------------------------------- shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, 3 -------------------------------------------------------------------------------- all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which 4 -------------------------------------------------------------------------------- will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.     3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $180,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a) THE EMPLOYEE BENEFITS. The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical examinations, 5 -------------------------------------------------------------------------------- dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was March 1, 1996.     (b) VACATION. The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c) LIFE INSURANCE. For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d) REIMBURSEMENT FOR EXPENSES. During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date 6 -------------------------------------------------------------------------------- of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof.     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject 7 -------------------------------------------------------------------------------- matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to General Counsel   If to the Employee:   Gary R. Johnson [                   ] [                   ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Huntsville, Madison County, Alabama, for any lawsuit arising from or relating to this Agreement.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such 8 -------------------------------------------------------------------------------- provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal 9 -------------------------------------------------------------------------------- Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     AVOCENT EMPLOYMENT SERVICES, INC.:           By:   /s/ JULIE YARBROUGH    --------------------------------------------------------------------------------     Its: President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ GARY R. JOHNSON    -------------------------------------------------------------------------------- Gary R. Johnson 10 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

THE STANLEY WORKS 1000 Stanley Drive New Britain, CT 06053 September 20, 2000 Mr. Matthew Jore Jore Corporation 45000 Highway 93 South Ronan, MT 59864 Re:License Agreement dated April 28, 1999 (the "License Agreement") Dear Matt: The purpose of this letter is to set forth our mutual understanding regarding the License Agreement and to amend certain provisions of the License Agreement. Defined terms used herein and not otherwise defined shall have the meaning assigned to them in the License Agreement. In consideration of the mutual promises set forth herein, the parties agree as follows: 1.(a)  Attached hereto is a list of all Licensed Articles for which Jore has submitted all products samples, packaging, labeling, point of sale materials, trade show displays, sales materials and advertising to Stanley for approval (collectively, the "Approved Licensed Articles"). Stanley and Jore hereby agree that no further approvals are required for such Approved Licensed Articles pursuant to Article 5 and paragraph 8.1 of the License Agreement and Stanley hereby agrees that the Approved Licensed Articles meet the standards referred to in the second sentence of paragraph 3.11.     (b) Jore shall not make any changes to any of the Approved Licensed Articles. In the event that Stanley determines that changes have been made to the Approved Licensed Articles, Stanley shall notify Jore in writing. Jore shall have thirty (30) days to correct the changes made to the Approved Licensed Articles. If at the end of such thirty (30) day period Jore has not corrected the unauthorized changes or has not made reasonable efforts to correct the unauthorized changes to Stanley's satisfaction, Stanley shall have the right to immediately terminate the License Agreement with respect to that Approved Licensed Article and Jore shall have no further right to manufacture, advertise, distribute, sell or otherwise deal in such Approved Licensed Article.     (c) The parties hereby agree and acknowledge that there will not be any additional Stanley® branded product introductions that are not Approved Licensed Articles subsequent to the date of this Letter. 2.Paragraph 3.10 of the License Agreement is hereby deleted in its entirety and replaced as follows: 3.10  [Intentionally Deleted] 3.Paragraph 6.2 of the License Agreement is hereby deleted in its entirety and replaced as follows: 6.2SECONDS AND DISPOSAL. If during the manufacture of the LICENSED ARTICLES, any SECONDS are produced, LICENSEE shall destroy such SECONDS. All products, packaging, labeling, point of sale, sales materials and advertising bearing trademarks, artwork and/or designs of OWNER produced by LICENSEE which are not suitable for use or sale pursuant to this Agreement shall be promptly destroyed. -------------------------------------------------------------------------------- 4.The last sentence of paragraph 15 is hereby amended as follows: "In the event OWNER advises LICENSEE that a special promotional effort is to take place in one individual store or chain, LICENSEE may elect to supply LICENSED ARTICLES to said store or chain in its sole discretion." * 5.Except to the extent amended by this letter amendment, the License Agreement remains in full force and effect. If the foregoing meets with your approval, please indicate in the space provided below. Very truly yours, /s/ KENNETH O. LEWIS    -------------------------------------------------------------------------------- Kenneth O. Lewis Agreed to and accepted, this 22nd day of September, 2000. JORE CORPORATION By:                      Name: Matthew Jore Title: President *Exhibit 1 is revised in its entirety to read as attached hereto. -------------------------------------------------------------------------------- Exhibit 1 Licensed Articles   Launch Year ** Confidential treatment requested pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. ** --------------------------------------------------------------------------------

  THIRD AMENDED AND RESTATED LOAN AGREEMENT   dated as of October 30, 2000 By and Among OMNI ENERGY SERVICES CORP., AMERICAN AVIATION L.L.C., OMNI ENERGY SERVICES CANADA CORP. OMNI ENERGY SERVICES -- ALASKA, INC. and HIBERNIA NATIONAL BANK         THIRD AMENDED AND RESTATED LOAN AGREEMENT THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement") dated as of October 30, 2000, by and among OMNI ENERGY SERVICES CORP., a Louisiana corporation (the "Borrower"), AMERICAN AVIATION L.L.C., a Missouri limited liability company ("Aviation"), OMNI ENERGY SERVICES CANADA CORP., an Alberta corporation formerly known as Hamilton Drill Tech, Inc. ("Omni Canada"), OMNI ENERGY SERVICES -- ALASKA, INC., an Alaska corporation ("Omni Alaska"; Aviation, Omni Canada, and Omni Alaska are herein collectively called the "Guarantor"), and HIBERNIA NATIONAL BANK, a national banking association (the "Bank"). RECITALS: 1. The Bank has previously extended certain credit facilities to Omni Geophysical, L.L.C., a Louisiana limited liability company ("Omni Geophysical") pursuant to that certain Loan Agreement dated as of July 19, 1996, by and between Omni Geophysical and the Bank, as heretofore amended by that certain First Amendment to Loan Agreement dated as of December 4, 1996, and by that certain Second Amendment to Loan Agreement dated as of April 4, 1997 (as so amended, the "Original Agreement"). 2. The Original Agreement was amended and restated pursuant to that certain Amended and Restated Loan Agreement dated as of June 13, 1997, by and between Omni Geophysical and the Bank, as amended by First Amendment thereto dated as of August 6, 1997, by Second Amendment thereto dated as of September 30, 1997, and by Third Amendment thereto dated as of November 21, 1997 (the Amended and Restated Loan Agreement, as amended, is herein called the "First Restated Agreement"). 3. The First Restated Agreement was amended and restated pursuant to that certain Amended and Restated Loan Agreement dated as of January 20, 1998, by and among Borrower, certain subsidiaries of the Borrower, and Bank, as amended by First Amendment thereto dated as of March 31, 1998, by Second Amendment thereto dated as of July 31, 1998, by Third Amendment thereto dated as of October 30, 1998, by Fourth Amendment thereto dated as of March 29, 1999, by Fifth Amendment thereto dated as of September 29, 1999, by Sixth Amendment thereto dated as of December 28, 1999, by Seventh Amendment thereto dated as of March 31, 2000, by Eighth Amendment thereto dated as of May 15, 2000, and by Ninth Amendment thereto dated as of June 12, 2000 (the Amended and Restated Loan Agreement dated as of January 20, 1998, as so amended, is herein called the "Second Restated Agreement"). 4. Each Guarantor is a wholly-owned subsidiary of the Borrower. 5. The Borrower, with the consent of the Guarantor, has requested that the Bank (i) extend the maturity date of the Revolving Note (as defined in the Second Restated Agreement), (ii) restructure and extend the maturity date of the Term Note (as defined in the Second Restated Agreement), and (iii) make certain other changes to the Second Restated Agreement.     PAGE 1 OF 42 6. The Bank, subject to the terms and conditions of this Agreement, has agreed to make certain of the changes requested by Borrower. NOW, THEREFORE, in consideration of the mutual covenants hereunder set forth, the Borrower, the Guarantor, and the Bank do hereby amend and restate the Second Restated Agreement in its entirety, and do hereby covenant and agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.1. Defined Terms. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Advance Rate" shall mean the following: (a) from the date of this Agreement through December 31, 2000, the Advance Rate will be 50%; (b) for the month of January 2001, the Advance Rate will be 40%; (c) for the month of February 2001, the Advance Rate will be 30%; (d) for the month of March 2001, the Advance Rate will be 20%; (e) for the month of April 2001, the Advance Rate will be 10%; (f) from May 1, 2001 and thereafter, the Advance Rate will be 0.00%. "Advantage Capital Group" means individually and collectively, Advantage Capital V Limited Partnership, Advantage Capital VI Limited Partnership, Advantage Capital VII Limited Partnership, Advantage Capital VIII Limited Partnership, Advantage Capital Technology Fund, L.L.C., any affiliate of any of the foregoing, any Advantage entity that participates in the equity offering referenced in Section 8.1.(p)(i) below, and their respective successors and assigns. "Amortizing Term Loan" shall mean the term loan evidenced by the Amortizing Term Note as defined below. "Amortizing Term Note" shall mean that certain promissory note of even date herewith by Borrower in the principal amount of $7,466,111.00, payable to the order of the Bank with interest at the Base Rate plus the Applicable Margin, together with all renewals, extensions, and refinancings of said indebtedness. The Amortizing Term Note constitutes a renewal and restructure of that certain promissory note by Borrower dated June 12, 2000 in the principal amount of $8,466,111.00 payable to the order of Bank.   PAGE 2 OF 42   "Agreement" shall mean this Third Amended and Restated Loan Agreement, as the same may from time to time be amended, modified or supplemented and in effect. "Aircraft Security Agreement" shall mean that certain Aircraft Security Agreement by Aviation, Borrower, and the Bank, dated as of August 6, 1997, as amended by First Amendment thereto dated as of December 29, 1997, as amended by Second Amendment thereto dated as of January 30, 1998, and as the same may be amended from time to time and in effect, affecting certain aircraft, engines, propellers, and related inventory, equipment and spare parts of Aviation. "Applicable Margin" shall mean 3.0%. "Aviation" shall mean American Aviation L.L.C., a Missouri limited liability company, together with its successors and assigns. "Bank" shall mean Hibernia National the Bank, a national banking association. "Base Rate" shall mean the rate of interest established from time to time by The Wall Street Journal, as the "prime" lending rate, and which is not necessarily the lowest rate charged by the Bank, such rate to be adjusted automatically on and as of the effective date of any change in such Base Rate. "Borrower" shall mean individually, interchangeably, and collectively, Omni Energy Services Corp., a Louisiana corporation, together with its successors and assigns. "Borrowing Base Amount" shall mean at any time (and monitored by Bank upon each advance but not less than on a weekly basis), based upon the most recent timely submitted borrowing base certificate submitted by or on behalf of the Borrower (but not less than on a weekly basis), as the same may be adjusted by the Bank upon each Request for Advance and on a weekly basis upon review of the Borrower's sales journals and cash receipts and as a result of field examinations of the Collateral, which adjustment(s) shall be in Bank's sole discretion the lesser of (i) $5,000,000.00 or (ii) the sum of (x) the amount of Qualified Receivables at such time and (y) the amount of Eligible Inventory at such time. "Business Day" means a day other than a Saturday, Sunday or legal holiday for commercial banks under the laws of the State of Louisiana or a day on which national banks are authorized to be closed in New Orleans, Louisiana. "Collateral" shall mean any interest in any kind of property or assets pledged, mortgaged or otherwise subject to an Encumbrance in favor of the Bank pursuant to the Collateral Documents. "Collateral Documents" shall collectively refer to the Mortgage, the Security Agreements, the Guaranty, and any and all other documents in which an Encumbrance is PAGE 3 OF 42 created on any property of the Borrower, the Guarantor, or of any third person to secure payment of the Indebtedness of either Borrower or any part thereof. "Commitment" shall mean the Revolving Loan Commitment. "Credits" shall have the meaning assigned to that term in Section 2.1 hereof. "Credit Application" shall have the meaning assigned to that term in Section 2.3.1 hereof. "Credit Commission" shall have the meaning assigned to that term in Section 2.3.3 hereof. "Credit Obligation" shall have the meaning assigned to that term in Section 2.3.4 hereof. "Debt" shall mean any and all amounts and/or liabilities owing from time to time by either Borrower to any Person, including the Bank, direct or indirect, liquidated or contingent, now existing or hereafter arising, including without limitation (i) indebtedness for borrowed money; (ii) the amounts of all standby and commercial letters of credit and bankers acceptances, matured or unmatured, issued on behalf of either Borrower; (iii) guaranties of the obligations of any other Person, whether direct or indirect, whether by agreement to purchase the indebtedness of any other Person or by agreement for the furnishing of funds to any other Person through the purchase or lease of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the indebtedness of any other Person, or otherwise; (iv) the present value of all obligations for the payment of rent or hire of property of any kind (real or personal) under leases or lease agreements required to be capitalized under GAAP, and (v) trade payables and operating leases incurred in the ordinary course of business or otherwise. "Default" shall mean an event which with the giving of notice or the lapse of time (or both) would constitute an Event of Default hereunder. "Dollars" and "$" shall mean lawful money of the United States of America. "Dominion Account" shall have the meaning ascribed to such term in Section 11.14 hereof. "EBITDA" shall mean earnings before interest, taxes, depreciation, and amortization. "Eligible Inventory" shall mean the Advance Rate times the aggregate value of Borrower's and each Guarantor's Inventory and Eligible Parts and Supplies except: (a) Inventory which is not owned by Borrower or Guarantor free and clear of all security interests, liens, encumbrances, and claims of third parties, except for security interests in favor of Bank;   PAGE 4 OF 42 (b) Inventory which Bank, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing, and/or Inventory which Bank, in its sole discretion, deems to be slow moving; (c) Inventory which has been returned; (d) Inventory which is damaged; (e) Inventory which is consigned; (f) Inventory which is not owned by Borrower or Guarantor; and (g) Inventory which is subject to purchase money security interest. "Eligible Parts and Supplies" shall mean that portion of the Borrower's equipment consisting of Parts and Supplies in which Bank has a first priority security interest. "Encumbrances" shall mean individually, collectively and interchangeably any and all presently existing and/or future mortgages, liens, privileges, servitudes, rights-of-way and other contractual and/or statutory security interests and rights of every nature and kind that, now and/or in the future may affect the property of either Borrower or the Guarantor or any part or parts thereof. "Environmental Laws" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., the Louisiana Environmental Affairs Act, La. R.S. 30:2001 et seq., or other applicable Governmental Requirements or regulations adopted pursuant to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" shall mean individually, collectively and interchangeably any of the Events of Default set forth below in Section 12.1 hereof. "First Restated Agreement" shall mean such term as defined in Recital 2 of this Agreement. "Funded Debt" shall mean, on a consolidated basis, all outstanding debt of Borrower from Bank and any other outstanding debt of Borrower owed to other creditors. "GAAP" shall mean, at any time, accounting principles generally accepted in the United States as then in effect. "General Intangibles" shall mean, all general intangibles as defined in Section 9-106 of the UCC, of the Borrower and the Guarantor, whether now owned or hereafter acquired, including without limitation (i) all contractual rights and obligations or indebtedness owing to the Borrower (other than Receivables) from whatever source arising; (ii) all things and actions, rights represented by judgments and claims arising out of tort and   PAGE 5 OF 42 other claims related to the Collateral, including the right to assert and otherwise be the proper party of interest to commence and prosecute actions; (iii) all goodwill, patents, patent licenses, trademarks, trademark licenses, trade names, service marks, trade secrets, rights and intellectual property, copyrights, permits and licenses; (iv) all rights or claims in respect of refunds for taxes paid; and (v) all deposit accounts of the Borrower and the Guarantor, including the Dominion Account. "Governmental Requirement" shall mean any applicable state, federal or local law, statute, ordinance, code, rule, regulation, order or decree. "Guarantor" shall mean individually, interchangeably, and collectively, American Aviation L.L.C., a Missouri limited liability company, and its successors and assigns, Omni Energy Services Canada Corp. (f/k/a/ Hamilton Drill Tech Inc.), an Alberta corporation, and its successors and assigns, Omni Energy Services - Alaska, Inc. an Alaska corporation, and its successors and assigns, and any wholly-owned Subsidiary of Borrower that the Borrower currently has or may hereafter acquire. "Guaranty" shall mean, collectively, that certain Commercial Guaranty dated January 20, 1998 by Aviation in favor of the Bank, that certain Commercial Guaranty dated May 19, 1998 by Omni Canada in favor of the Bank, that certain Commercial Guaranty by Omni Alaska dated October 30, 1998 in favor of the Bank, and each Commercial Guaranty of even date with this Agreement executed by each Guarantor in favor of the Bank. "Indebtedness" shall mean, at any time, the indebtedness of the Borrower evidenced by the Notes executed by the Borrower pursuant to this Agreement, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges, together with all Credit Obligations, Credit Commissions, commitment fees and other indebtedness and costs and expenses for which the Borrower is responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" also includes, any and all other loans, extensions of credit, obligations, debts and liabilities of the Borrower, plus interest thereon, that may now and in the future be owed to or incurred in favor of the Bank, as well as all claims by the Bank against the Borrower, whether existing now or later; whether they are voluntary or involuntary, due or to become due, direct or indirect or by way of assignment, determined or undetermined, absolute or contingent, liquidated or unliquidated; whether the Borrower may be liable individually or jointly with others, of every nature and kind whatsoever, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges; whether the Borrower may be obligated as principal obligor, guarantor, surety, accommodation party or otherwise. "Inventory" shall mean all of the Borrower's and each Guarantor's raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower or Guarantor now has or hereafter acquires any right, whether held by     PAGE 6 OF 42 Borrower, Guarantor or others, and all documents of title, warehouse receipts, bills of lading, and all others documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of Borrower's or Guarantor's custody or possession and all returns on Receivables. "Loans" shall mean, collectively, the Revolving Loans and the Amortizing Term Loan. "Loan Documents" shall mean this Agreement, the Notes, the Collateral Documents and any other Related Documents. "Material Adverse Change" shall mean, with respect to the Borrower or either Guarantor, an event which causes a material adverse effect on the business, assets, operations or condition (financial or otherwise) of such Person, or which otherwise changes in a materially adverse way any other facts, circumstances or conditions which the Bank has relied upon or utilized in making its Commitments hereunder. "Mortgage" shall mean that certain Multiple Indebtedness Mortgage by Omni Geophysical in favor of the Bank dated June 13, 1997, as amended from time to time and in effect, pursuant to which the Bank is granted a mortgage lien on certain real property in Lafayette Parish, Louisiana; which Mortgage is recorded in the mortgage records of Lafayette Parish under File No. 97-020694. "Notes" shall mean, collectively, the Revolving Note and the Amortizing Term Note, as each of them may be renewed or extended, together with all other promissory note or notes given in renewal, substitution, or as a refinancing of any part of the indebtedness evidenced thereby. "Omni Alaska" shall mean Omni Energy Services-Alaska, Inc., an Alaska corporation, and its successors and assigns. "Omni Canada" shall mean Omni Energy Services Canada Corp., an Alberta, Canada corporation, together with its successors and assigns. "Omni International" shall mean Omni International Energy Services, Ltd., a Cayman Islands corporation, and its successors and assigns. "Omni South America" shall mean Omni International Energy Services-South America, Ltd., a Cayman Islands corporation, and its successors and assigns. "Original Agreement" shall mean such term as defined in Recital 1 of this Agreement. "Parts and Supplies" shall mean all parts and supplies purchased by Borrower for use with or integration into Borrower's equipment, of whatever kind. For example, all replacement parts and supplies for Borrower's marsh and/or swamp buggies shall constitute Parts and Supplies.     PAGE 7 OF 42 "Permitted Encumbrances" shall have the meaning ascribed to such term in Section 11.4 hereof. "Person" shall mean an individual or a corporation, partnership, trust, joint venture, incorporated or unincorporated association, joint stock company, government, or an agency or political, subdivision thereof, or other entity of any kind . "Qualified Receivables" shall mean eighty percent (80%) of the Receivables of the Borrower and/or the Guarantor, carried on their respective books of account, which, on the date as of which the determination is made, (a) are subject to a first priority perfected Encumbrance in favor of the Bank, (b) arose in the ordinary course of business of the Borrower and/or the Guarantor, (c) arose from the sale of goods or performance of services by the Borrower and/or the Guarantor, (d) are evidenced by an "invoice" (i.e., an invoice, shipping order or similar writing), (e) are not subject to setoff, counterclaim, defense, or a dispute of any kind or nature, (f) are not more than 90 days old, (g) are payable by Persons other than any Person who is an affiliate (as defined in accordance with GAAP) of the Borrower and/or the Guarantor or an officer or director of the Borrower and/or the Guarantor or an officer or director of an affiliate of the Borrower and/or the Guarantor, (h) are not payable by the United States of America or any agency or department thereof (unless such Receivable has been assigned to the Bank pursuant to a properly perfected assignment under the Federal Assignment of Claims Act, 31 U.S.C. Section 3727), (i) do not by their own terms prohibit the collateral assignment thereof or require the consent of the obligor thereon to any collateral assignment thereof, (j) do not arise out of a transaction with an account debtor outside the United States of America (unless covered by a letter of credit acceptable to the Bank), (k) are not Receivables due by a Person from whom over 50% of its entire accounts receivable balance with the Borrower or the Guarantor is unpaid for more than 90 days past the invoice date(s) related thereto, (1) are not credit balances, (m) are not Receivables which the Bank believes, in its sole credit judgment reasonably applied, that collection of such Receivables is insecure or that such Receivables may not be paid by reason of the account debtor's financial inability to pay or that such Receivables are otherwise unacceptable collateral, (n) are not that portion of the Receivables due by a single Person which are in excess of 25% of all of the Receivables due to the Borrower and/or the Guarantor, (o) commencing 90 days from the date hereof, are owed by a Person who has either signed an acceptance of the work giving rise to the Receivable or signed an acceptance of the proposal for work giving rise to the Receivable, and (p) Receivables that have been sold, assigned or factored to another entity. For purposes of this Agreement, a Receivable is 90 days old on the 90th day after the date of the invoice evidencing such Receivable (regardless of the due date of such invoice). "Receivables" shall mean, with respect to such Person, all accounts (as such term is defined in Section 9--1061 of the UCC) of such Person, including all indebtedness presently existing or hereafter owing to such Person in connection with such Person's business, profession, occupation or undertaking, including, but not limited to, the sale of goods or     PAGE 8 OF 42 the performance of services, together with all proceeds thereof; excluding, however, any indebtedness due to or arising out of claims in tort and indebtedness evidenced by a promissory note or a negotiable instrument. "Related Documents" shall mean and include individually, collectively, interchangeably and without limitation all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, collateral mortgages, deeds of trust, and all other instruments and documents, whether now or hereafter existing, executed in connection with the Indebtedness. "Request for Advance" shall mean the Borrower's request for a Revolving Loan, as the case may be. "Revolving Loans" shall mean loans made by the Bank under the Revolving Note to the Borrower in accordance with and subject to the terms of the Revolving Loan Commitment. "Revolving Loan Commitment" shall mean the agreement by the Bank to the Borrower to make Revolving Loans and to issue Credits in accordance with the provisions of Article II hereof. "Revolving Note" shall mean that certain promissory note of even date herewith, by Borrower in the maximum aggregate principal amount of $5,000,000.00 payable to the order of the Bank:, together with any and all extensions, renewals, modifications, and substitutions therefor. The Revolving Note constitutes a renewal and reduction of that certain promissory note by Borrower dated September 29, 1999 in the original principal amount of $6,000,000.00, payable to the order of the Bank. "Second Restated Agreement" shall mean such term as defined in Recital 3 of this Agreement. "Security Agreements" shall mean (i) that certain Commercial Security Agreement dated July 19, 1996, by Omni Geophysical in favor of the Bank, as amended by First Amendment thereto dated as of June 13, 1997, by Second Amendment thereto dated as of August 6, 1997, by Third Amendment thereto dated as of September 30, 1997, by Fourth Amendment thereto dated as of November 21, 1997, and by Fifth Amendment thereto dated as of January 20, 1998, affecting all of the properties described therein, (ii) that certain Security Agreement (Fixtures) by Omni Geophysical dated as of June 13, 1997 in favor of the Bank, as amended by First Amendment thereto dated as of January 20, 1998, (iii) that certain Aircraft Security Agreement by Aviation dated August 6, 1997 in favor of the Bank, as amended by First Amendment thereto dated as of December 29, 1997, and by Second Amendment thereto dated as of January 20, 1998, (iv) that certain Commercial Security Agreement dated August 6, 1997 by Aviation in favor of the Bank, as amended by First Amendment thereto dated as of January 20, 1998, (v) that certain Commercial Security Agreement by the Borrower in favor of the Bank dated as of January 20, 1998, PAGE 9 OF 42 (vi) that certain Commercial Security Agreement by Omni Marine dated as of January 20, 1998 in favor of the Bank, (vii) that certain Commercial Security Agreement by Hamilton dated as of May 19, 1998 in favor of the Bank, (viii) that certain Aircraft Security Agreement dated March 12, 1998 by the Borrower in favor of the Bank, (ix) that certain Aircraft Security Agreement dated June 4, 1998 by the Borrower in favor of the Bank, (x) that certain Aircraft Security Agreement dated June 29, 1998 by the Borrower in favor of the Bank, (xi) that certain Aircraft Security Agreement dated October 1, 1998 by the Borrower in favor of the Bank, (xii) that certain Commercial Security Agreement dated October 30, 1998 by Omni Alaska in favor of the Bank, (xiii) all security agreements granted prior to the date of the Third Amendment by the Borrower, the Guarantors (or any of them), and/or any other Person as security for the Indebtedness, (xiv) all UCC-1 financing statements, and related documents required by the Bank in connection with any of the foregoing, (xv) all amendments or modifications to any of the foregoing, and (xvi) all additional security agreements hereafter granted by any Person as security for the Indebtedness, together with any and all amendments or modifications to any of the foregoing, including, if executed, the documentation necessary to create the security interests referred to in paragraph 9 of the Second Amendment. "Solvent" shall mean, when used with respect to any Person on a particular day, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including without limitation, contingent liabilities, of such person, (ii) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts and liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all of the facts and circumstances existing at such time, represents the amount that can be reasonably expected to become an actual or matured liability. "Subordinated Debt" shall mean all indebtedness owed by Borrower to the Advantage Capital Group, which indebtedness has been subordinated in favor of Bank pursuant to a written subordination agreement. "Subsidiaries" shall mean at any date with respect to any Person all the corporations of which such Person at such date, directly or indirectly, owns 50% or more of the outstanding capital stock (excluding directors' qualifying shares), and "Subsidiary" means any one of the Subsidiaries; provided, however, the terms Subsidiary and Subsidiaries shall not include Omni International and Omni South America.   PAGE 10 OF 42 "Tangible Net Worth" shall mean, at any time, the Borrower's consolidated total assets excluding intangible assets (i.e., patents, copyrights, trademarks, trade names, franchises, goodwill, organizational expenses, and similar intangible expenses, but including leaseholds and leasehold improvements), less the consolidated total liabilities of the Borrower. "Termination Date" shall mean, with respect to the Bank's Commitment the earlier to occur of (i) January 31, 2002, or (ii) the date of termination of the Commitment pursuant to Article XII hereof. "UCC" shall mean the Uniform Commercial Code, Commercial Laws-Secured Transactions (La. R.S. 10--9--101 et seq.) in the State of Louisiana, as amended from time to time, provided that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the Bank's Encumbrances against the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Louisiana "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction. Section 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with GAAP.     ARTICLE II REVOLVING LOANS AND LETTERS OF CREDIT Section 2.1. The Revolving Loan Commitment. Subject to the terms and conditions of this Agreement, the Bank agrees to extend credit to the Borrower during the period from the date hereof until the Termination Date (a) by making Revolving Loans to the Borrower from time to time, and (b) by the Bank issuing irrevocable standby and commercial letters of credit (said irrevocable standby and commercial letters of credit being referred to herein as the "Credits") for the account of the Borrower from time to time; provided, however, that at no time shall the sum of (1) the aggregate principal amount of Revolving Loans to the Borrower at such time outstanding, plus (2) the aggregate unfunded amount of Credits issued for the account of the Borrower at such time outstanding, exceed the Borrowing Base Amount then in effect. In the event, at any time, and from time to time, the sum of all outstanding Revolving Loans and Credits issued and outstanding to the Borrower exceeds the Borrowing Base Amount then in effect, the Borrower shall prepay the Revolving Loans by such an amount to cause the sum of the Revolving Loans and Credits outstanding to the Borrower to equal the Borrowing Base Amount (or, at the option of the Bank, the Borrower may post cash collateral to secure such deficiency in the Borrowing Base Amount).   PAGE 11 OF 42   Section 2.2. Revolving Loans. Section 2.2.1. Revolving Loans. Subject to the terms and conditions of this Agreement, the Bank agrees to make Revolving Loans to the Borrower from time to time during the period from the date hereof to and including the Termination Date; provided, however, that (1) no such Revolving Loan shall exceed an amount which, when added to (i) the aggregate principal amount of all Revolving Loans to the Borrower at such time outstanding, plus (ii) the aggregate undisbursed amount of Credits issued for the account of the Borrower at such time outstanding, exceeds the Borrowing Base Amount then in effect. Within the limits set forth herein, the Borrower may borrow from the Bank hereunder, repay any and all such Revolving Loans as hereinafter provided and reborrow hereunder. The Borrower's obligation to repay the Revolving Loans made by the Bank shall be evidenced by the Revolving Note. The Revolving Loans shall bear interest at the Base Rate plus the Applicable Margin. Section 2.2.2. Manner and Notice of Borrowing Under the Revolving Loan Commitment. Requests: For Advances under the Revolving Loan Commitment may be made by the Borrower in writing (including facsimile transmission and e-mail transmission) to the Bank and such requests shall be fully authorized by the Borrower if made by any one of the persons designated by the Borrower in writing to the Bank. The Bank shall have the right, but not the obligation, to verify any telephone requests by calling the person who made the request at the telephone number designated by the Borrower in writing to the Bank. Requests For Advances must be received by not later than 1:00 p.m. (Central Time) on the date of the proposed advance. Not later than the close of business on the date of such request, assuming all conditions of this Agreement for such advance has been satisfied, the Bank will make such advance. The amount thereof shall be credited by the Bank to the checking account maintained in the name of the Borrower with the Bank and the credit advice resulting therefrom shall be mailed to the Borrower. The Bank's copy of such credit advice indicating such deposit to the account of the Borrower shall be deemed conclusive evidence of the Borrower's indebtedness to the Bank in connection with such borrowing. The aggregate outstanding amount of principal and interest due by the Borrower at any given time under the Revolving Loan Commitment shall be and constitute the indebtedness of the Borrower to the Bank under the Revolving Note made by the Borrower. When each advance is made by the Bank to the Borrower hereunder, the Borrower shall be deemed to have renewed and reissued its Revolving Note for the amount of the advance plus all amounts due by the Borrower to the Bank under the Revolving Loan Commitment immediately prior to such advance. Section 2.2.3. Borrowings Under the Revolving Loan Commitment. Within the limits of the Revolving Loan Commitment to the Borrower hereunder and subject to the terms and conditions of this Agreement, the Bank shall only be obligated to lend the Borrower an amount which will not cause its Borrowing Base Amount to be exceeded. During the period of the Revolving Loan Commitment, the Borrower may use the Revolving Loan Commitment by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions of this Agreement.   PAGE 12 OF 42   Section 2.2.4. Payment of the Revolving Note Under the Revolving Loan Commitment. Interest on the unpaid principal balance of the Revolving Note shall be payable on Monday of each week; provided, however, interest will be payable monthly if the Borrower's Debt to EBITDA ratio is equal to or less than 5:00 to 1.0 and such ratio is maintained. Principal shall be payable on the Termination Date; provided, however, in the event at any time the aggregate outstanding principal amounts of the Revolving Loans to the Borrower, when added to the aggregate unfunded amounts of Credits at such time outstanding to the Borrower, causes its Borrowing Base Amount to be exceeded, the Borrower shall immediately upon demand by the Bank prepay its Revolving Note in an amount necessary to cause the aggregate principal amount of its unpaid Revolving Loans plus the aggregate unfunded amount of its Credits to equal its Borrowing Base Amount (or, at the option of the Bank, the Borrower may post cash collateral to secure such deficiency in its Borrowing Base Amount). The Borrower hereby authorizes the Bank to debit the Dominion Account to pay interest due on the Revolving Note on each Interest Payment Date, and to credit all proceeds of the Receivables received in the Dominion Account when collected (or earlier, if the Bank in its sole discretion allows such funds to be available to the Borrower prior to the: date on which any checks or other instruments given in payment of Receivables are actually collected) towards payment of the Revolving Loans outstanding under the Revolving Note. Further, in the event there is no outstanding debt under the Revolving Note, the Borrower authorizes the Bank to sweep daily the proceeds from the Dominion Account into the Borrower's operating account with Bank. The Bank agrees to give notice to the Borrower of any debits to the said funding account used to pay interest within three (3) Business Days following each such debit. Section 2.2.5. Proceeds of Dominion Account. The Borrower has executed a lockbox agreement with the Bank, pursuant to which all checks, drafts and other instruments evidencing payment of the Borrower's Receivables shall be delivered to the Bank and deposited into the Borrower's Dominion Account more fully described in Section 10.14. hereof. The Borrower hereby authorizes the Bank to apply, on a daily basis, the proceeds of all its accounts receivable actually collected (or, at the sole discretion of the Bank, amounts which have been received but not yet collected) by the Bank from the Dominion Account to reduce the outstanding principal balance of the Revolving Loans due. Such payments will adjust availability immediately for purposes of loan availability and on the next day for bookkeeping and interest purposes. Section 2.2.6. Use of Proceeds. The Borrower shall use the proceeds of the Revolving Loan Commitment solely to finance working capital requirements. Section 2.2.7. Overlines and Overadvances. Notwithstanding the provisions of Section 2.2.1 hereof, in the event that at any time the aggregate unpaid principal amount of the Revolving Loans ever exceeds $5,000,000.00 (the maximum possible amount of the Borrowing Base Amount), the Borrower agrees to pay the excess amount (an "overline") immediately upon demand by the Bank. Notwithstanding the foregoing, Borrower agrees and understands that any overline is prohibited. In the event the unpaid principal amount of the Revolving Loans ever exceeds the Borrowing Base Amount then in effect, the Borrower agrees to pay the excess amount (an "overadvance''') immediately upon demand by the Bank. Overlines and overadvances shall bear interest at the rate of 18% per annum. Upon request of the Bank, the Borrower shall     PAGE 13 OF 42 execute a promissory note, payable to the order of the Bank, to represent the amount of any overline or overadvance; however, the Borrower acknowledges and agrees that the records of the Bank and this Agreement shall constitute conclusive evidence of any overline or overadvance and the obligation of the Borrower to repay any overline or overadvance, with interest. All overlines and overadvances for which the Bank has not demanded payment earlier, and all unpaid and accrued interest on overlines and overadvances not due and payable earlier, shall be due and payable on the Termination Date. Section 2.3. The Credits. Section 2.3.1. The Credits. Upon the written application of the Borrower, using the form of letter of credit application then normally required by the Bank in connection with the issuance of such Credits (the "Credit Application"), executed by the Borrower (or by any one of the persons designated by the Borrower in writing to the Bank in accordance with the terms hereof), the Bank agrees, subject to the terms and conditions of this Agreement, that it will issue its Credit substantially in accordance with the Credit Application. Credits may either be commercial letters of credit, in which case they shall have an expiry date on a Business Day not later than the earlier to occur of the Termination Date, or standby letters of credit issued to secure workers' compensation obligations of the Borrower (or for other purposes deemed acceptable by the Bank in its sole discretion), in which case they shall have an expiry date not later than the earlier to occur of the Termination Date or one year from the date of issuance. In no event shall a Credit be issued by the Bank for the account of the Borrower (i) if the sum of the face amount thereof when added to the aggregate unfunded amount of Credits issued for the account of the Borrower then outstanding exceeds $1,000,000.00 or (ii) if the sum of the face amount thereof when added to the aggregate unfunded amount of Credits issued for the account of the Borrower then outstanding plus the aggregate principal amount of the Revolving Loans to the Borrower at such time outstanding exceeds the Borrowing Base Amount then in effect. Section 2.3.2. Issuance of Credits. Each Credit shall be issued not later than three (3) Business Days after receipt by the Bank of the Credit Application related thereto. No later than 12:00 noon (Central Time.) on the third Business Day following receipt of the Credit Application and upon fulfillment of the applicable conditions set forth in this Agreement, the Bank shall issue its Credit. The Bank ma: y rely fully and completely upon the authority of the signatory of the Credit Application and the contents thereof unless such authority is terminated by written notice delivered to the Bank, and any such termination of authority shall be effective only prospectively. Section 2.3.3. Credit Commission. The Borrower agrees to pay to the Bank the standard fees charged and established by the Bank from time to time for the issuance and processing of letters of credit (the "Credit Commission") with respect to each Credit created by the Bank hereunder. Payment of such Credit Commission with respect to each Credit created by the Bank shall be paid in advance on the date of issuance of the Credit. With respect to standby Credits issued hereunder, the Borrower unconditionally agrees to pay to the Bank, in addition to the Bank's standard fees for the issuance and processing of such Credits, a commission, payable in advance on or before the date of issuance of each Credit, calculated at the rate of 1.50% per   PAGE 14 OF 42 annum on the face amount of each Credit, based upon the number of days of the term of each such Credit divided by 360, which commission shall not be less than $300.00 per standby letter of credit. Section 2.3.4. Credit Obligations. The Borrower agrees unconditionally to pay the Bank on demand in United States currency at the Bank's principal office in New Orleans, Louisiana, the amount required to pay (a) any and all drafts drawn and any and all demands made or purported to be made under any Credit issued for its account, (b) any and all costs, charges, fees and/or expenses incurred or paid by the Bank in connection with any Credit issued for its account, and (c) interest on such amounts described above under (a) and (b) as hereinafter provided (the "Credit Obligations"). In the event of any drafts drawn and any and all demands made under any Credit are payable in foreign currency, the Borrower agrees to make the aforementioned payment to the Bank in United States currency at the Bank's selling rate for cable transfers to the place of payment of such draft on the date of such payment. Such obligation of the Borrower shall be deemed a Credit Obligation hereunder. The Borrower further agrees to comply with any and all governmental currency exchange regulations or requirements now or hereafter applicable to such Credit or to any drafts related thereto. The Borrower further authorizes the Bank, at its option, to compensate itself by applying any part or all of the balance of any deposit account or certificate of deposit which the Borrower may maintain with the Bank, at any time, whether or not the deposit is mature, and/or any and all monies or property or interest of any kind now or hereafter in the Bank's hands, or in transit to or from the Bank, and belonging to the Borrower, to the payment, in whole or in part, of the amount of any draft and all interest, costs and attorney's fees which the Borrower may owe the Bank pursuant to this Agreement. In the event a Credit Obligation is not paid when demanded by the Bank, the Borrower agrees to pay to the Bank on demand a sum equal to the amount of the Credit Obligation, plus interest thereon from the date the Credit Obligation is demanded by the Bank until paid at the interest rate then in effect under the Revolving Note. A payment shall not be deemed made until funds therefor have been actually collected and made available to the Bank. Upon the occurrence of an Event of Default hereunder, the Borrower agrees to pay to the Bank on demand a sum equal to the aggregate unfunded amounts of all Credits outstanding, together with interest thereon at the Base Rate, or at any higher rate of interest which the Bank may impose as a default rate pursuant to the terms of the Borrower's Revolving Note issued pursuant to the terms hereof (such obligation of the Borrower shall be deemed a Credit Obligation as such term is used herein). Upon the occurrence of such Event of Default, the Bank may exercise its right of offset and compensation set forth above in this Section 2.3.4. Any amount which the Bank offsets or which the; Borrower may pay to the Bank in excess of drafts actually drawn on any outstanding Credits, shall be held by the Bank in pledge to secure the payment of future drafts until the Commitments to the Borrower have been terminated, all Indebtedness of the Borrower has been paid in full, and no further Credits issued for the account of the Borrower are outstanding. Section 2.3.5. Revolving Loans. In the event that Credit Obligations owed the Bank by the Borrower are not paid when due for any reason including Credit Obligations arising upon occurrence of an Event of Default hereunder, notwithstanding the limitation contained in Section 2.2.1, such Credit Obligations shall be immediately paid by the Borrower pursuant to Revolving     PAGE 15 OF 42 Loans in the amount of such Credit Obligations. Such Credit Obligations shall be immediately converted to Revolving Loans by the Bank and evidenced by the Revolving Note. If at any time any Event of Default occurs and any portion of any Credits remains unfunded, the Borrower for whose account such Credits were issued shall pay to the Bank in cash for application to future drawings under the outstanding Credits, an amount equal to the aggregate unfunded portion of the outstanding Credits. If the Borrower does not pay such amount on demand, notwithstanding the limitation contained in Section 2.2.1, such amount shall be immediately paid by the Borrower by Revolving Loans to the Borrower from the Bank. Such amount shall be immediately converted to a Revolving Loan by the Bank and shall be evidenced by the Revolving Note. The amount of such Revolving Loans shall be held by the Bank in pledge securing all of the Borrower's obligations under this Agreement, with the Borrower hereby granting the Bank a continuing security interest in such funds as security for the Indebtedness of the Borrower until the Commitments have all terminated, all Indebtedness of the Borrower has been paid in full, and no further Credits issued for the account of the Borrower are outstanding. Section 2.3.6. Hold Harmless. The Bank shall have the right to deliver the Credit through any correspondents or agents (the "Correspondents") that the Bank in its sole discretion may choose. Except in the case of the Bank's gross negligence or willful misconduct, the Borrower shall hold the Bank harmless from any actions that arise out of the handling of such delivery by the Correspondents making the delivery. The Borrower further agrees that the Bank and any Correspondent shall not in any way be responsible for performance by any beneficiary of obligations to the Borrower nor for the form, validity, sufficiency, correctness, truthfulness or genuineness of any documents delivered in connection with any Credit, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; for failure of any Credit draft to bear any reference or correct reference to the Credit; for errors, omissions, or delays in transmission or delivery of any messages, whether by mail, cable, teletransmission, or otherwise; or for any error, neglect or default of any Correspondents. The Borrower further agrees that, if any of the above events should occur, such event will not affect, impair or prevent the Borrower's liability or the Bank's rights or powers hereunder. No liability shall attach to the Bank or to the Correspondents for any losses or damage, in consequence of present or future laws, censorships, regulations, decrees, orders or restrictions, right or wrongfully exercised by an de facto or de jure government or governmental agency. Without limiting the foregoing, and in addition to any other provision hereof, the Bank is hereby expressly authorized and directed to honor any request for payment which is made under and in compliance with the terms of the Credit without regard to, and without any duty on the Bank's part to inquire into, the existence of any disputes or controversies between the Borrower and the beneficiary or any other person, firm, or corporation, or the respective rights, duties or liabilities of any of them or whether any facts or occurrences represented in any documents presented under the Credit are true and correct. The Borrower fully understands and agrees that tile sole obligation of the Bank to the Borrower shall be limited to honoring requests for payment made under and in compliance with the Credit and the obligation of the Bank remains so limited even if the Bank may have assisted the Borrower in the preparation of the wording of the Credit or any documents required to be presented thereunder or if the Bank may otherwise be aware of tile underlying transaction giving rise to the Credit. If the Bank, in its sole discretion and at the written request of the Borrower, agrees to any change or modification to the amount or terms of     PAGE 16 OF 42 any Credit or any instrument or document related thereto, the Borrower agrees that this Agreement shall be binding upon it with regard to any changes or modifications and with regard to any actions taken by the Bank or by any agents or Correspondents relative thereto. ARTICLE III TERM LOAN Section 3.1. The Amortizing Term Loan. Subject to the terms, conditions and provisions of this Agreement, the Bank agrees to make the Amortizing Term Loan to the Borrower, which Amortizing Term Loan shall constitute a renewal and restructure of the indebtedness evidenced by the promissory note of Borrower dated June 12, 2000 in the principal amount of $8,466,111.00. Section 3.2. The Amortizing Term Note. The Borrower's indebtedness to the Bank pursuant to the Amortizing Term Loan shall be evidenced by the Amortizing Term Note. The Amortizing Term Note shall be due and payable as follows: (i) in monthly principal installments of $90,000.00 each payable on the last day of each month commencing November 30, 2000, and continuing through March 31, 2001; (ii) in monthly principal payments of $100,000.00 each payable on the last day of each month commencing April 30, 2001, and continuing through the Termination Date; and (iii) in weekly installments of accrued unpaid interest, payable on Monday of each week and on the Termination Date; provided, however, if the Borrower's Debt to EBITDA ratio is equal to or less than 5:00 to 1.0 (and such ratio is maintained), then Borrower will be permitted to make monthly payments of accrued unpaid interest.     ARTICLE IV RESERVED     ARTICLE V FEES Section 5.1. Commitment Fee. In addition to the Credit fees and commissions described in Section 2.3.3 above, the Borrower shall pay to the Bank a commitment fee of $93,496.00, payable on June 30, 2001. Also, in the event the Borrower reduces the principal amount of the Amortizing Term Loan by $500,000.00 or more (in addition to the normally scheduled principal payments) by June 30, 2001, the commitment fee will be reduced by Bank to $62,331.00. The Borrower hereby authorizes the Bank to debit its account maintained with the Bank for collection of the fee.       PAGE 17 OF 42 Section 5.2. Unused Fee. The Borrower shall pay the Bank a fee equal to 0.25% per annum on the unused portion of the Revolving Loan Commitment payable monthly in arrears. The unused portion of the Revolving Loan Commitment shall be determined on a daily basis by subtracting from $5,000,000.00 the amount of all Revolving Loans and Credits outstanding, and by averaging said daily amounts for the period for which the fee is to be determined. Section 5.3. Stock Option. The provisions of paragraph 3(c)(ii) of the Second Amendment to the First Restated Agreement shall remain in effect.   ARTICLE VI CERTAIN GENERAL PROVISIONS Section 6.1. Payments to the Bank. All payments of principal, interest, commitment fees and any other amounts due hereunder or under any of the other Related Documents shall be made to the Bank at the Bank's office at 313 Carondelet Street, New Orleans, Louisiana 70130, or at such other location that the Bank may from time to time designate in writing to the Borrower, in each case in immediately available funds. Section 6.2. No Offset, etc. All payments by the Borrower hereunder and under any of the other Related Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Bank, on the date on which such amount is due and payable hereunder or under such other Related Document, such additional amount in Dollars as shall be necessary to enable the Bank to receive the same net amount which the Bank would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Bank certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Documents. Section 6.3. Computations. All computations of interest on the Loans and of commitment or other fees shall be assessed utilizing a 360-day daily interest factor over the number of days in an actual calendar year (365 days or 366 days in a leap year). Whenever a payment hereunder or under any of the other Related Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the Bank's books and records from time to time shall be prima facie evidence of the amounts so outstanding.   PAGE 18 OF 42     Section 6.4. Additional Costs, etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to the Bank by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (1) subject the Bank to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Related Documents or the Indebtedness (other than taxes based upon or measured by the revenue, income or profits of the Bank), or (2) materially change the basis of taxation (except for changes in taxes on revenue, income or profits) of payments to the Bank of the principal of or the interest on the Indebtedness of any other amounts payable to the Bank under this Agreement or the other Related Documents, or (3) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of the Bank, or (4) impose on the Bank any other conditions or requirements with respect to this Loan Agreement, the other Related Documents, the Indebtedness, or any class of loans of which the Indebtedness forms a part, and the result of any of the foregoing is (i) to increase the cost to the Bank of making, funding, issuing, renewing, extending or maintaining the Indebtedness or issuing Credits, or (ii) to reduce the amount of principal, interest or other amount payable to the Bank hereunder on account of such the Indebtedness, or (iii) to require the Bank to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by the Bank from Borrower hereunder, then, and in each such case, the Borrower will, upon demand made by the Bank at any time and from time to time and as often as the occasion therefor may arise, pay to the Bank such additional amounts as will be sufficient to compensate the Bank for such additional cost, reduction, payment or foregoing interest or others sum.   ARTICLE VII SECURITY FOR THE INDEBTEDNESS Section 7.1. Security. The Indebtedness shall be secured by the following:   PAGE 19 OF 42 (a) the Security Agreements; (b) the Mortgage; (c) Guaranty; and (d) First priority security interest affecting not less than 65% of all outstanding stock issued by Omni International. The Borrower understands and acknowledges that items (a) and (b) above constitute a first priority mortgage lien or security interest, as the case may be, in favor of the Bank.   ARTICLE VIII CONDITIONS PRECEDENT Section 8.1. Precedent to All Loans and Credits. The obligation of the Bank to make any Loan or to issue any Credit hereunder shall be subject to the satisfaction and the continued satisfaction of the following conditions precedent: (a) The Borrower shall have executed and delivered to the Bank this Agreement, the Notes, and all other documents required by this Agreement, all in form and substance and in such number of counterparts as may be required by the Bank; (b) The representations, warranties, and covenants of the Borrower and the Guarantors as set forth in this Agreement, or in any Related Document furnished to the Bank in connection herewith, shall be and remain true and correct; (c) The Bank shall have received a favorable legal opinion of counsel to the Borrower and the Guarantors, in form, scope and substance satisfactory to the Bank; (d) The Bank shall have received certified resolutions of the Borrower and the Guarantors authorizing the execution of all documents and instruments contemplated by this Agreement; (e) The Bank shall have received all fees, charges and expenses which are due and payable as specified in this Agreement and any Related Documents; (f) No Default or Event of Default shall exist or shall result from the making of a Loan or the issuance of a Credit; (g) The Borrower and the Guarantors shall have provided the Bank with all financial statements, reports and certificates required by this Agreement;   PAGE 20 OF 42   (h) The Bank shall have received the articles of incorporation and bylaws, as amended, of the Borrower and the articles of organization, operating agreement, articles of incorporation, and bylaws, as amended, of the Guarantors, and the Bank's counsel shall have reviewed the foregoing documents and is satisfied with the validity, due authorization and enforceability thereof and of all Related Documents; (i) The Bank shall have received evidence acceptable to the Bank and its counsel that its Encumbrances affecting the Collateral shall have a first priority position, subject only to Permitted Encumbrances; (j) The Borrower shall have complied with the procedure set forth in this Agreement, for the making of a Revolving Loan; (k) There shall have occurred no Material Adverse Change; (1) The Bank's due diligence and review of all financial information provided by the Borrower and the Guarantors, and the Bank's field audit of the Borrower's books and records, shall be satisfactory to the Bank; (m) The Bank's receipt of a current listing of all senior and subordinated debt of the Borrower (on a consolidated basis); (n) The Borrower must maintain insurance acceptable to the Bank, naming Bank as additional insured and/or loss payee, and deliver to Bank evidence of such insurance coverages; and (o) The Borrower must pay all outstanding fees and disbursements owed to Bank's counsel; and (p) On or before November 10, 2000, the acquisition of Gulf Coast Resources by Borrower must be completed; and (q) In addition to the foregoing, the following conditions precedent must be satisfied by the Borrower upon execution of this Agreement (except as otherwise provided in clause (iv) below), and satisfactory evidence thereof must be delivered to Bank: (i) The Borrower shall have made an equity offering yielding not less than $4,000,000.00 in immediately available funds wired to Bank (pursuant to wire instructions provided by Bank); (ii) The Borrower must make a $1,000,000.00 payment to Bank to be applied by Bank to the $8,466,111.00 term loan facility under the Second Restated Agreement; (iii) Subordinated Debt shall not exceed $5,000,000.00;     PAGE 21 OF 42 (iv) On or before November 10, 2000, the Advantage Capital Group must convert not less than $3,750,000.00 of Subordinated Debt into shares of Series A preferred stock of Borrower; (v) The Borrower shall have working capital (determined in accordance with GAAP) of not less than $2,000,000.00; and (vi) All interest, fees, and expenses due Bank under the Second Restated Agreement shall be paid to Bank by Borrower. The Bank reserves the right, in its sole discretion, to waive any one or more of the foregoing conditions precedent.   ARTICLE IX REPRESENTATIONS AND WARRANTIES The Borrower and the Guarantor represent and warrant to the Bank as follows: Section 9.1. Corporate Authority. The Borrower is a corporation duly created, validly existing and in good standing under the laws of its state of Louisiana, and is duly qualified and in good standing as a foreign corporation in all other jurisdictions where the failure to qualify would have an adverse effect upon its ability to perform its obligations under this Agreement and all Related Documents. The Borrower has the power to enter into this Agreement, issue the Notes, mortgage and grant the liens and security interests in the Collateral in the manner and for the purpose contemplated by the Collateral Documents. The Borrower has the corporate power to perform its obligations hereunder and under the Related Documents. The making and performance by the Borrower of the Related Documents have all been duly authorized by all necessary company action (including all necessary member action), and do not and will not violate any provision of any law, rule, regulation, order, writ, judgment, decree, determination or award presently in effect having applicability to the Borrower or the articles of incorporation and/or bylaws of the Borrower. The making and performance by the Borrower of the Related Documents to which it is a party do not and will not result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement or instrument to which the Borrower is a party or by which it may be bound or affected, or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature (other than as contemplated by the Related Documents) upon or with respect to any of the properties now owned or hereafter acquired by the Borrower, and the Borrower is not in default under or in violation of any such order, writ, judgment, decree, determination, award, indenture, agreement or instrument. Each of the Related Documents to which the Borrower is a party constitutes a legal, valid and binding obligations of the Borrower, enforceable in accordance with its terms. Omni Canada is a corporation duly created, validly existing, and in good standing under the laws of the Province of Alberta, Canada. Omni Canada's execution of this Agreement, the Guaranty, and the Collateral Documents to which it is   PAGE 22 OF 42 a party, has been authorized by all necessary corporate action, and each such document constitutes a legal, valid, and binding obligation of Omni Canada, enforceable in accordance with its terms. Aviation is a limited liability company duly created, validly existing, and in good standing under the laws of the State of Missouri. Aviation is registered to do business in the State of Louisiana. Aviation's execution of this Agreement, the Guaranty, and the Collateral Documents to which it is a party, has been authorized by all necessary action, and each such document constitutes a legal, valid, and binding obligation of Aviation, enforceable in accordance with its terms. Omni Alaska is a corporation duly created, validly existing and in good standing under the laws of the State of Alaska. Omni Alaska's execution of this Agreement, the Guaranty, and the Collateral Documents to which it is a party, have been authorized by all necessary corporate action, and each such document constitutes a legal, valid, and binding obligation of Omni Alaska, enforceable in accordance with its terms. Section 9.2. Financial Statements. The balance sheet of the Borrower at the date thereof, and the related statements of income and retained earnings for the year then ended, copies of which have been delivered to the Bank, are complete and correct and fairly present the financial condition of such entities as of the date or dates thereof. Each of said financial statements were prepared in conformity with GAAP applied on a basis consistent with the preceding year. No Material Adverse Change has occurred since said dates in the financial position or in the results of operations of the Borrower in their businesses taken as a whole. Section 9.3. Title to Collateral. The Borrower or the Guarantor, as applicable, has good and marketable title to the Collateral, free and clear of all Encumbrances other than Permitted Encumbrances. The Collateral Documents constitute legal, valid and perfected first Encumbrances on the property interests covered thereby, subject only to Permitted Encumbrances. Section 9.4. Litigation. Other than as has been disclosed previously to the Bank in writing, there are no legal actions, suits or proceedings pending or threatened against or affecting the Borrower, the Guarantor, or any of their properties before any court or administrative agency (federal, state or local), which, if determined adversely to any of the Borrower or the Guarantor would constitute a Material Adverse Change to any of them, and there are no judgments or decrees affecting the Borrower or its property (including, without limitation, the Collateral) which are or may become an Encumbrance against such property. Section 9.5. Approvals. No authorization, consent, approval or formal exemption of, nor any filing or registration with, any governmental body or regulatory authority (federal, state or local), and no vote, consent or approval of the members of the Borrower is or will be required in connection with the execution and delivery by the Borrower of the Related Documents or the performance by the Borrower of its obligations hereunder and under the other Related Documents. Section 9.6. Required Insurance. The Borrower and the Guarantor shall maintain insurance with insurance companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which each of them     PAGE 23 OF 42 operates, and as shall be reasonably satisfactory to the Bank, in each case with the Bank named as the loss payee and/or additional insured, as appropriate. Aviation shall also carry such insurance coverages as may be required by the Aircraft Security Agreement. The Borrower and the Guarantor agree to provide the Bank with originals or certified copies of such policies of insurance. The Borrower and the Guarantor further agree to promptly furnish the Bank with copies of all renewal notices and, if requested by the Bank, with copies of receipts for paid premium. The Borrower and the Guarantor shall provide the Bank with originals or certified copies of all renewal or replacement policies of insurance no later than fifteen (15) days before any such existing policy or policies should expire. If the Borrowers' and/or the Guarantor's insurance policies required hereunder and renewals thereof are held by another person, the Borrower and the Guarantor agree to supply original or certified copies of the same to the Bank within the time periods required above. Section 9.7. Licenses . The Borrower and the Guarantor possess adequate franchises, licenses and permits to own its properties and to carry on their business as presently conducted. Section 9.8. Adverse Agreements . The Borrower and the Guarantor are not parties to any agreement or instrument, nor subject to any charter or other restriction, materially and adversely affecting the business, properties, assets, or operations of the Borrower or the Guarantor or its/their condition (financial or otherwise), and the Borrower and the Guarantor are not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which they are a party, which default would constitute a Material Adverse Change. Section 9.9. Default or Event of Default. No Default or Event of Default hereunder has occurred or is continuing or will occur as a result of the giving effect hereto. Section 9.10. Employee Benefit Plans . Each employee benefit plan as to which the Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event (as defined in ERISA) has occurred with respect to any such plan, (ii) the Borrower has not withdrawn from any such plan or initiated steps to do so, and (iii) no steps have been taken to terminate any such plan. Section 9.11. Investment Company Act. The Borrower is not an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 9.12. Public Utility Holding Company Act. The Borrower is not a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 9.13. Regulations G, T and U. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors   PAGE 24 OF 42 of the Federal Reserve System), and none of the proceeds of the Loans will be used for the purpose of purchasing or carrying such margin stock. Section 9.14. Location of Offices, Records, Equipment and Inventory. The chief place of business of Omni Canada and Omni Alaska, and the office where Omni Canada and Omni Alaska keeps their records concerning the Collateral, is 4500 N.E. Evangeline Thruway, Carencro, Louisiana 70520. The chief place of business of Aviation, and the office where Aviation keeps its records concerning the Collateral, is 4500 N.E. Evangeline Thruway, Carencro, Louisiana 70520. The chief place of business of the Borrower, and the office where the Borrower keeps all of its records concerning the Collateral, is 4500 N.E. Evangeline Thruway, Carencro, Louisiana 70520. Section 9.15. Information. All information heretofore or contemporaneously herewith furnished by the Borrower and the Guarantor to the Bank for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of the Borrower and the Guarantor to the Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. Section 9.16. Environmental Matters. Except as may have been disclosed in writing to the Bank prior to the date hereof, no properties of the Borrower has ever been, nor will ever be so long as this Agreement remains in effect, used for the generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance, as those terms are defined in the Environmental Laws, except in compliance with such Environmental Laws. Except as may have been disclosed in writing by the Borrower to the Bank, the Borrower represents and warrants that it is in material compliance with all Environmental Laws affecting it and its properties. No friable asbestos, or any substance containing asbestos deemed hazardous by federal or state regulations on the date of this Agreement, has been installed in or on any of the property comprising the Collateral. The said property and the Borrower are not in violation of or subject to any existing, pending, or threatened investigation or inquiry by any governmental authority or to any remedial obligations under any applicable laws pertaining to health or the environment (hereinafter sometimes collectively called "Applicable Environmental Laws"), including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"), and this representation and warranty would continue to be true and correct following disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances, if any, pertaining to the said property and known to the Borrower. The Borrower has not obtained and is not required to obtain any permits, licenses or similar authorizations to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of the said property by   PAGE 25 OF 42 reason of any Applicable Environmental Laws. No hazardous substances or solid wastes have been disposed of or otherwise released on or to the said property. The use which the Borrower makes and intends to make of the said property will not result in the disposal or other release of any hazardous substance or solid waste on or to the said property. The terms "hazardous substance" and "release" as used in this Agreement shall have the meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") shall have the meanings specified in RCRA, provided, however, in the event that the laws of the State of Louisiana establish a meaning for "hazardous substance," "release," "solid waste," or "disposal" which is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. Section 9.17. Solvency of the Borrower and the Guarantor. The Borrower and the Guarantor are, and after consummation of the transactions contemplated by this Agreement (including the making of the Loans and the issuance of the Credits), and after giving effect to all obligations incurred by the Borrower and the Guarantor in connection herewith, will be, Solvent. Section 9.18. Governmental Requirements. The Collateral is in compliance with all current governmental requirements affecting the said property. Section 9.19. Survival of Representations and Warranties. The Borrower and the Guarantor understand and agree that the Bank is relying upon the above representations and warranties in making the Loans to the Borrower. The Borrower and the Guarantor further agree that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as the Indebtedness shall be paid in full, or until this Agreement shall be terminated, whichever is the last to occur.   ARTICLE X AFFIRMATIVE COVENANTS In addition to the covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by the Borrower and the Guarantor, as the case may be, the Borrower and the Guarantor covenant and agree as follows: Section 10.1. Financial Statements. The Guarantor and the Borrower will furnish or cause to be furnished to the Bank: (a) as soon as available and in any event within one hundred twenty (120) days following the close of fiscal year of the Borrower, audited, consolidated and consolidating financial statements of the Borrower consisting of a balance sheet as at the end of such fiscal year and statements of income, and statement of cash flow for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, certified by independent certified public accountants of recognized standing acceptable to the Bank,   PAGE 26 OF 42   (b) as soon as available and in any event within ninety (90) days following the close of fiscal year of Omni Canada, Omni Alaska, Aviation, and any other Subsidiary of the Borrower, audited financial statements of Omni Canada, Omni Alaska, Aviation, and any other Subsidiary of the Borrower consisting of a balance sheet as at the end of such fiscal year and statements of income, and statement of cash flow for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, certified by independent certified public accountants of recognized standing acceptable to the Bank, (c) within thirty (30) days following the end of each month, financial statements consisting of the consolidated balance sheet of the Borrower as of the end of such month, and a statement of income and statement of cash flow of the Guarantor for such month and for the fiscal year through such quarter, all certified as materially true and correct by the chief financial officer of the Borrower as having been prepared in accordance with GAAP consistently applied, (d) within thirty (30) days following the end of each month, financial statements consisting of the balance sheet of Omni Canada, Omni Alaska, Aviation, and any other Subsidiary of the Borrower as of the end of such month, and a statement of income and statement of cash flow for such quarter and for the fiscal year through such month, all certified as materially true and correct by the chief financial officer of Omni Canada, Omni Alaska, Aviation, and any other Subsidiary of the Borrower as having been prepared in accordance with GAAP consistently applied, (e) within forty-five (45) days after the end of each calendar quarter, a compliance certificate signed by the chief financial officer of the Borrower in the form attached hereto as Exhibit A, certifying that he has reviewed this Agreement and to the best of his knowledge no Default or Event of Default has occurred, or if such Default or Event of Default has occurred, specifying the nature and extent thereof, and that all financial covenants in this Agreement have been met, and providing a computation of all financial covenants contained herein, and details of any waivers, amendments, or modifications of any covenant contained in this Agreement, (f) on Monday of each week, an aging of each the Borrower's and the Guarantor's Receivables and accounts payable, (g) within fifteen (15) days following the end of each calendar month, and not less than daily during each calendar month, and at any time upon the request by the Bank, a borrowing base certificate showing the Borrower's total Receivables, minus ineligibles, total Qualified Receivables, in form and substance acceptable to the Bank, accompanied by such supporting documents as may be required by the Bank, with the Borrower's borrowing base certificate to be certified by the chief financial officer of the Borrower,   PAGE 27 OF 42 (h) a monthly Board of Director's package in form and content satisfactory to Bank, and (i) such other necessary financial information concerning the Borrower and the Guarantor as the Bank may reasonably request from time to time. Section 10.2. Notice of Default; Litigation; ERISA Matters. The Borrower will give written notice to the Bank as soon as reasonably possible and in no event more than five (5) Business Days of (i) the occurrence of any Default or Event of Default hereunder of which it has knowledge or should have knowledge, (ii) the filing of any actions, suits or proceedings against the Borrower in any court or before any governmental authority or tribunal of which they have knowledge or should have knowledge which could cause a Material Adverse Change with respect to the Borrower and/or the Guarantor, (iii) the occurrence of a reportable event under, or the institution of steps by the Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which the Borrower may have liability, or (iv) the occurrence of any other action, event or condition of any nature of which they have knowledge which may cause, or lead to, or result in, any Material Adverse Change to the Borrower and/or the Guarantor. Section 10.3. Maintenance of Existence, Properties and Liens. Each of the Borrower and the Guarantor will (i) continue to engage in the business presently being operated by it; (ii) maintain its existence and good standing in each jurisdiction in which it is required to be qualified; (iii) keep and maintain all franchises, licenses and properties necessary in the conduct of its business in good order and condition; (iv) duly observe and conform to all material requirements of any governmental authorities relative to the conduct of its business or the operation of its properties or assets; and (v) maintain in favor of the Bank a first perfected lien and security interest in the Collateral, subject only to other Permitted Encumbrances . Section 10.4. Collateral Schedules and Locations . As often as the Bank shall reasonably require, the Borrower and the Guarantor shall deliver to the Bank schedules of such Collateral, including such information as the Bank may require, including without limitation names and addresses of account debtors and agings of Receivables and General Intangibles. Section 10.5. Taxes . Each of the Borrower and the Guarantor shall pay or cause to be paid when due, all taxes, local and special assessments, and governmental and other charges of every type and description, that may from time to time be imposed, assessed and levied against it or its properties. The Borrower and the Guarantor further agree to furnish the Bank with evidence that such taxes, assessments, and governmental and other charges due by the Borrower and the Guarantor have been paid in full and in a timely manner. The Borrower and/or the Guarantor may withhold any such payment or elect to contest any lien if the Borrower and/or the Guarantor are in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as the Bank's interest in the Collateral is not jeopardized. Section 10.6. Performance of Loan Documents . The Borrower and the Guarantor shall duly and punctually pay and perform each of its obligations under the Notes, under this   PAGE 28 OF 42   Agreement (as the same may at any time be amended or modified and in effect) and under each of the Related Documents to which it is a party, in accordance with the terms hereof and thereof. Section 10.7. Compliance with Environmental Laws. The Borrower shall comply with and shall cause all of its employees, agents, invitees or sublessees to comply with all Environmental Laws with respect to the disposal of industrial refuse or waste, and/or the discharge, procession, treatment, removal, transportation, storage and handling of hazardous or toxic wastes and substances, and pay immediately when due the cost of removal of any such waste or substances from, and keep their properties free of any lien imposed pursuant to any such laws, rules, regulations or orders. The Borrower shall give notice to the Bank as soon as reasonably possible and in no event more than five (S) clays after it receives any compliance orders, environmental citations, or other notices from any governmental entity relating to any environmental condition relating to its properties or elsewhere for which it may have legal responsibility with a full description thereof; the Borrower agrees to take any and all reasonable steps, and to perform any and all reasonable actions necessary or appropriate to promptly comply with any such citations, compliance orders or Environmental Laws requiring the Borrower to remove, treat or dispose of such hazardous materials, wastes or conditions at the sole expense of the Borrower, to provide the Bank with satisfactory evidence of such compliance; provided, however, that nothing contained herein shall preclude the Borrower from contesting any such compliance orders or citations if such contest is made in good faith, appropriate reserves are established for the payment for the cost of compliance therewith, and the Bank's security interest in any such property affected thereby (or the priority thereof) is not jeopardized. Regardless of whether any Event of Default hereunder shall have occurred and be continuing, the Borrower (i) releases and waives any present or future claims against the Bank for indemnity or contribution in the event the Borrower becomes liable for remediation costs under and Environmental Laws, and (ii) agrees to defend, indemnify and hold harmless the Bank from any and all liabilities (including strict liability), actions, demands, penalties, losses, costs or expenses (including, without limitation, reasonable attorneys fees and remedial costs), suits, administrative orders, agency demand letters, costs of any settlement or judgment and claims of any and every kind whatsoever which may now or in the future (whether before or after the termination of this Agreement) be paid, incurred, or suffered by, or asserted against the Bank by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, or release from or onto the property of the Borrower of any hazardous materials, wastes or conditions regulated by any Environmental Laws, contamination resulting therefrom, or arising out of, or resulting from, the environmental condition of such property or the applicability of any Environmental Laws relating to hazardous materials (including, without limitation, CERCLA or any so called federal, state or local "super fund" or "super lien" laws, statute, ordinance, code, rule, regulation, order or decree) regardless of whether or not caused by or within the control of the Bank (the costs and/or liabilities described in (i) and (ii) above being hereinafter referred to as the "Liabilities"). The covenants and indemnities contained in this Section 11.7 shall survive termination of this Agreement.   PAGE 29 OF 42 Section 10.8. Further Assurances. The Borrower and the Guarantor will, at any time and from time to time, execute and deliver such further instruments and take such further action as may reasonably be requested by the Bank, in order to cure any defects in the execution and delivery of, or to comply with or accomplish the covenants and agreements contained in this Agreement or the Collateral Documents. Section 10.9. Financial Covenants. The Borrower shall comply with the following covenants and ratios: (a) Minimum EBITDA. The Borrower shall maintain a minimum EBITDA on a cumulative basis as follows: Quarter Ended Minimum EBITDA 3/31/01 $1 6/30/01 $1,000,000 9/30/01 $2,500,000 12/31/01 $4,000,000 (b) Maximum Debt to EBITDA. The Borrower shall maintain a maximum Debt to EBITDA ratio on a cumulative basis as follows: Quarter Ended Minimum EBITDA 3/31/01 11:1 6/30/01 10:1 9/30/01 8:1 12/31/01 5:1 (c) Minimum Working Capital. The Borrower shall at all times maintain working capital (on a consolidated basis) of not less than $1,000,000.00. For the purposes hereof, "working capital" shall mean total consolidated current assets (including availability under the Revolving Loan Commitment) less total consolidated current liabilities. (d) Maximum Capital Expenditures. Capital expenditures by Borrower shall not exceed $500,000.00 in the aggregate on an annual basis. Section 10.10. Operations. The Borrower and the Guarantor shall conduct their business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting their properties, charters, businesses and operations, including compliance with all minimum funding standards and other requirements of ERISA of 1974, and other laws applicable to any employee benefit plans which they may have.         PAGE 30 OF 42 Section 10.11. Change of Location. The Borrower and the Guarantor shall, within ten (10) Business Days prior to any such addition or change, notify the Bank in writing of any proposed additions to or changes in the location of their respective businesses. Section 10.12. Employee Benefit Plans. So long as this Agreement remains in effect, the Borrower and the Guarantor will maintain each employee benefit plan as to which they may have any liability, in compliance with all applicable requirements of law and regulations Section 10.13. Deposit Accounts. The Borrower, the Guarantor, and any Subsidiary of the Borrower, will maintain all material deposit and operating accounts of any kind (including separate tenant deposit accounts) with the Bank. Section 10.14. Dominion Account. The Borrower has established a lockbox with the Bank into which all proceeds of Receivables of the Borrower shall be remitted. The Borrower will promptly direct its customers to remit payments of all of their accounts receivable to such lockbox. Remittances received under the lockbox arrangement will be deposited by the Bank to the demand deposit account maintained by the Borrower with the Bank (the "Dominion Account", account number 812378643). The Bank shall have dominion over all funds in the Dominion Account. The Borrower shall deposit all payments of accounts receivable which are not remitted by customers directly to the Dominion Account into the Dominion Account on the date such remittance is received. Amounts deposited into the Dominion Account will be used for daily loan payments towards the Revolving Note as described in Section 2.2.6. The Borrower will have no access to any funds in the Dominion Account for so long as this Agreement remains in effect, the Revolving Note has not been paid in full, or any Credits or other Indebtedness of the Borrower remains outstanding. Section 10.15. Field Audits; Other Information. Each of the Borrower and the Guarantor shall allow the Bank's employees and agents access to their books and records and properties during normal business hours to perform field audits on a quarterly basis. The Borrower shall pay all costs and expenses associated with such field audits. The Borrower and the Guarantor will provide the Bank with such other information as the Bank may reasonably request from time to time. The Bank is authorized by the Borrower and Guarantors to cause all of the real property, equipment, and inventory of Borrower and Guarantor that are part of the Collateral to be appraised, at Borrower's expense, at least once prior to the Termination Date. Section 10.16. Ownership of Aviation, Omni Canada, and Omni Alaska. The Borrower and the Guarantors covenant and agree that the Borrower shall continue to own 100% of the membership interests of Aviation and 100% of the issued and outstanding stock of Omni Canada and Omni Alaska. Section 10.17. Sale of Collateral. In the event the Borrower or any Guarantor sells any equipment or any other tangible asset that is part of the Collateral subject to a first Encumbrance in favor of Bank, the Borrower and the Guarantor agree to deliver to Bank 100% of the net sale proceeds for application to the Amortizing Term Note. In the event the Borrower or any   PAGE 31 OF 42 Guarantor sells any equipment or any other tangible assets that is part of the Collateral but subject to a first Encumbrance in favor of a Person other than Bank, and the net sale proceeds exceed the indebtedness owed to the Person holding the first Encumbrance, the Borrower and the Guarantor agree to deliver Bank 50% of the remaining net sale proceeds after paying the Person holding the first Encumbrance, for application to the Amortizing Term Note. Also, in the event any Collateral which is subject to a first Encumbrance in favor of a Person other than Bank is released, Bank's Encumbrance shall become a first priority Encumbrance. Further, in the event any assets of foreign entities are sold by the Borrower or any Guarantor, the Borrower and the Guarantor agree to deliver to Bank 50% of the net sale proceeds for application to the Amortizing Term Note. Section 10.18. The Borrower agrees that it shall cause Omni International and Omni South America to maintain at all times their respective registers of shareholders at a location in the Cayman Islands. Section 10.19. Foreign Ventures. The Borrower shall not participate in any foreign project or venture without. first obtaining the Bank's prior written consent. The Borrower agrees that its equity interest and/or the equity interest of any Subsidiary and/or Omni International in any Bank approved foreign venture shall be not less than 80%. In addition, the Borrower agrees that either the Borrower or a Subsidiary of the Borrower shall have voting control of the board of directors of any entity formed by the Borrower or its Subsidiary to participate in a Bank approved foreign joint venture. In the event of any sale of assets owned by and Subsidiary and/or Omni International, Omni South America, or any other indirect Subsidiary of Borrower occurs, Borrower agrees to pay not less than 50% of the net sale proceeds to Bank for application to the Amortizing Term Note. Section 10.20. Bolivian Joint Venture. The Borrower agrees that all accounts receivable paid to the Bolivian joint venture participated in by Omni South America shall be paid in U.S. currency and that the customers of the said joint venture shall be publicly traded, rated entities and other customers acceptable to the Bank. Section 10.21. Subsidiaries. The Borrower agrees that it shall not change the name or alter the status or existence of any of its Subsidiaries, including the Guarantors, without first obtaining the prior written consent of the Bank. Section 10.22. Bimonthly Cash Forecasts. The Borrower agrees that it shall furnish the Bank on a bi-monthly basis (to be delivered to Bank every other Monday), a cash forecast with a detailed projection of cash receipts and disbursements. Section 10.23. Future Acquisitions. The Borrower agrees that Bank shall be entitled to and shall receive a first priority Encumbrance on all assets acquired by Borrower as a result of a merger or other acquisition. In the event Borrower acquires the stock or interests of another entity, Borrower agrees to cause the acquired entity to grant Bank a first priority Encumbrance on all assets of said acquired entity.     PAGE 32 OF 42 ARTICLE XI NEGATIVE COVENANTS In addition to the negative covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by the Borrower and the Guarantor, as the case may be, the Borrower and the Guarantor covenant and agree as follows: Section 11.1. Limitations on Fundamental Changes. The Borrower and the Guarantor shall not change the nature of their business, grant credit terms to its customers on terms different than those presently granted to customers, or form any subsidiary without the prior written consent of the Bank, nor shall the Borrower or the Guarantor enter into any transaction of merger or consolidation, or liquidate or dissolve itself (or suffer any liquidation or dissolution). Section 11.2. Disposition of Assets. The Borrower and the Guarantor shall not convey, sell, lease, assign, transfer or otherwise dispose of, any of its property, business or assets (whether now owned or hereafter acquired) that has a value of $2,000,000 or more without the prior written consent of the Bank. Proceeds of any permitted asset disposition must be based on an arm's length transaction at market rates, and must be used to reduce the Amortizing Term Loan as set forth in Sections 10.17 and 10.19 above. Section 11.3. Restricted Payments. The Borrower shall not declare or pay (or set aside reserves for payment of) any dividends or distributions, make any shareholder or affiliate loans, or pay excessive compensation or enter into any similar transactions with the shareholders, officers, or affiliates of the Borrower. Section 11.4. Encumbrances. The Borrower and the Guarantor shall not create, incur, assume or permit to exist any Encumbrances on any of their property now owned or hereafter acquired, except for the following (hereinafter referred to as the "Permitted Encumbrances"): (a) Encumbrances for taxes, assessments, or other governmental charges not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserves as shall be required by GAAP shall have been made therefor; (b) Encumbrances of landlords, vendors, carriers, warehousemen, mechanics, laborers and materialmen arising by law in the ordinary course of business for sums either not yet due or being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by GAAP shall have been made therefor; (c) Inchoate liens arising under ERISA to secure the contingent liabilities, if any, permitted by this Agreement; (d) The Collateral Documents and any other liens in favor of the Bank to secure the Indebtedness of the Borrower to the Bank;   PAGE 33 OF 42 (e) Liens in favor of the Advantage Capital Group, so long as such liens are expressly subordinated in favor of Bank; provided, however, the provisions of this subpart (e) of Section 11.4. shall not apply to any Receivables of Borrower that are not (pursuant to a filed UCC-3 release signed by Bank) part of the Collateral; or (f) Liens in favor of the Advantage Capital Group affecting certain Receivables of the Borrower for which the Bank has released (pursuant to a filed UCC-3) its security interest. Section 11.5. Debts, Guaranties and Other Obligations. The Borrower and the Guarantor will not incur, create, assume or in any manner become or be liable in respect of any Additional Debt, direct or contingent, except for: (a) The Indebtedness to the Bank under this Agreement; (b) Trade payables or operating and facility leases from time to time incurred in the ordinary course of business; or (c) Taxes, assessments or other government charges which are not yet due or are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by generally accepted accounting principles shall have been made therefor. The term "Additional Debt" shall mean the consolidated debt of the Borrower and the Guarantor, including senior and Subordinated Debt, but excluding the Indebtedness. Section 11.6. Investments, Loans and Advances. The Borrower and the Guarantor will not make or permit to remain outstanding any loans or advances to or investments in any Person, except for: (a) Investments in direct obligations of the United States of America or any agency thereof; (b) Investments in either certificates of deposit of maturities less than one year, issued by the Bank, or if the Bank is not substantially competitive (in terms of certificate of deposit interest rate for comparable amounts) with other banks (having a credit rating acceptable to the Bank) certificates of deposit of maturities less than one year, issued by one or more of such other banks; (c) Investments in commercial paper of maturities less than one year with the best rating by Standard & Poors, Moody's Investors Service, Inc., or any other rating agency satisfactory to the Bank; and (d) Routine advances to employees made in the ordinary course of business.     PAGE 34 OF 42 Section 11.7. Changes in Management and Control. The senior management of the Borrower will not change without the prior written consent of the Bank, and David Jeansonne will remain as President and Chairman of the Board of the Borrower. In addition, no more than 51 % of the equity interest and voting rights in the Borrower will change during the term of the Agreement. Section 11.8. Other Agreements. The Borrower and the Guarantor will not enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by any of them hereunder or in connection herewith. Section 11.9. Transactions with Affiliates. The Borrower and the Guarantor will not enter into any agreement with any affiliate except to the extent that such agreements are commercially reasonable which provide for terms which would normally be obtainable in an arm's length transaction with an unrelated third party. Section 11.10. Minimum Amount in Dominion Account. The Borrower will maintain a minimum balance of $2,000.00 in the Dominion Account. ARTICLE XII EVENTS OF DEFAULT Section 12.1. Events of Default. The occurrence of any one or more of the following shall constitute an Event of Default: Default under the Indebtedness. Should the Borrower default in the payment of principal or interest under the Indebtedness of the Borrower. Default under this Agreement. Should the Borrower or the Guarantor violate or fail to comply fully with any of the terms and conditions of, or default under, this Agreement, and such default not be cured within ten days of the occurrence thereof (provided, however, that no cure period shall be available f-or a default in the obligation to maintain insurance coverages required hereby). Default Under Other Agreements. Should any event of default occur or exist under any of the Related Documents or should the Borrower or the Guarantor violate, or fail to comply fully with, any terms and conditions of any of the Collateral Documents or Related Documents, and such default not be cured within ten days of the occurrence thereof (provided, however, that no cure period shall be available for a default in the obligation to maintain insurance coverages required thereby). Other Defaults in Favor of the Bank. Should the Borrower default under any other loan, extension of credit, security agreement, or other obligation in favor of the Bank and fail to cure same in accordance with any applicable cure periods.     PAGE 35 OF 42 Default in Favor of Third Parties. Should the Borrower or the Guarantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person and fail to cure same in accordance with any applicable cure periods. Insolvency. 'The following occurrences, in addition to the failure or suspension of either the Borrower or the Guarantor, shall constitute an Event of Default hereunder: (a) Filing by the Borrower or either Guarantor of a voluntary petition or any answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing, or any action by the Borrower or either Guarantor consenting to, approving of, or acquiescing in, any such petition or proceeding; the application by the Borrower or either Guarantor for, or the appointment by consent or acquiescence of, a receiver or trustee of the Borrower or either Guarantor for all or a substantial part of the property of any such Person; the making by the Borrower or either Guarantor, of an assignment for the benefit of creditors; the inability of the Borrower or either Guarantor or the admission by the Borrower or either Guarantor in writing, of its inability to pay its debts as they mature (the term "acquiescence" means the failure to file a petition or motion in opposition to such petition or proceeding or to vacate or discharge any order, judgment or decree providing for such appointment within sixty (60) days after the appointment of a receiver or trustee); or (b) Filing of an involuntary petition against the Borrower or either Guarantor in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing and such petition remains undismissed or unanswered for a period of sixty (60) days from such filing; or the insolvency appointment of a receiver or trustee of the Borrower or either Guarantor for all or a substantial part of the property of such Person and such appointment remains unvacated or unopposed for a period of sixty (60) days from such appointment, execution or similar process against any substantial part of the property of the Borrower or either Guarantor and such warrant remains unbonded or undismissed for a period of sixty (60) days from notice to the Borrower or either Guarantor of its issuance. Dissolution Proceedings. Should proceedings for the dissolution or appointment of a liquidator of the Borrower or either Guarantor be commenced. False Statements. Should any representation or warranty of either the Borrower or the Guarantor made in connection with the Indebtedness prove to be incorrect or misleading in any material respect when made or reaffirmed.     PAGE 36 OF 42   Material Adverse Change. Should a Material Adverse Change with respect to either the Borrower or the Guarantor occur at any time and not be cured within ten days of the occurrence thereof. Upon the occurrence of an Event of Default, all Commitments of the Bank under this Agreement will terminate immediately (including any obligation to make any further Revolving Loans or issue any further Credits to or for the account of any Borrower), and, at the Bank's option, the Notes and all Indebtedness of the Borrower will become immediately due and payable, all without notice of any kind to the Borrower or the Guarantor, except that in the case of type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. Upon the occurrence of an Event of Default, the Bank may proceed to realize upon the Collateral under the terms of the Collateral Documents and exercise any other rights which it has by law or contract (which. rights shall be cumulative in nature). Section 12.2. Waivers. Except as otherwise provided for in this Agreement and by applicable law, the Borrower and the Guarantor waive (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by the Bank on which the Borrower or the Guarantor may in any way be liable and hereby ratify and confirm whatever the Bank may do in this regard, (ii) all rights to notice and a hearing prior to the Bank's taking possession or control of, or to the Bank's replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing the Bank to exercise any of its remedies, and (iii) the benefit of all valuation, appraisal and exemption laws. The Borrower and the Guarantor acknowledge that they have been advised by counsel of their choice with respect to this Agreement, the other Collateral Documents, and the transactions evidenced by this Agreement and other Collateral Documents.     ARTICLE XIII MISCELLANEOUS Section 13.1. No Waiver; Modification in Writing. No failure or delay on the part of the Bank in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. No amendment, modification or waiver of any provision of this Agreement or of the Notes, nor consent to any departure by the Borrower or the Guarantor therefrom, shall in any event be effective unless the same shall be in writing signed by or on behalf of the Bank and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower or the Guarantor in any case shall entitle   PAGE 37 OF 42 the Borrower or the Guarantor to any other or further notice or demand in similar or other circumstances. Section 13.2. Payment on Non-Business Day. Whenever any payment to be made hereunder or on account of any of the Notes shall be scheduled to become due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest and fees payable hereunder or on account of the Notes. Section 13.3. Addresses for Notices. All notices and communications provided for hereunder shall be in writing and, shall be mailed, by certified mail, return receipt requested, or delivered as set forth below unless any person named below shall notify the others in writing of another address, in which case notices and communications shall be mailed, by certified mail, return receipt requested, or delivered to such other address. If to the Bank: Hibernia National the Bank P. 0. Box 61540 New Orleans, LA 70161 Attn: Special Assets Department If to the Borrower: Omni Energy Services Corp. 4500 N.E. Evangeline Thruway Carencro, LA 70520 Attn: David Jeansonne If to Aviation: American Aviation L.L.C. 4500 N.E. Evangeline Thruway Carencro, LA 70520 Attn: David Jeansonne If to Omni Canada: Omni Energy Services Corp. Canada 4500 N.E. Evangeline Thruway Carencro, LA 70520 Attn: David Jeansonne         PAGE 38 OF 42 If to Omni Alaska: Omni Energy Services -- Alaska, Inc. 4500 N.E. Evangeline Thruway Carencro, LA 70520 Attn: David Jeansonne Section 13.4. Fees and Expenses. The Borrower agrees to pay all fees, costs and expenses of the Bank in connection with the preparation, execution and delivery of this Agreement, and all Related Documents to be executed in connection herewith and subsequent modifications or amendments to any of the foregoing, including without limitation, the reasonable fees and disbursements of counsel to the Bank, and to pay all costs and expenses of the Bank in connection with the enforcement of this Agreement, the Notes or the other Related Documents, including reasonable legal fees and disbursements arising in connection therewith. The Borrower also agrees to pay, and to save the Bank harmless from any delay in paying stamp and other similar taxes, if any which may be payable or determined to be payable in connection with the execution and delivery of this Agreement, the Notes, the other Related Documents, or any modification thereof. Section 13.5. Security Interest and Right of Set-off. The Bank shall have a continuing security interest in, as well as the right to set-off the obligations of the Borrower hereunder against, all funds which the Borrower may maintain on deposit with the Bank (with the exception of funds deposited in the, Borrower's accounts in trust for third parties or funds deposited in pension accounts, IRA's, Keogh accounts and All Saver Certificates), and the Bank shall have a lien upon and a security interest in all property of the Borrower in the Bank's possession or control which shall secure the Indebtedness of the Borrower. Section 13.6. Waiver of Marshaling. The Borrower and the Guarantor shall not at any time hereafter assert any right under any law pertaining to marshaling (whether of assets or liens) and the Borrower and the Guarantor expressly agree that the Bank may execute or foreclose upon the Collateral in such order and manner as the Bank, in its sole discretion, deems appropriate. Section 13.7. Governing Law. This Agreement and the Notes shall be deemed to be contracts made under the flaws of the State of Louisiana and for all purposes shall be construed in accordance with the laws of said State. Section 13.8. Consent to Loan Participation. The Borrower and the Guarantor agree and consent to the Bank's sale or transfer, whether now or later, of one or more participation interests in the Indebtedness of the Borrower arising pursuant to this Agreement to one or more purchasers, whether related or unrelated to the Bank. The Bank may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge the Bank may have about the Borrower and the Guarantor or about any other matter relating to such Indebtedness, and the Borrower and the Guarantor hereby waive any rights to privacy they may have with respect to such matters. The Borrower and the Guarantor also agree     PAGE 39 OF 42 that the purchasers of any such participation interest will be considered as the absolute owners of such interests in such Indebtedness. Section 13.9. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) THE BORROWER, THE- GUARANTOR, AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER, THE GUARANTOR, AND THE BANK MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE NOTES, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, THE GUARANTOR, AND THE BANK, AND THE BORROWER, THE GUARANTOR, AND THE BANK HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER, THE GUARANTOR, AND THE BANK EACH FURTHER REPRESENT THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. (b) THE BORROWER AND THE GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN LOUISIANA AND AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE NOTES, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION. Section 13.10. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be! invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Section 13.11. WAIVER OF DEFENSES; RELEASE OF LIABILITIES. THE BORROWER AND THE, GUARANTORS ACKNOWLEDGE THAT THIS AGREEMENT CONTAINS A RENEWAL OF THE LOANS AND AN EXTENSION OF PAYMENTS. IN CONSIDERATION OF THE BANK'S EXECUTION OF THIS AGREEMENT, THE BORROWER AND THE- GUARANTORS DO HEREBY IRREVOCABLY WAIVE ANY AND ALL CLAIMS, CAUSES OF ACTION, AND/OR DEFENSES TO PAYMENT ON ANY INDEBTEDNESS OWED BY ANY OF THEM TO THE BANK THAT MAY EXIST AS OF     PAGE 40 OF 42 THE DATE OF EXECUTION OF THIS AGREEMENT. FURTHER, BORROWER AND THE GUARANTORS HEREBY AGREE THAT ALL DISPUTES AND CLAIMS WHATSOEVER OF ANY KIND OR NATURE WHICH BORROWER AND/OR ANY OF THE GUARANTORS PRESENTLY HAS OR MAY HAVE AGAINST BANK, WHETHER PRESENTLY KNOWN OR UNKNOWN, WHICH BORROWER AND/OR ANY OF THE GUARANTORS COULD HAVE ASSERTED AGAINST BANK, ARE FULLY AND FINALLY RELEASED, COMPROMISED AND SETTLED. BORROWER AND THE GUARANTORS, INDIVIDUALLY AND FOR THEMSELVES, THEIR, SUCCESSORS IN INTEREST AND ASSIGNS, DO HEREBY EXPRESSLY RELEASE AND FOREVER RELIEVE, DISCHARGE AND GRANT FULL ACQUITTANCE TO BANK FOR AND FROM ANY AND ALL CAUSES OF ACTION, SUITS, CLAIMS, DEBTS, OBLIGATIONS OR LIABILITIES OF ANY NATURE WHATSOEVER, KNOWN OR UNKNOWN, ALLEGED OR NOT ALLEGED, WHICH BORROWER AND/OR ANY OF THE GUARANTORS HAS OR MAY HAVE AGAINST BANK, ITS AGENTS, OFFICERS, EMPLOYEES, DIRECTORS AND SHAREHOLDERS AS OF THE DATE HEREOF. ACCEPTANCE OF THE PROCEEDS OF EACH REVOLVING LOAN AFTER THE, DATE HEREOF SHALL CONSTITUTE A RATIFICATION, ADOPTION AND CONFIRMATION BY BORROWER AND GUARANTORS OF THE FOREGOING GENERAL RELEASE OF RELEASED CLAIMS AND LIABILITIES THAT ARE BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT KNOWN OR UNKNOWN, EXISTING ON OR PRIOR TO THE DATE OF RECEIPT OF ANY SUCH REVOLVING LOAN. THIS WAIVER AND RELEASE SHALL BE CONSTRUED TO HAVE THE BROADEST POSSIBLE SCOPE. Section 13.12. Headings. Article and Section headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. [The remainder of this page is intentionally left blank]         PAGE 41 OF 42 IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. OMNI ENERGY SERVICES CORP. BY:____________________________ Name: __________________________ Title:___________________________   AMERICAN AVIATION L.L.C. By: Omni Energy Services Corp., as Sole Member BY:____________________________ Name: _________________________ Title:___________________________ OMNI ENERGY SERVICES CANADA CORP. BY:____________________________ Name: _________________________ Title: __________________________   OMNI ENERGY SERVICES -- ALASKA, INC. BY:____________________________ Name: _________________________ Title:__________________________   HIBERNIA NATIONAL BANK BY:____________________________ Name: Tammy M. Angelety Title: Vice President     PAGE 42 OF 42

EX. 10.1                 --------------------------------------------------------------------------------   ACQUISITION AGREEMENT DATED August 28, 2000   --------------------------------------------------------------------------------       OSLER, HOSKIN & HARCOURT LLP - WHITE & CASE LLP TABLE OF CONTENTS ARTICLE 1 Interpretation 1 Section 1.1 Definitions 1 Section 1.2 Interpretation Not Affected by Headings, etc. 6 Section 1.3 Currency 6 Section 1.4 Number, etc. 6 Section 1.5 Date For Any Action 6 Section 1.6 Entire Agreement 7 Section 1.7 Schedules 7 Section 1.8 Accounting Matters 7 Section 1.9 Knowledge 7 ARTICLE 2 THE AMALGAMATION 7 Section 2.1 Implementation Steps by Repap 7 Section 2.2 Articles of Amalgamation 8 Section 2.3 Repap Circular 8 Section 2.4 Preparation of Filings, etc. 8 ARTICLE 3 REPRESENTATIONS AND WARRANTIES 9 Section 3.1 Representations and Warranties of Repap 9 Section 3.2 Representations and Warranties of UPM 23 Section 3.3 Survival 25 ARTICLE 4 COVENANTS 25 Section 4.1 Retention of Goodwill 25 Section 4.2 Covenants of Repap 25 Section 4.3 Covenants of UPM 29 Section 4.4 Treatment of Repap Stock Options 30 Section 4.5 Covenants Regarding Non-Solicitation 30 Section 4.6 Notice by Repap of Superior Proposal Determination 32 Section 4.7 Access to Information 33 Section 4.8 Closing Matters 33 Section 4.9 Indemnification 33 ARTICLE 5 CONDITIONS 34 Section 5.1 Mutual Conditions Precedent. 34 Section 5.2 Additional Conditions Precedent to the Obligations of UPM 35 Section 5.3 Additional Conditions Precedent to the Obligations of Repap 36 Section 5.4 Notice and Cure Provisions 36 Section 5.5 Satisfaction of Conditions. 37 ARTICLE 6 AMENDMENT AND TERMINATION 37 Section 6.1 Amendment 37 Section 6.2 [Intentionally Deleted] 38 Section 6.3 Termination 38 Section 6.4 Break and Other Fees; Option 39 Section 6.5 Remedies 39 ARTICLE 7 GENERAL 40 Section 7.1 Notices 40 Section 7.2 Assignment 41 Section 7.3 Binding Effect 42 Section 7.4 Waiver and Modification 42 Section 7.5 Further Assurances 42 Section 7.6 Expenses 42 Section 7.7 Consultation 42 Section 7.8 Governing Laws 43 Section 7.9 Time of Essence 43 Section 7.10 Counterparts 43 SCHEDULE A - AMALGAMATION AGREEMENT SCHEDULE B - SPECIAL RESOLUTION OF THE REPAP SHAREHOLDERS SCHEDULE C - REGULATORY APPROVALS SCHEDULE D - CONFIDENTIALITY PROVISIONS SCHEDULE E - OPTION AGREEMENT ACQUISITION AGREEMENT MEMORANDUM OF AGREEMENT made as of the 28th day of August, 2000 B E T W E E N : UPM-KYMMENE CORPORATION , a corporation existing under the laws of Finland ("UPM") - and - REPAP ENTERPRISES INC. , a corporation existing under the laws of Canada ("Repap"). THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE 1 INTERPRETATION Section 1.1 Definitions In this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the following meanings respectively: "Acquireco" means 3796477 Canada Inc., a corporation existing under the laws of Canada and a wholly-owned subsidiary of UPM; "Acquisition Proposal" means any proposal or offer with respect to any merger, amalgamation, arrangement, business combination, liquidation, dissolution, recapitalization, take-over bid, tender offer, purchase of all or any material assets of, or any purchase of more than 20% of the equity (or rights thereto) of, or similar transactions involving, Repap or any Repap Material Subsidiary, excluding the Amalgamation; "Affiliate" shall have the meaning ascribed thereto under the Securities Act; "Amalco" means the corporation continuing as a result of the Amalgamation; "Amalco Special Shares" means the redeemable special shares of Amalco to be issued on the Amalgamation and to be redeemed by Amalco on the Redemption Date at the Redemption Price; "Amalgamation" means an amalgamation of Repap and Acquireco under Section 181 of the CBCA on the terms and subject to the conditions set out in the Amalgamation Agreement, subject to any amendments or variations thereto made in accordance with Section 6.1; "Amalgamation Agreement" means the amalgamation agreement providing for the Amalgamation substantially in the form and content of Schedule A annexed hereto and any amendments or variations thereto made in accordance with Section 6.1; "Amalgamation Resolution" means the special resolution of the Repap Shareholders, to be substantially in the form and content of Schedule B annexed hereto; "Ancillary Documents" means the schedules hereto and any disclosure letters between the parties as contemplated herein; "Articles of Amalgamation" means the articles of amalgamation of Repap and Acquireco in respect of the Amalgamation that are required by the CBCA to be filed with the Director; "Berg Litigation" means the litigation relating to Mr. S. Berg disclosed in the documents Publicly Disclosed by Repap; "Break Fee" shall have the meaning ascribed thereto in Section 6.4(1); "Business Day" means any day on which commercial banks are generally open for business in Toronto, Ontario and Helsinki, Finland other than a Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario or in Helsinki, Finland under applicable Laws; "CBCA" means the Canada Business Corporations Act as now in effect and as it may be amended from time to time prior to the Effective Date; "COBRA" has the meaning ascribed thereto in Section 3.1(1)(vii); "Convertible Debenture" means the U.S. $45 million principal amount 6% convertible subordinated debenture of Repap; "Director" means the Director appointed pursuant to Section 260 of the CBCA; "Dissent Rights" means the rights of dissent in respect of the Amalgamation under Section 190 of the CBCA; "Dissenting Shareholder" means any Repap Shareholder which exercises its Dissent Rights in compliance with Section 190 of the CBCA and thereby becomes entitled to receive the fair value of the Repap Common Shares held by that Repap Shareholder; "Effective Date" means the date shown on the certificate of amalgamation to be issued by the Director under the CBCA giving effect to the Amalgamation; "Environmental Laws" means all applicable Laws, including applicable common law, relating to the protection of the environment and public health and safety or any hazardous or toxic substance or pollutant; "ERISA" has the meaning ascribed thereto in Section 3.1(l)(vi); "Exchange Act" means the United States Securities Exchange Act of 1934, as amended and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "Governmental Entity" means any (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, (b) self regulatory organization or stock exchange including The Nasdaq Stock Market, Inc. OTC Bulletin Board and The Toronto Stock Exchange, (c)  subdivision, agent, commission, board, or authority of any of the foregoing, or (d)  quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; "Holders" means, when used with reference to the Repap Common Shares and the Repap Preferred Shares, the holders thereof shown from time to time in the register maintained by or on behalf of Repap in respect of such securities; "Including" means including without limitation; "Information" has the meaning ascribed thereto in Section 4.7(2); "Intellectual Property Rights" means all patents, trade-marks, copyright, industrial designs, trade-names and other intellectual property rights whether registered or not, owned by or licensed to Repap or its subsidiaries; "Copyright" means the rights prescribed by section 3(1) of the Copyright Act (Canada) and other copyright rights; "Industrial Designs" means the exclusive rights conferred under the Industrial Design Act (Canada) and other equivalent rights including design patent rights; "Patents" means all issued patents and inventions and pending applications therefor and patents which may be issued from current applications (including divisions, reissues, renewals, re-examinations, continuations, continuations-in-part and extensions) applied for or registered in any jurisdiction; and "Trade-marks" means the trade-marks, trade-names, brands, business names, uniform resource locators, domain names, tag lines, designs, graphics, logos, service marks and other commercial symbols and indicia of origin whether registered or not and any goodwill associated therewith; "Laws" means all statutes, regulations, statutory rules, orders, and terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, and the term "applicable" with respect to such Laws and in the context that refers to one or more Persons, means that such Laws apply to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Governmental Entity having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities; "Match Period" has the meaning ascribed thereto in Section 4.6(1); "Material Adverse Change", when used in connection with a Person, means any change, effect, event or occurrence with respect to the financial condition, properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations of such Person or any of its subsidiaries that is or would be material and adverse to such Person and its subsidiaries taken as a whole, other than any change, effect, event or occurrence (i) relating to, or arising out of, the Canadian, United States or European economies, political conditions or securities markets in general or (ii) affecting the worldwide pulp and paper industry in general or the North American coated paper industry in general which does not have a materially disproportionate impact on such Person and its subsidiaries; "Material Adverse Effect" when used in connection with a Person, means any effect resulting in a Material Adverse Change with respect to it; "Material Fact" shall have the meaning ascribed thereto under the Securities Act; "Option Agreement" means the option agreement attached as Schedule C hereto; "OSC" means the Ontario Securities Commission; "Outside Date" means December 20, 2000 or such later date as may be mutually agreed by the parties; "Person" includes any individual, firm, partnership, limited partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status; "Publicly Disclosed by Repap" means disclosed by Repap in a public filing made by it with the OSC or the SEC on or before the date hereof; "Redemption Date" means the Effective Date; "Redemption Price" means Cdn. $0.20 per Amalco Special Share or such greater amount established in accordance with Section 4.6; "Regulatory Approvals" means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of Governmental Entities, as set out in Schedule C hereto; "Repap Circular" means the notice of the Repap Meeting and accompanying management information circular, including all appendices thereto, to be sent to Repap Shareholders in connection with the Repap Meeting; "Repap Common Shares" means the common shares in the capital of Repap; "Repap Documents" has the meaning ascribed thereto in Section 3.1(m); "Repap Material Subsidiary" means Repap New Brunswick Inc. and each other subsidiary of Repap (i) the total assets of which constituted more than ten percent of the consolidated assets of Repap or (ii) the total revenues of which constituted more than ten percent of the consolidated revenues of Repap, in each case as set out in the financial statements of Repap for the year ended December 31, 1999 and each affiliate of Repap that directly or indirectly holds an equity interest in any such subsidiary; "Repap Meeting" means the special meeting of Repap Shareholders, including any adjournment or postponement thereof, to be called and held to consider the Amalgamation; "Repap Options" means the Repap Common Share purchase options granted under the Repap Stock Option Plans; "Repap Plans" has the meaning ascribed thereto in Section 3.1(l); "Repap Preferred Shares" means collectively the Preferred Shares, Series C and the Preferred Shares, Series F in the capital of Repap; "Repap Shareholders" means the holders of Repap Common Shares and Repap Preferred Shares; "Repap Shares" means the Repap Common Shares and the Repap Preferred Shares; "Repap Stock Option Plans" means Repap's 1987 Directors, Officers and Employees Stock Option Plan, and the 1991 Salaried Employees Amended Stock Option Plan, as amended to the date hereof; "Representatives" has the meaning ascribed thereto in Section 4.7(1); "SEC" means the United States Securities and Exchange Commission; "Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "Subsidiary" means, with respect to a specified body corporate, any body corporate of which more than 50% of the outstanding shares ordinarily entitled to elect a majority of the board of directors thereof (whether or not shares of any other class or classes shall or might be entitled to vote upon the happening of any event or contingency) are at the time owned directly or indirectly by such specified body corporate, and shall include any body corporate, partnership, joint venture or other entity over which such specified body corporate exercises direction or control or which is in a like relation to a subsidiary; "Superior Proposal" means any bona fide written Acquisition Proposal that in the good faith determination of the Board of Directors of Repap, after consultation with its financial advisors and with outside counsel (a) is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of such proposal and the party making such proposal, and (b) would, if consummated in accordance with its terms, result in a transaction more favourable to the holders of Repap Common Shares and no less favourable to the holders of Repap Preferred Shares from a financial point of view than the transaction contemplated by this Agreement; "Tax" and "Taxes" have the respective meanings ascribed thereto in Section 3.1(k) (iii); "Tax Returns" means all returns, declarations, reports, information returns and statements required to be filed with any taxing authority relating to Taxes; "Technical Information" means all know-how and related technical knowledge owned by or licensed to Repap, its subsidiaries or affiliates including, without limitation: all trade secrets, confidential information and other proprietary know-how; all public information and non-proprietary know-how; any information of a scientific, technical, financial or business nature regardless of its form; all documented research, forecasts, studies, marketing plans, budgets, market data, developmental, demonstration or engineering work; all information that can be or is used to define a design or process or procure, produce, support or operate material and equipment; all software, methods of production and procedures; all integrated circuit topographies, mask works and similar rights in semi-conductor chip technology; and all formulae, designs, drawings, blueprints, patterns, plans, flow charts, parts lists, manuals and records; "Unsolicited" means unsolicited after Tuesday, August 22, 2000; and "US Repap Plans" has the meaning ascribed thereto in Section 3.1(l)(vi). Section 1.2 Interpretation Not Affected by Headings, etc. The division of this Agreement into Articles, Sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number and/or a letter refer to the specified Article or Section of this Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and similar expressions refer to this Agreement (including the Schedules hereto) and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto. Section 1.3 Currency Unless otherwise specifically indicated, all sums of money referred to in this Agreement are expressed in lawful money of Canada. Section 1.4 Number, etc. Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders. Section 1.5 Date For Any Action In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. Section 1.6 Entire Agreement This Agreement, and the agreements and other documents referred to herein, constitute the entire agreement between the parties hereto pertaining to the terms of the transactions contemplated hereby and supersede all other prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties hereto with respect to the terms of the transactions contemplated hereby. Section 1.7 Schedules The following Schedules are annexed to this Agreement and are hereby incorporated by reference into this Agreement and form part hereof: Schedule A - Amalgamation Agreement Schedule B - Special Resolution of the Repap Shareholders Schedule C - Regulatory Approvals Schedule D - Confidentiality Provisions Schedule E - Option Agreement Section 1.8 Accounting Matters Unless otherwise stated, all accounting terms used in this Agreement in respect of Repap shall have the meanings attributable thereto under Canadian generally accepted accounting principles and all determinations of an accounting nature in respect of Repap required to be made shall be made in a manner consistent with Canadian generally accepted accounting principles and past practice. Section 1.9 Knowledge Each reference herein to the knowledge of Repap means, unless otherwise specified, the actual knowledge of H. Stephen, S. Larson, M. Cormier or T. McBride following due review of corporate records and inquiry of such employees of Repap as they determine in their reasonable judgement can be made without jeopardizing the confidentiality of the subject matter of this Agreement. Each reference herein to the knowledge of UPM means, unless otherwise specified, the actual knowledge of UPM's senior officers. ARTICLE 2 THE AMALGAMATION Section 2.1 Implementation Steps by Repap Repap covenants in favour of UPM that Repap shall: a. convene and hold the Repap Meeting, within 30 days of causing the Repap Circular and other documentation required in connection with the Repap Meeting to be sent to each Repap Shareholder pursuant to Section 2.3, for the purpose of considering the Amalgamation Resolution; b. subject to Section 4.6(1) and Section 5.4(2), not postpone or cancel (or propose for adjournment, postponement or cancellation) the Repap Meeting without UPM's prior written consent except as required for quorum purposes, by Law or by the Repap Shareholders; c. at the request of UPM, use commercially reasonable efforts to solicit from the Repap Shareholders proxies in favour of the approval of the Amalgamation Resolution and to take all other action that is necessary or desirable to secure the approval of the Amalgamation Resolution by the Repap Shareholders, except to the extent that the Board of Directors has changed its recommendation in accordance with the terms of this Agreement (and subject in all cases to Section 6.4); and d. subject to the satisfaction or waiver of the other conditions herein contained in favour of each party and on written direction from UPM, send to the Director, for endorsement and filing by the Director, the Articles of Amalgamation and such other documents as may be required in connection therewith under the CBCA to give effect to the Amalgamation. Section 2.2 Articles of Amalgamation The Articles of Amalgamation shall implement the Amalgamation, as a result of which, among other things, each holder of Repap Common Shares will be entitled to receive one Amalco Special Share for each Repap Common Share. Section 2.3 Repap Circular Repap shall commence preparation of the Repap Circular no later than on August 29, 2000. As promptly as reasonably practicable after the execution and delivery of this Agreement, Repap shall complete the Repap Circular together with any other documents required by the Securities Act or other applicable Laws in connection with the Amalgamation required to be prepared by Repap, and as promptly as practicable after the execution and delivery of this Agreement, and in any event on or prior to September 15, 2000 Repap shall, unless otherwise agreed by the parties, cause the Repap Circular and other documentation required in connection with the Repap Meeting to be sent to each Repap Shareholder and filed as required by applicable Laws. Section 2.4 Preparation of Filings, etc. e. UPM and Repap shall use all reasonable efforts to cooperate in the preparation, seeking and obtaining of all circulars, filings, consents, Regulatory Approvals and other approvals and other matters in connection with this Agreement and the Amalgamation. f. Each of UPM and Repap shall furnish to the other all such information concerning it and its shareholders as may be required (and, in the case of its shareholders, available to it) for the effectuation of the actions described in Sections 2.3 and the foregoing provisions of this Section 2.4, and each covenants that no information furnished by it (to its knowledge in the case of information concerning its shareholders) in connection with such actions or otherwise in connection with the consummation of the Amalgamation and the other transactions contemplated by this Agreement will contain any untrue statement of a material fact or omit to state a material fact required to be stated in any such document or necessary in order to make any information so furnished for use in any such document not misleading in the light of the circumstances in which it is furnished. g. Repap shall promptly notify UPM if at any time before the Effective Date it becomes aware that the Repap Circular contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made, or that otherwise requires an amendment or supplement to the Repap Circular or such other document. In any such event, UPM and Repap shall cooperate in the preparation of a supplement or amendment to the Repap Circular or such application or other document, as required and as the case may be, and, if required, shall cause the same to be sent to Repap Shareholders and filed as required by applicable Laws. h. Repap shall ensure that the Repap Circular complies in all material respects with all applicable Laws. Without limiting the generality of the foregoing, Repap shall ensure that the Repap Circular provides holders of Repap Shares with information in sufficient detail to permit them to form a reasoned judgement concerning the matters to be placed before them at the Repap Meeting. ARTICLE 3 REPRESENTATIONS AND WARRANTIES Section 3.1 Representations and Warranties of Repap Repap represents and warrants to and in favour of UPM as follows and acknowledges that UPM is relying upon such representations and warranties in connection with the transactions contemplated by this Agreement: Organization. Each of Repap and the Repap Material Subsidiaries has been duly incorporated or formed under all applicable Laws, is validly subsisting and has full corporate or legal power and authority to own its properties and conduct its businesses as currently owned and conducted. All of the outstanding shares and other ownership interests of the Repap Material Subsidiaries which are held directly or indirectly by Repap are validly issued, fully paid and non-assessable and all such shares and other ownership interests are owned directly or indirectly by Repap, free and clear of all material liens, claims or encumbrances, except for restrictions on transfers contained in articles or similar documents, and there are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any such shares or other ownership interests in any of the Repap Material Subsidiaries. Repap has disclosed in writing to UPM in a form acceptable to UPM the names and jurisdictions of incorporation of each of the Repap Material Subsidiaries. Capitalization. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, the authorized capital of Repap consists of an unlimited number of Repap Common Shares and an unlimited number of Preferred Shares, issuable in series. As of the date hereof, there are 743,960,637 Repap Common Shares (and no more) and 240,000 Preferred Shares, Series C (and no more) and 400,000 Preferred Shares, Series F (and no more) and no Preferred Shares of any other series, issued and outstanding. In addition, as at the date hereof, options to acquire an aggregate of not more than 60,895,000 Repap Common Shares are granted and outstanding under the Repap Stock Option Plans and the right to acquire an aggregate of not more than 128,571,429 Repap Common Shares is outstanding under the Convertible Debenture at a conversion price as at the date hereof of U.S.$0.35 per Repap Common Share. Except as described in the preceding sentences of this Section 3.1(b), there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating Repap or any Repap subsidiary to issue or sell any shares of Repap or of any of the Repap subsidiaries or securities or obligations of any kind convertible into or exchangeable for any shares of Repap or of any Repap subsidiary. All outstanding Repap Common Shares and Repap Preferred Shares have been duly authorized and are validly issued and outstanding as fully paid and non-assessable shares, free of pre-emptive rights. Except as has been disclosed in this Section, there are no outstanding contractual obligations of Repap or any of the Repap subsidiaries to repurchase, redeem or otherwise acquire any of its outstanding securities or with respect to the voting or disposition of any outstanding securities of Repap or any of the Repap subsidiaries. Authority and No Violation. Repap has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the Option Agreement by Repap and the consummation by Repap of the transactions contemplated by this Agreement and the Option Agreement have been duly authorized by its Board of Directors and no other corporate proceedings on its part are necessary to authorize this Agreement or the transactions contemplated hereby, other than: A. with respect to the Repap Meeting, the Repap Circular and other matters relating solely thereto, the approval of the Board of Directors of Repap; and B. with respect to the completion of the Amalgamation, the requisite approval of the Repap Shareholders. This Agreement and the Option Agreement have been duly executed and delivered by Repap and constitute legal, valid and binding obligations, enforceable against Repap in accordance with their terms, subject to bankruptcy, insolvency and other applicable Laws affecting creditors' rights generally, and to general principles of equity. The Board of Directors of Repap has (A) unanimously determined as of the date hereof that the Amalgamation is fair to the Repap Shareholders and is in the best interests of Repap, (B) received an opinion from Donaldson, Lufkin & Jenrette Securities Corporation to the effect that, as of the date of this Agreement, the consideration offered to Repap Shareholders pursuant to the Amalgamation is fair from a financial point of view to the Repap Shareholders, and (C) determined as of the date hereof unanimously to recommend that the Repap Shareholders vote in favour of the Amalgamation. Repap's directors have advised Repap that, except in the event of a Superior Proposal, they intend to vote all Repap Shares held by them in favour of the Amalgamation and will so represent in the Repap Circular. The approval of this Agreement and the Option Agreement, the execution and delivery by Repap of this Agreement and the Option Agreement and the performance by it of its obligations under those agreements and the completion of the Amalgamation and the transactions contemplated thereby, will not: A. result (with or without notice or the passage of time) in a violation or breach of, require any consent to be obtained under or give rise to any termination, accelerated payment right, purchase or sale rights or payment obligation under any provision of : I. its or any Repap Material Subsidiary's certificate of incorporation, articles, by-laws or other charter documents; II. any Laws, judgement or decree (subject to obtaining the Regulatory Approvals relating to Repap and UPM), except to the extent that the violation or breach of, or failure to obtain any consent under, any Laws, judgement or decree would not, individually or in the aggregate, have a Material Adverse Effect on Repap and would not prevent, materially hinder or materially delay the completion of the transactions contemplated hereby; or III. except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, any contract, agreement, licence, franchise, permit, loan, government grant or guarantee to which Repap or any Repap subsidiary is party or by which it is bound or subject or is the beneficiary, except as would not, individually or in the aggregate, have a Material Adverse Effect on Repap; B. except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, give rise to any right of termination or acceleration of indebtedness of Repap or any Repap subsidiary, or cause any such indebtedness to come due before its stated maturity, or cause any available credit of Repap or any Repap subsidiary to cease to be available, other than as would not, individually or in the aggregate, have a Material Adverse Effect on Repap; or C. result in the imposition of any encumbrance, charge or lien upon any of its assets or the assets of any Repap subsidiary, except as would not, individually or in the aggregate, have a Material Adverse Effect on Repap. v No consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity is required to be obtained by Repap or any of its subsidiaries in connection with the execution and delivery of this Agreement or the Option Agreement or the consummation by Repap of the transactions contemplated hereby other than (A) filings with the Director under the CBCA, (B) the Regulatory Approvals relating to Repap and (C) any other consents, approvals, orders, authorizations, declarations or filings of or with a Governmental Entity which have been disclosed in writing by Repap to UPM in a form acceptable to UPM or which, if not obtained, would not, individually or in the aggregate, have a Material Adverse Effect on Repap and would not prevent, materially hinder or materially delay the completion of the transactions contemplated hereby. No Defaults. Subject to obtaining the Regulatory Approvals relating to Repap, neither Repap nor any of its subsidiaries is in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any contract, agreement, licence or franchise to which it is a party which would have a Material Adverse Effect on Repap. Absence of Certain Changes or Events. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM or Publicly Disclosed by Repap, since December 31, 1999 each of Repap and the Repap Material Subsidiaries has conducted its business only in the ordinary and regular course of business consistent with past practice and there has not occurred: i. a Material Adverse Change with respect to Repap; ii. any damage, destruction or loss not fully covered by insurance, subject to customary deductions, retentions and exclusions, that would have a Material Adverse Effect on Repap; iii. any redemption, repurchase or other acquisition of Repap Common Shares by Repap or Repap Preferred Shares or any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to Repap Common Shares or Repap Preferred Shares; iv. any material increase in or modification of the compensation payable or to become payable by it to any of its directors or officers, the entering into of any change of control, "golden parachute" or similar agreement or arrangement with any of its directors or officers, or any grant to any such director or officer of any increase in severance or termination pay; v. any material increase in or modification of any bonus, pension, insurance or benefit arrangement (including the granting of stock options, restricted stock awards or stock appreciation rights) made to, for or with any of its directors or officers; vi. any acquisition or sale of its property or assets aggregating 10% or more of Repap's total consolidated property and assets as at December 31, 1999 other than in the ordinary and regular course of business consistent with past practice; vii. any entering into, amendment of, relinquishment, termination or non-renewal by it of any material contract, agreement, licence, franchise, lease transaction, commitment or other right or obligation that would have a Material Adverse Effect on Repap; viii. any resolution to approve a split, consolidation or reclassification of any of its outstanding shares; ix. any material change in its accounting methods, policies or practices; x. any guarantee of the payment of material indebtedness or any incurrence of material indebtedness for money borrowed or any issue or sale of any debt securities except in the ordinary and regular course of business consistent with past practice; xi. except in the usual, ordinary and regular course of business and consistent with past practice: (A) any satisfaction or settlement of any claims or liabilities prior to the same being due, which were, individually or in the aggregate, material; or (B) any grant of any waiver, exercise of any option or relinquishment of any contractual rights which were, individually or in the aggregate, material; or xii. any giving of a consent by Repap to the assignment of the purchase agreement dated as of May 15, 1998 relating to the original issuance of the Convertible Debenture. Employment Matters. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, neither Repap nor any Repap Material Subsidiary is a party to any agreement, obligation or understanding providing for severance or termination payments to, or any employment, change of control, "golden parachute" or similar agreement with, any director or officer, other than any common law obligations of reasonable notice of termination or pay in lieu thereof and any statutory obligations. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, Repap and its subsidiaries are not subject to any collective bargaining agreements, and there are no current, pending or, to the knowledge of Repap, threatened strikes or lockouts at Repap or any Repap Material Subsidiary that would, individually or in the aggregate, have a Material Adverse Effect on Repap. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, neither Repap nor any Repap Material Subsidiary is subject to any litigation, actual or, to the knowledge of Repap, threatened, relating to employment or termination of employment of employees or independent contractors, other than those claims or such litigation as would, individually or in the aggregate, not have a Material Adverse Effect on Repap. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, Repap and all Repap Material Subsidiaries have, during the past 12 months, operated in accordance with all applicable Laws with respect to employment and labour, including, but not limited to, employment and labour standards, occupational health and safety, employment equity, pay equity, workers' compensation, human rights and labour relations and there are no current, pending or, to the knowledge of Repap, threatened proceedings before any board or tribunal with respect to any of the above areas, other than as has been disclosed in writing by Repap to UPM in a form acceptable to UPM or where the failure to so operate or such proceedings would, individually or in the aggregate, not have a Material Adverse Effect on Repap. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, there are no outstanding stock appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based upon the book revenue, value, income or any other attribute of Repap or any Repap subsidiary. Financial Statements; Contingent Liabilities. The audited consolidated financial statements for Repap as at and for each of the 12-month periods ended on or about December 31, 1999, 1998 and 1997 have been prepared in accordance with Canadian generally accepted accounting principles and such financial statements present fairly, in all material respects, the consolidated financial position and results of operations of Repap as of the respective dates thereof and for the respective periods covered thereby. Except as set forth in the Repap Documents filed prior to the date hereof, and except for liabilities and obligations incurred in the ordinary course of business since the date of the most recent consolidated balance sheet included in the Repap Documents, neither Repap nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) except for those that would not, individually or in the aggregate, have a Material Adverse Effect on Repap. The quarterly financial statements for Repap for the fiscal quarters ended March 31, 2000 and June 30, 2000 have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with the consolidated audited financial statements for the year ended December 31, 1999 and such financial statements fairly present, in all material respects, the consolidated financial position and results of operations of Repap as of the respective dates thereof and for the respective periods covered thereby. Books and Records. The financial books, records and accounts of Repap and its subsidiaries, in all material respects, (i) have been and are being maintained in accordance with accounting principles generally accepted in the country of domicile of each such entity on a basis consistent with prior years, (ii) are stated in reasonable detail and accurately and fairly reflect the acquisitions and dispositions of the assets of Repap and its subsidiaries and (iii) accurately and fairly reflect the basis for the Repap consolidated financial statements. Repap's and the Repap Material Subsidiaries' corporate minute books contain minutes of all meetings and resolutions of the directors and shareholders held, and full access thereto has been provided to UPM with the exception of certain recent minutes of the board of directors relating solely to the strategic initiatives of Repap. Litigation, Etc. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM or Publicly Disclosed by Repap, there is no claim, action, proceeding or investigation pending or, to the knowledge of Repap, threatened against Repap or any of its subsidiaries before any court or Governmental Entity that if determined adversely to Repap or such subsidiary would reasonably be expected to have a Material Adverse Effect on Repap or to prevent, materially hinder or materially delay consummation of the transactions contemplated by this Agreement. Neither Repap nor any Repap subsidiary, nor any of their respective assets and properties, is subject to any outstanding judgement, order, writ, injunction or decree that has had or would reasonably be expected to have a Material Adverse Effect on Repap or that would prevent, materially hinder or materially delay consummation of the transactions contemplated by this Agreement. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, to Repap's knowledge, Repap and the Repap subsidiaries are not subject to any warranty, negligence, performance or other claims or disputes or potential claims or disputes in respect of products or services currently being delivered or previously delivered, and to Repap's knowledge there are no events or circumstances which would reasonably be expected to give rise to any such claims or disputes or potential claims or disputes, in each case which has had or would reasonably be expected to have a Material Adverse Effect on Repap. Environmental. Except for any matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Repap or except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM: i. all operations of Repap and its subsidiaries have been conducted, and are now, in compliance with all Environmental Laws; and ii. neither Repap nor any Repap subsidiary is subject to: A. any Environmental Law which requires or may require any material work, repairs, construction, change in business practices or operations, or expenditures; or B. any written demand or written notice with respect to a breach of or liability under any Environmental Laws applicable to Repap or any Repap subsidiary; iii. there are no claims, proceedings or actions by any Governmental Entity or other person or entity pending or, to the knowledge of Repap threatened, against Repap or any of its subsidiaries under any Environmental Law; and iv. there are no facts, to the knowledge of Repap, relating to the business or operations of Repap or any of its subsidiaries, or to any real property at any time owned, leased or operated by Repap or any of its subsidiaries, that would give rise to any claim, proceeding or action, or to any liability, under any Environmental Law. Tax Matters. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM: i. Repap and each of the Repap Material Subsidiaries have filed, or caused to be filed, all material Tax Returns required to be filed by or with respect to them in the form and within the time prescribed under applicable Laws for so doing (all of which returns were correct and complete in all material respects), and have paid, or caused to be paid, all material amounts of Taxes shown to be due and payable thereon, and Repap's most recently published financial statements contain an adequate provision in accordance with Canadian generally accepted accounting principles for all material amounts of Taxes payable in respect of each period covered by such financial statements and all prior periods to the extent such Taxes have not been paid, whether or not due and whether or not shown as being due on any Tax Returns. Repap and each of its subsidiaries have made adequate provision in accordance with accounting principles generally accepted in the domicile of each such entity in their books and records for any material amounts of Taxes accruing in respect of any accounting period which has ended subsequent to the period covered by such financial statements. Repap has duly and timely withheld from any amount paid or credited by it to or for the account or benefit of any person, including any employees, officers or directors and any non-resident person, the amount of all Taxes and other deductions required by any Laws, rule or regulation to be withheld from any such amount and has duly and timely remitted the same to the appropriate Governmental Entity. ii. Except as disclosed in writing by Repap to UPM in a manner acceptable to UPM, neither Repap nor any of its subsidiaries has received any written notification that any issues involving a material amount of Taxes have been raised (and are currently pending) by the Canada Customs and Revenue Agency, the United States Internal Revenue Service or any other taxing authority, including any sales tax authority, in connection with any of the Tax Returns filed or required to be filed, and no waivers of statutes of limitations, or objections to any assessments or reassessments, have been given or requested or made with respect to Repap or any Repap Material Subsidiary. Except as disclosed by Repap to UPM in a form acceptable to UPM, all liability of Repap and its subsidiaries for income taxes has been assessed for up to the fiscal years disclosed in writing by Repap to UPM in a manner acceptable to UPM. Neither Repap nor any Repap Material Subsidiary has received any written notice from any taxing authority to the effect that any Tax Return is being examined. To the best of the knowledge of Repap, there are no written proposals to assess additional Taxes involving a material amount of Taxes and none has been asserted in writing. No Tax liens have been filed for material amounts of Taxes other than for Taxes not yet due and payable. Neither Repap nor any of the Repap Material Subsidiaries is a party to any Tax sharing, allocation, indemnification or other similar agreement or arrangement of any nature with any other Person (other than Repap or any of its subsidiaries) pursuant to which Repap or any of the Repap Material Subsidiaries has or could have any liabilities in respect of a material amount of Taxes. Neither Repap nor any Repap Material Subsidiary has received a refund of any Taxes to which it was not entitled. iii. "Tax" and "Taxes" means, with respect to any entity, all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all capital taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes, value added taxes, transfer taxes, franchise taxes, licence taxes, withholding taxes or other withholding obligations, payroll taxes, employment taxes, Canada or Quebec Pension Plan premiums, excise, severance, social insurance or social security premiums, workers' compensation premiums, employment insurance or compensation premiums, stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or add-on minimum taxes, goods and services tax, customs duties or other taxes of any kind whatsoever (whether payable directly or by withholding or not requiring the filing of a Tax Return), all estimated taxes and deficiency assessments, together with any interest and any penalties or additional amounts imposed by any taxing authority (domestic or foreign) on such entity or for which such entity is responsible, and any interest, penalties, additional taxes, additions to tax or other amounts imposed with respect to the foregoing. iv. For purposes of this Section 3.1(k), the term "material amount of Taxes" shall mean an amount of Taxes that is material to Repap and its subsidiaries taken as a whole. Pension and Employee Benefits. i. Repap has made available to UPM a list of all current employee benefit, health, welfare, supplemental unemployment benefit, bonus, pension, profit sharing, deferred compensation, stock option, stock compensation, stock purchase, retirement, hospitalization insurance, medical, dental, legal, disability and similar plans or arrangements or practices, whether written or oral, which are maintained by Repap and each of its subsidiaries (collectively referred to as the "Repap Plans"). ii. To Repap's knowledge, no step has been taken, no event has occurred and no condition or circumstance exists that has resulted in or would reasonably be expected to result in any Repap Plan being ordered or required to be terminated or wound up in whole or in part or having its registration under applicable Laws refused or revoked, or being placed under the administration of any trustee or receiver or regulatory authority or being required to pay any material Taxes, penalties or levies under applicable Laws. To Repap's knowledge, there are no actions, suits, claims (other than routine claims for payment of benefits in the ordinary course), trials, demands, investigations, arbitrations or other proceedings which are pending or threatened in respect of any of the Repap Plans or their assets which individually or in the aggregate would have a Material Adverse Effect on Repap. iii. Repap has made available to UPM true, correct and complete copies of all of the material Repap Plans requested by UPM (or, in the case of any material unwritten Repap Plan, a description thereof) together with funding agreements, actuarial reports, funding and financial information returns and statements with respect to each Repap Plan, and current plan summaries, booklets and personnel manuals. Repap has made available to UPM a true and complete copy of the most recent report filed with applicable Governmental Entities with respect to each Repap Plan in respect of which such a report was required. iv. Other than as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, all of the Repap Plans are in compliance in all material respects with all applicable Laws and their terms, and all of the Repap Plans are fully insured or fully funded. v. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, the entry into or performance by Repap of this Agreement and the completion of the Amalgamation and the transactions contemplated thereby will not result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of Repap or any Repap Material Subsidiary, or increase any benefits otherwise payable under any Material Repap Plan or result in the acceleration of time of payment or vesting of any such benefits. vi. Repap has disclosed in writing to UPM in a form acceptable to UPM an accurate and complete list of each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA") and each stock option, stock appreciation right, restricted stock, stock purchase, stock unit, performance share, incentive, bonus, profit-sharing, savings, deferred compensation, health, medical, dental, life insurance, disability, accident, supplemental unemployment or retirement, employment, severance or salary or benefits continuation or fringe benefit plan, program, arrangement or agreement, in each case, subject to ERISA or for the benefit of active, retired or former employees or directors residing within the United States of America (or with respect to which any such employee or director is a participant or party), that have been established or maintained by Repap or any subsidiary thereof (collectively, the "US Repap Plans"). vii. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM: (A) each US Repap Plan is in substantial compliance with all applicable laws (including, without limitation, ERISA and the Code) and has been administered and operated in all material respects in accordance with its terms; (B) each US Repap Plan which is intended to be "qualified" within the meaning of Section 401(a) of the Code has received a favourable determination letter or opinion letter from the Internal Revenue Service and, to the knowledge of Repap, no event has occurred and no condition exists which would reasonably be expected to result in the revocation of any such determination; (C) no US Repap Plan is covered by Title IV of ERISA or subject to Section 412 of the Code or Section 302 of ERISA; (D) full payment has been timely made of all amounts which Repap and/or its subsidiaries are required under applicable law or under any US Repap Plan or related agreement to have paid as of the last day of the most recent fiscal year of each US Repap Plan ended prior to the date hereof, or such non-payment has been reflected in their financial statements, and, to the knowledge of Repap, no event has occurred or condition exists that would reasonably be expected to result in a material increase in the level of such amounts paid or accrued for the most recently ended fiscal year; (E) neither Repap nor any of its subsidiaries has incurred or expects to incur any material liability (including, without limitation, additional contributions, fines, taxes or penalties) as a result of a failure to administer or operate any US Repap Plan that is a "group health plan" (as such terms is defined in Section 607(l) of ERISA or Section 5000(b)(l) of the Code) in compliance with the applicable requirements of Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code ("COBRA"); (F) no US Repap Plan provides for post-employment or retiree health, life insurance or other welfare benefits (G) neither Repap nor any of its subsidiaries has engaged in any transaction, act or omission to act in connection with any US Repap Plan that would reasonably be expected to result in the imposition of a material penalty or fine pursuant to Section 502 of ERISA, or a tax pursuant to Section 4975 of the Code; (I) the execution of this Agreement and the consummation of the transactions contemplated hereby do not constitute a triggering event under any US Repap Plan, policy, arrangement or agreement, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment, "parachute payment" (as such term is defined in Section 280G of the Code), severance, bonus, retirement or job security or similar-type benefit, or increase any benefits or accelerate the payment or vesting of any benefits to any employee or former employee or director or Repap or any of its affiliates; (J) no US Repap Plan provides for the payment of severance, termination, change in control or similar-type payments or benefits; (K) no material liability, claim, action, litigation, audit, examination, investigation or administrative proceeding has been made, commenced or, to the best knowledge or Repap, threatened with respect to any US Repap Plan (other than routine claims for benefits payable in the ordinary course) which could result in a material liability of Repap or any affiliate thereof; and (L) except as required to maintain the tax-qualified status of any US Repap Plan intended to qualify under Section 401(a) of the Code, no condition or circumstance exists that would prevent the amendment or termination of any US Repap Plan. viii. Repap has delivered or caused to be delivered to UPM or its counsel true and complete copies of each US Repap Plan, together with all amendments thereto, and, to the extent applicable, (A) all current summary plan descriptions; (B) the annual report on Internal Revenue Service Form 5500-series, including any attachments thereto, for each of the last three plan years; (C) the most recent actuarial valuation report; and (D) the most recent determination letter. Reports. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, Repap has filed with the OSC and the SEC and Repap New Brunswick Inc. has filed with the SEC, true and complete copies of all forms, reports, schedules, statements and other documents required to be filed by them since January 1, 1998 (such forms, reports, schedules, statements and other documents, including any financial statements or other documents, including any schedules included therein, are collectively referred to as the "Repap Documents"). The Repap Documents at the time filed (i) did not contain any misrepresentation of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) complied in all material respects with the requirements of applicable securities Laws. Neither Repap nor Repap New Brunswick Inc. has filed any confidential material change report with the OSC, the SEC or any other securities authority or regulator or any stock exchange or other self-regulatory authority which at the date hereof remains confidential. Compliance with Laws. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM or Publicly Disclosed by Repap, Repap and the Repap Material Subsidiaries have complied with and are not in violation of any applicable Laws, orders, judgements and decrees other than non-compliance or violations which would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Repap. Without limiting the generality of the foregoing, all securities of Repap (including all options, rights or other convertible or exchangeable securities) have been issued in compliance with all applicable securities Laws and, subject to Regulatory Approvals, all securities to be issued on or before the Effective Date upon exercise of any such options, rights and other convertible or exchangeable securities will be issued in compliance with all applicable securities Laws. Restrictions on Business Activities. There is no agreement, judgement, injunction, order or decree binding upon Repap or any subsidiary or affiliate that has or would reasonably be expected to have the effect of prohibiting, materially restricting or materially impairing any business practice of Repap or any subsidiary or affiliate, any acquisition of property by Repap or any subsidiary or affiliate or the conduct of business by Repap or any subsidiary or affiliate as currently conducted (including following the Amalgamation) other than such agreements, judgements, injunctions, orders or decrees which would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Repap. Property. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM or Publicly Disclosed by Repap, Repap and each Repap Material Subsidiary have good and sufficient title to the real property interests, including fee simple estate of and in real property, leases, easements, rights of way, permits or licences from land owners or authorities permitting the use of land by Repap or such Repap Material Subsidiary, necessary to permit the operation of their businesses as presently owned and conducted except for such failure of title that would, individually or in the aggregate, not have a Material Adverse Effect on Repap. Repap and its subsidiaries are not a party to, or under any agreement to become a party to, any lease with respect to real property which if terminated would reasonably be expected to have a Material Adverse Effect on Repap. Licences, Etc. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, Repap and each Repap Material Subsidiary owns, possesses, or has obtained and is in compliance with, all licences, permits, certificates, orders, grants and other authorizations of or from any Governmental Entity necessary to conduct its businesses as now conducted except for such failure that would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Repap. Authorizations etc. Repap and each Repap Material Subsidiary owns, possesses, or has obtained and is in compliance with any authorizations, certificates, approvals or licences of or from any Person necessary to conduct its business as now conducted except for such failures that would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Repap. Registration Rights. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, no holder of securities issued by Repap has any right to compel Repap to register or otherwise qualify such securities for public sale in Canada or the United States or elsewhere. Intellectual Property. Repap has set forth in writing in a form acceptable to UPM a complete and accurate list of all (i) registrations and applications relating to Intellectual Property which is owned by Repap or its subsidiaries; and (ii) Intellectual Property Rights and Technical Information that is licensed by Repap which is material to Repap's business and any applicable licensing agreements. Except as disclosed in writing by Repap to UPM in a form acceptable to UPM: A. Repap, or one of its subsidiaries is the exclusive beneficial owner of all right, title and interest in and to the Intellectual Property Rights and Technical Information (with no breaks in the chain of title thereof) free and clear of any claim, security interest, lien, pledge, option, charge or encumbrance of any kind whatsoever. Neither Repap nor any of its subsidiaries has transferred nor will it transfer such rights, licenses or privileges, to any other Person; B. Repap and its subsidiaries have and shall maintain all right, title and interest in and to the Intellectual Property Rights and Technical Information, including the right to use all licensed Intellectual Property Rights and Technical Information, to the extent necessary to continue to conduct its business as it has been conducted to the date hereof; C. the Intellectual Property Rights are in full force and effect and have not been used or enforced or failed to be used or enforced in a manner that would result in their abandonment, cancellation or unenforceability; D. there are no claims of adverse ownership or invalidity or other opposition to or conflicts with any of the Intellectual Property Rights and Technical Information nor any claim against Repap or any of its affiliates relating to the Intellectual Property Rights and Technical Information; E. to Repap's knowledge, the use by it and its subsidiaries of the Intellectual Property Rights and Technical Information does not breach, violate, infringe or interfere with any rights of any Person; and F. there are no claims, oppositions, conflicts, suits, proceedings, demands, actions, investigations, breaches, violations, infringements and interferences of the Intellectual Property Rights and Technical Information, and to the best of Repap's knowledge, there are no facts upon which a challenge could be made; except to the extent that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Repap; provided that, notwithstanding the foregoing, Repap makes no representation or warranty in this Section 3.1(t) with respect to the technology for making pulp known as the ALCELL® technology. Non-Arm's Length Transactions. Except as has been disclosed in writing by Repap to UPM in a form acceptable to UPM, there are no material contracts, commitments, agreements, arrangements or other transactions between Repap or any of its subsidiaries, on the one hand, and any (i) officer or director of Repap or any of its subsidiaries, (ii) any holder of record or beneficial owner of five percent or more of the securities of Repap or of the Convertible Debenture, or (iii) any affiliate or associate of any such officer, director or beneficial owner, on the other hand. Insurance. Repap and its subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks, subject to customary deductions, retentions and exclusions, as are in accordance with normal industry practice for companies engaged in businesses similar to that of Repap and its subsidiaries. Customers and Suppliers. Since January 1, 2000, there has been no termination or cancellation of, and no material adverse modification or change in, the business relationship with any customer or group of customers which individually or in the aggregate provided more than 10% of the consolidated gross revenues of Repap and its subsidiaries for the fiscal year ended on December 31, 1999. Foreign Private Issuer. Repap is a "foreign private issuer" as such term is defined in Rule 3b-4(c) of the Exchange Act. Broker's or Finder's Fee. Except for Donaldson, Lufkin & Jenrette Securities Corporation (whose fees and expenses will be paid by Repap in accordance with their agreement with such firm, a true and correct copy of which has been previously delivered to UPM), no agent, broker, Person or firm acting on behalf of Repap is, or will be, entitled to any fee, commission or broker's or finder's fees from Repap, or from any Person controlling, controlled by, or under common control with Repap, in connection with this Agreement or any of the transactions contemplated hereby. Cumulative Breach. The breaches, if any, of the representations made by Repap in this Agreement that would occur if all references in such representations to phrases concerning materiality, including references to the qualification "Material Adverse Effect" or "Material Adverse Change", were deleted, in the aggregate do not have and would not reasonably be expected to have a Material Adverse Effect on, or do not or would not reasonably be expected to amount to a Material Adverse Change in respect of, Repap. Section 3.2 Representations and Warranties of UPM UPM represents and warrants to and in favour of Repap as follows and acknowledges that Repap is relying upon such representations and warranties in connection with the matters contemplated by this Agreement: Organization. Each of UPM and Acquireco has been duly incorporated or formed under applicable Laws, is validly subsisting and has full corporate or legal power and authority to own its properties and conduct its businesses as currently owned and conducted. Capitalization. The issued capital of Acquireco consists of one common share. Authority and No Violation. i. UPM has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement by UPM and the performance by UPM of the transactions contemplated by this Agreement have been duly authorized by its Board of Directors and no other proceedings on its part are necessary to authorize this Agreement or the transactions contemplated hereby or thereby. ii. This Agreement has been duly executed and delivered by UPM and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other applicable Laws affecting creditors' rights generally, and to general principles of equity. The Amalgamation Agreement will be duly executed and delivered by Acquireco and, when so executed and delivered, will constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other applicable Laws affecting creditors' rights generally, and to general principles of equity. iii. The approval of this Agreement and the Option Agreement, the execution and delivery by UPM of this Agreement and the Option Agreement and by Acquireco of the Amalgamation Agreement and the performance by each of them of their respective obligations hereunder and thereunder and the completion of the Amalgamation and the transactions contemplated thereby, will not result (with or without notice or the passage of time) in a violation or breach of, require any consent to be obtained under or give rise to any termination, purchase or sale rights or payment obligation under any provision of: A. its certificate of incorporation, articles, by-laws or other charter documents; or; B. any Laws, judgement or decree (subject to obtaining the Regulatory Approvals relating to UPM and Repap), except to the extent that the violation or breach of, or failure to obtain any consent under, any Laws, judgement or decree would not, individually or in the aggregate, prevent, materially hinder or materially delay the completion of the transactions contemplated hereby. i. No consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity is required to be obtained by UPM in connection with the execution and delivery of this Agreement or the Option Agreement or the consummation by UPM of the transactions contemplated hereby other than (A) the Regulatory Approvals relating to UPM, and (B) any other consents, approvals, orders, authorizations, declarations or filings of or with a Governmental Entity which have been set forth in writing by UPM to Repap in a form acceptable to Repap or which, if not obtained, would not, individually or in the aggregate have a Material Adverse Effect on UPM. Necessary Funds. UPM has or has access to the funds necessary to redeem the Amalco Special Shares and the Repap Preferred Shares after they have become Amalco Preferred Shares as contemplated in this Agreement. Section 3.3 Survival The representations and warranties of Repap and UPM contained herein shall survive the execution and delivery of this Agreement and shall terminate on the earlier of the termination of this Agreement in accordance with its terms and the Effective Date. Any investigation by a party hereto or its advisors shall not mitigate, diminish or affect the representations and warranties of another party to this Agreement. ARTICLE 4 COVENANTS Section 4.1 Retention of Goodwill Until the Effective Date, Repap will continue to carry on the business of Repap and its subsidiaries in a manner consistent with prior practice, working to preserve the attendant goodwill of such entities and to contribute to retention of that goodwill to and after the Effective Date, but subject to the following provisions of this Article 4. The provisions of Section 4.2 are intended to be in furtherance of this general commitment. Section 4.2 Covenants of Repap Repap covenants and agrees that, until the Effective Date or the earlier termination of this Agreement in accordance with Article 6, except (i) with the consent of UPM to any deviation therefrom; (ii) as has been disclosed in writing by Repap to UPM in a form acceptable to UPM prior to the date hereof; or (iii) with respect to any matter expressly contemplated by this Agreement, including the transactions involving the businesses of Repap contemplated hereby, Repap will, and will cause the Repap Material Subsidiaries to: i. carry on its business in, and only in, the ordinary and regular course in substantially the same manner as heretofore conducted and, to the extent consistent with such business, use all reasonable efforts to preserve intact its present business organization and keep available the services of its present officers and employees and others having business dealings with it; ii. not split, consolidate or reclassify any of the outstanding shares of Repap nor declare, set aside or pay any dividends on or make any other distributions on or in respect of the outstanding shares of Repap; iii. not amend the articles or by-laws of Repap or materially amend the articles or by-laws of any subsidiary; iv. not sell, pledge, encumber, allot, reserve, set aside or issue, authorize or propose the sale, pledge, encumbrance, allotment, reservation, setting aside or issuance of, or purchase or redeem or propose the purchase or redemption of, any shares in its capital stock or of any Repap Material Subsidiary or any class of securities convertible or exchangeable into, or rights, warrants or options to acquire, any such shares or other convertible or exchangeable securities, except for (A) transactions between two or more wholly-owned Repap subsidiaries or between a wholly-owned subsidiary of Repap and Repap, and (B) the issuance of Repap Common Shares pursuant to fully vested and duly exercised Repap Options granted prior to the date hereof; v. except to vest any currently issued and unvested options under the Repap Stock Option Plans (unless specifically agreed to the contrary), not amend, vary or modify the Repap Stock Option Plans, or other benefits granted thereunder; vi. not reorganize, amalgamate or merge Repap or any of the Repap Material Subsidiaries with any other Person, nor acquire or agree to acquire by amalgamating, merging or consolidating with, purchasing substantially all of the assets or shares of or otherwise, any business of any corporation, partnership, association or other business organization or division thereof, which acquisition would be material to its business or financial condition on a consolidated basis; vii. except with respect to the sale of inventory of Repap or any subsidiary in the ordinary and regular course of business consistent with past practice, not sell, lease, encumber or otherwise dispose of any material assets (other than relating to transactions between two or more wholly-owned Repap subsidiaries or between a wholly-owned subsidiary of Repap and Repap); viii. use its reasonable efforts to comply promptly with all requirements which applicable Laws may impose on Repap or its subsidiaries with respect to the transactions contemplated hereby; ix. not: A. other than pursuant to existing employment, pension, supplemental pension, termination, compensation arrangements or policies, enter into or modify any employment, severance, change of control, "golden parachute" or similar agreements, policies or arrangements with, or grant any bonuses, salary increases, pension or supplemental pension benefits, profit sharing, retirement allowances, deferred compensation, incentive compensation, severance or termination pay to or any other form of compensation or with respect to any increase of benefits payable to, or make any loan to, any officers or directors of Repap or any Repap subsidiary; or B. other than in the usual, ordinary and regular course of business and consistent with past practice or pursuant to existing employment, pension, supplemental pension, termination, compensation arrangements or policies, in the case of employees who are not officers or directors of Repap or any Repap subsidiary, take any action with respect to the entering into or modification of any material employment, severance, collective bargaining or similar agreements, policies or arrangements or grant any material bonuses, salary increases, pension or supplemental pension benefits, profit sharing, retirement allowances, deferred compensation, incentive compensation, severance or termination pay or any other form of compensation or with respect to any material increase of benefits payable, or make any material loans to employees; x. not settle or compromise any claim brought by any present, former or purported holder of any of its securities in connection with the transactions contemplated by this Agreement or the prior to the Effective Date; xi. not guarantee the payment of material indebtedness or incur material indebtedness for money borrowed or issue or sell any debt securities except in the ordinary and regular course of business consistent with past practice, other than as has been disclosed in writing by Repap to UPM in a form acceptable to UPM; xii. not, except in the usual, ordinary and regular course of business and consistent with past practice: (A) satisfy or settle any claims or liabilities prior to the same being due, except such as have been reserved against in the financial statements of Repap and its subsidiaries or as has been disclosed in writing to UPM by Repap in a form acceptable to UPM, which are, individually or in the aggregate, material; (B) grant any waiver, exercise any option or relinquish any contractual rights which are, individually or in the aggregate, material; or (C) enter into any interest rate, currency or commodity swaps, hedges or other similar financial instruments; xiii. use its reasonable commercial efforts to cause its current insurance (or re-insurance) policies not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and re-insurance companies of nationally recognized standing providing coverage, subject to customary deductions, retentions and exclusions, equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect; xiv. incur or commit to capital expenditures prior to the Effective Date only in the ordinary course consistent with past practice and Repap's approved capital expenditure budget for 2000; xv. continue to defend the Berg Litigation and not enter into any settlement in respect of the Berg Litigation without the prior written consent of UPM; xvi. not make any changes to existing accounting practices relating to Repap or any Repap subsidiary, except as required by Canadian or U.S. Law or required by Canadian generally accepted accounting principles, or make any material tax election inconsistent with past practice; and xvii. promptly advise UPM orally and, if then requested, in writing: A. of any event known to it occurring subsequent to the date of this Agreement that would render any representation or warranty of Repap contained in this Agreement (except any such representation or warranty which speaks solely as of a date prior to the occurrence of such event), if made on or as of the date of such event or the Effective Date, untrue or inaccurate in any material respect; B. of any Material Adverse Change known to it in respect of Repap; and C. of any material breach by Repap known to it of any covenant or agreement contained in this Agreement; Repap shall and shall cause its subsidiaries to perform all obligations required or desirable to be performed by Repap or any of its subsidiaries under this Agreement, co-operate with UPM in connection therewith, and do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement and, without limiting the generality of the foregoing, Repap shall and where appropriate shall cause its subsidiaries to: i. use all reasonable efforts to obtain the requisite approvals of the Repap Shareholders to the Amalgamation; ii. apply for and use all reasonable efforts to obtain all Regulatory Approvals relating to Repap or any of its subsidiaries, including, without limitation, any approvals with respect to timber licences held by Repap or any of its subsidiaries required as a result of the Amalgamation and, in doing so, to keep UPM informed as to the status of the proceedings related to obtaining the Regulatory Approvals, including, but not limited to, providing UPM with copies of all related applications and notifications, in draft form, in order for UPM to provide its reasonable comments and providing UPM with copies of all material correspondence; iii. defend all lawsuits or other legal, regulatory or other proceedings to which it is a party challenging or affecting this Agreement or the consummation of the transactions contemplated hereby and not enter into any settlement of any lawsuits or such other proceedings without the prior written consent of UPM; iv. use its reasonable efforts to have lifted or rescinded any injunction or restraining order relating to Repap or other order which may adversely affect the ability of the parties to consummate the transactions contemplated hereby; v. use its reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities from Repap or any of its subsidiaries relating to the Amalgamation; vi. use its reasonable efforts to obtain all necessary waivers, consents and approvals required to be obtained by Repap or a subsidiary in connection with the Amalgamation from other parties to any material loan agreements, leases or other material contracts; and use its reasonable efforts to comply promptly with all requirements which applicable Laws may impose on Repap or its subsidiaries with respect to the transactions contemplated hereby. Section 4.3 Covenants of UPM UPM hereby covenants and agrees to and, if applicable, will cause Acquireco to, perform all obligations required or desirable to be performed by it under this Agreement, to co-operate with Repap in connection therewith, and to do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement and, without limiting the generality of the foregoing, to: apply for and use all reasonable efforts to obtain all Regulatory Approvals relating to UPM and, in doing so, to keep Repap informed as to the status of the proceedings related to obtaining the Regulatory Approvals, including, but not limited to, providing Repap with copies of all related applications and notifications, in draft form, in order for Repap to provide its reasonable comments and providing Repap with copies of all material correspondence; effect all necessary registrations, filings and submissions of information required by Governmental Entities from UPM or its subsidiaries relating to the Amalgamation; defend all lawsuits or other legal, regulatory or other proceedings to which it is a party challenging or affecting this Agreement or the consummation of the transactions contemplated hereby; use commercially reasonable efforts to have lifted or rescinded any injunction or restraining order or other order relating to UPM which may adversely affect the ability of the parties to consummate the transactions contemplated hereby; effect all necessary registrations, filings and submissions of information required by Governmental Entities from UPM or its subsidiaries relating to the Amalgamation; promptly advise Repap orally and, if then requested, in writing: i. of any event known to it occurring subsequent to the date of this Agreement that would render any representation or warranty of UPM contained in this Agreement (except any such representation or warranty which speaks solely as of a date prior to the occurrence of such event), if made on or as of the date of such event or the Effective Date, untrue or inaccurate in any material respect; and ii. of any material breach by UPM known to it of any covenant or agreement contained in this Agreement; UPM acknowledges the employment contracts (as amended) disclosed in writing by Repap to UPM in a manner acceptable to UPM, and agrees to cause Repap to comply with such contracts, as may be amended from time to time with UPM's consent; and cause Amalco to redeem the Amalco Special Shares and the Repap Preferred Shares on the Effective Date following the completion of the Amalgamation. Section 4.4 Treatment of Repap Stock Options UPM understands that Repap will provide interim financial assistance to holders of Repap Options in connection with the exercise of such Repap Options. Such financial assistance shall consist of interest free loans in an amount necessary to enable such holders of Repap Options to exercise such options. Each loan shall be secured by an assignment of the proceeds and direction of payment thereof to Repap of any disposition of the shares under option up to the amount of the loans. Furthermore, Repap shall provide lists to UPM of optionholders who will receive financial assistance, the number of options held by those holders and the exercise price(s) of their options. Section 4.5 Covenants Regarding Non-Solicitation Subject to Section 4.6, Repap shall not, directly or indirectly, through any officer, director, employee, representative (including for greater certainty any investment banker, lawyer or accountant) or agent of Repap or any of its subsidiaries, (i) solicit, initiate, knowingly encourage or otherwise facilitate (including by way of furnishing information or entering into any form of agreement, arrangement or understanding) the initiation of any inquiries or proposals regarding an Acquisition Proposal, (ii) initiate or participate in any discussions or negotiations regarding any Acquisition Proposal, (iii) approve or recommend, or propose to recommend, any Acquisition Proposal or (iv) accept or enter into any agreement, arrangement or understanding related to any Acquisition Proposal. Notwithstanding the preceding part of this Section 4.5(1) and any other provision of this Agreement, nothing shall prevent the Board of Directors of Repap from complying with Repap's disclosure obligations under applicable Laws with regard to an Acquisition Proposal or from considering, participating in any discussions or negotiations, or entering into a confidentiality agreement and providing information pursuant to Section 4.5(3) (but, subject to Section 4.6, shall not approve, recommend, accept or enter into any agreement, arrangement or understanding), regarding an unsolicited bona fide written Acquisition Proposal (a) in respect of which any required financing has been demonstrated to the satisfaction of the Board of Directors of Repap, acting in good faith, to be reasonably likely to be obtained or available, (b) that did not otherwise result from a breach of this Section 4.5 and (c) which the Board of Directors of Repap has determined in good faith, after consultation with financial advisors and outside counsel, is a Superior Proposal and that it is required to take such actions in order to comply with its fiduciary duties under applicable Laws. Repap shall, and shall cause its subsidiaries and the officers, directors, employees, representatives and agents of itself and its subsidiaries to, cease immediately all current discussions and negotiations regarding any proposal that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal, and request the return or destruction of all confidential information provided in connection therewith. Repap shall forthwith notify UPM, at first orally and then in writing, of any Acquisition Proposal and any inquiry that could lead to an Acquisition Proposal, or any amendments to the foregoing, or any request for non-public information (including requests for shareholder or noteholder lists) relating to Repap or any Repap Material Subsidiary in connection with an Acquisition Proposal or for access to the properties, books or records of Repap or any Repap Material Subsidiary by any Person. Such notice shall include a description of the material terms and conditions of any proposal, the identity of the Person making such proposal, inquiry or contact and provide such other details of the proposal, inquiry or contact as UPM may reasonably request. Repap shall keep UPM informed of the status including any change to the material terms of any such Acquisition Proposal or inquiry. If Repap receives a request for material non-public information from a Person who has made an unsolicited bona fide written Acquisition Proposal and Repap is permitted, subject to and as contemplated under the second sentence of Section 4.5(1), to negotiate the terms of such Acquisition Proposal, then, and only in such case, the Board of Directors of Repap may, subject to the execution by such Person of a confidentiality agreement containing employee non-solicitation provisions, provide such Person with access to information regarding Repap; provided, however, that Repap sends a copy of any such confidentiality agreement to UPM promptly upon its execution and UPM is provided with a list of or copies of the information provided to such Person and promptly provided with access to similar information to which such Person was provided. Repap shall ensure that its officers, directors and employees and its subsidiaries and their officers, directors and employees and any financial advisors or other advisors or representatives retained by it or its subsidiaries are aware of the provisions of this Section 4.5, and Repap shall be responsible for any breach of this Section 4.5 by its and its subsidiaries' officers, directors, employees, representatives or agents. Section 4.6 Notice by Repap of Superior Proposal Determination Notwithstanding Sections 4.5(1), (2) and (3), but subject to UPM's rights under Sections 6.3(3)(c) and 6.4, Repap may accept, approve, recommend or enter into any agreement, understanding or arrangement in respect of an unsolicited Superior Proposal if, and only if: (i) it has provided UPM with a copy of the Superior Proposal document; and (ii) five calendar days (the "Match Period") shall have elapsed from the later of the date UPM received written notice advising UPM that Repap's Board of Directors has resolved, subject only to compliance with this Section 4.6, to accept, approve, recommend or enter into an agreement, understanding or arrangement in respect of such Superior Proposal and the date UPM received a copy of such Superior Proposal. In the event that Repap provides UPM with the notice contemplated in this Section on a date that is less than seven calendar days prior to the Repap Meeting, Repap shall adjourn the Repap Meeting to a date that is not less than seven calendar days and not more than 10 calendar days after the date of such notice. Any information provided by Repap to UPM pursuant to this Section 4.6 or pursuant to Section 4.5 shall constitute "Information" under Section 4.7(2). During the Match Period, Repap agrees that UPM shall have the right, but not the obligation, to offer to amend the terms of this Agreement. The Board of Directors of Repap will review any offer by UPM to amend the terms of this Agreement in good faith in order to determine, in its discretion in the exercise of its fiduciary duties, whether UPM's offer upon acceptance by Repap would result in such Superior Proposal ceasing to be a Superior Proposal. If the Board of Directors of Repap so determines, it will enter into an amended agreement with UPM reflecting UPM's amended proposal. If the Board of Directors of Repap continues to believe, in good faith, after consultation with its financial advisors and outside counsel, that such Superior Proposal remains a Superior Proposal and therefore rejects UPM's amended proposal, Repap may approve, recommend, accept or enter into an agreement, understanding or arrangement with respect to the Superior Proposal, provided that such acceptance or agreement does not obligate Repap or any other Person to seek to interfere with the timing or the holding of the Repap Meeting to consider whether to approve the Amalgamation or to provide for any "break", "hello" or other fees or options or rights to acquire assets or securities or any other obligations of Repap or any subsidiary that would be payable or apply if the Amalgamation occurs. In addition, in such circumstances, Repap may proceed with such approvals, consents, filings of or required by Governmental Entities and such other Persons as Repap shall consider appropriate in order to consummate such Superior Proposal, provided that such activity does not interfere with the timing or the holding of the Repap Meeting to consider whether to approve the Amalgamation. If as a result of the application of this Section there is another Acquisition Proposal to be considered at the Repap Meeting, Repap will act fairly in connection with the order of presentation, signage, proxy forms and other matters related thereto. Subject to Section 4.6(l), nothing contained in this Section 4.6 shall limit in any way the obligation of Repap to convene and hold the Repap Meeting in accordance with Section 2.1 of this Agreement. Repap acknowledges and agrees that each successive material amendment to any Acquisition Proposal shall constitute a new Acquisition Proposal for purposes of the requirement under clause (ii) of Section 4.6(1) to initiate an additional Match Period. Section 4.7 Access to Information Subject to Section 4.7(2) and applicable Laws, upon reasonable notice, Repap shall (and shall cause each of its subsidiaries to) afford UPM's officers, employees, counsel, accountants and other authorized representatives and advisors (" Representatives") access, during normal business hours from the date hereof and until the earlier of the Effective Date or the termination of this Agreement, to its and its subsidiaries' properties, books, contracts and records as well as to its management personnel, and, during such period, Repap shall (and shall cause each of its subsidiaries to) furnish promptly to UPM all information concerning Repap's and its subsidiaries' businesses, properties and personnel as UPM may reasonably request; provided, however, that neither Repap nor any of its subsidiaries shall be required to disclose trade secrets, breach confidentiality obligations or waive solicitor-client privilege. UPM acknowledges that certain information provided to it under Section 4.7(1) above will be non-public and/or proprietary in nature (the "Information") and will be subject to the terms for confidentiality set forth in Schedule D hereto. For greater certainty, the provisions of Schedule D shall survive the termination of this Agreement for the periods set forth in Schedule D, provided that Schedule D and Section 4.7(1) shall terminate at the Effective Date notwithstanding anything to the contrary contained therein. Section 4.8 Closing Matters Each of UPM and Repap shall deliver, at the closing of the transactions contemplated hereby, such customary certificates, resolutions and other closing documents as may be required by the other party hereto, acting reasonably. Section 4.9 Indemnification UPM agrees that all rights to indemnification or exculpation now existing in favour of the current and former directors or officers of Repap or any subsidiary as provided in its articles or by-laws or by contract or otherwise shall survive the Amalgamation and shall continue in full force and effect for a period of not less than six years from the Effective Date. UPM hereby irrevocably and unconditionally guarantees the obligations of Repap in favour of such directors or officers, whether or not they remain in office, and Repap shall hold the benefit of such obligations in favour of such persons. There shall be maintained in effect, for not less than six years from the Effective Date, coverage substantially equivalent to that in effect under the current policies of the directors' and officers' liability insurance maintained by Repap or any of its subsidiaries, as the case may be, which is no less advantageous, and with no gaps or lapses in coverages with respect to matters occurring prior to the Effective Date. Alternatively, at UPM's option, it may cause Repap to purchase "run-off" directors' and officers' liability insurance providing coverage as favourable to such directors and officers as that in effect under such current policies to cover prior events during such six year period or the balance thereof. ARTICLE 5 CONDITIONS Section 5.1 Mutual Conditions Precedent The respective obligations of the parties hereto to complete the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Effective Date, of the following conditions precedent, each of which may only be waived by the mutual consent of UPM and Repap: a. the Amalgamation shall have been approved at the Repap Meeting by not less than two-thirds of the votes cast by the Repap Shareholders voting together and by not less than two-thirds of the votes cast by the holders of Repap Common Shares; b. there shall not be in force any final and non-appealable injunction, order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement and there shall be no proceeding, of a judicial or administrative nature or otherwise, brought by a Governmental Entity in progress or threatened that relates to or results from the transactions contemplated by this Agreement that would, if successful, result in an order or ruling that would preclude completion of the transactions contemplated by this Agreement in accordance with the terms hereof; c. this Agreement shall not have been terminated pursuant to Article 6; d. other than the Regulatory Approvals, all consents, waivers, permits, orders and approvals of any Governmental Entity, and the expiry of any waiting periods, in connection with, or required to permit, the consummation of the Amalgamation, the failure of which to obtain or the non-expiry of which would constitute a violation of applicable Laws, or would have a Material Adverse Effect on UPM or Repap, as the case may be, shall have been obtained or received on terms that will not have a Material Adverse Effect on UPM and/or Repap; there shall not be pending or threatened any suit, action or proceeding by any Governmental Entity: (i) seeking to prohibit or restrict the acquisition by UPM or any of its subsidiaries of any Repap Common Shares or Repap Options, seeking to restrain or prohibit the consummation of the Amalgamation or seeking to obtain from Repap or UPM any damages directly or indirectly in connection with the Amalgamation, (ii) seeking to prohibit or materially limit the ownership or operation by UPM or any of its subsidiaries of any material portion of the business or assets of Repap or any of its subsidiaries or to compel UPM or any of its subsidiaries to dispose of or hold separate any portion of the business or assets of Repap or any of its subsidiaries, (iii) seeking to impose limitations on the ability of UPM or any of its subsidiaries to acquire or hold, or exercise full rights of ownership of, any Repap Common Shares, including the right to vote the Repap Common Shares purchased by them on all matters properly presented to the shareholders of Repap, (iv) seeking to prohibit UPM or any of its subsidiaries from effectively controlling in any material respect the business or operations of Repap or any of its subsidiaries or (v) which otherwise is reasonably likely to have a Material Adverse Effect on Repap or UPM; and e. the Regulatory Approvals shall have been obtained or satisfied on terms and conditions satisfactory to UPM, acting reasonably. Section 5.2 Additional Conditions Precedent to the Obligations of UPM The obligations of UPM to complete the transactions contemplated by this Agreement shall also be subject to the fulfilment of each of the following conditions precedent (each of which is for UPM's exclusive benefit and may be waived by UPM): a. all covenants of Repap under this Agreement to be performed on or before the Effective Date shall have been duly performed by Repap in all material respects; b. the representations and warranties of Repap under this Agreement shall have been true and correct in all material respects on the date hereof; c. the representations and warranties of Repap under this Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak solely as of an earlier date, in which event such representations and warranties shall be true and correct to such extent as of such earlier date, or except as affected by transactions contemplated or permitted by this Agreement), and UPM shall have received a certificate of Repap addressed to UPM and dated the Effective Date, signed on behalf of Repap by two senior executive officers of Repap (on Repap's behalf and without personal liability), confirming the same as at the Effective Date; d. the Board of Directors of Repap shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Repap and the subsidiaries to permit the consummation of the Amalgamation; e. between the date hereof and the Effective Date, there shall not have occurred a Material Adverse Change to Repap; f. the holders of Repap Common Shares representing in excess of 15% of the outstanding Repap Common Shares shall not have exercised Dissent Rights or similar rights in connection with the Amalgamation; and g. all outstanding options or other rights or entitlements of any type whatsoever to purchase or otherwise acquire authorized and unissued Repap Common Shares, other than pursuant to the Convertible Debenture, shall have been exercised in full or irrevocably released, surrendered and waived by the holders thereof. (2) UPM may not rely on the failure to satisfy any of the above conditions precedent if the condition precedent would have been satisfied but for a material default by UPM in complying with its obligations hereunder. Section 5.3 Additional Conditions Precedent to the Obligations of Repap The obligations of Repap to complete the transactions contemplated by this Agreement shall also be subject to the following conditions precedent (each of which is for the exclusive benefit of Repap and may be waived by Repap): a. all covenants of UPM under this Agreement to be performed on or before the Effective Date shall have been duly performed by UPM in all material respects; b. all representations and warranties of UPM under this Agreement shall have been true and correct in all material respects on the date hereof; c. the representations and warranties of UPM under this Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak solely as of an earlier date, in which event such representations and warranties shall be true and correct to such extent as of such earlier date, or except as affected by transactions contemplated or permitted by this Agreement), and Repap shall have received a certificate of UPM addressed to Repap and dated the Effective Date, signed on behalf of UPM by two senior executive officers of UPM (on UPM's behalf and without personal liability), confirming the same as at the Effective Date; and d. the Board of Directors of UPM shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Acquireco to permit the consummation of the Amalgamation. 1. Repap may not rely on the failure to satisfy any of the above conditions precedent if the condition precedent would have been satisfied but for a material default by Repap in complying with its obligations hereunder. Section 5.4 Notice and Cure Provisions UPM and Repap will give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof until the Effective Date, of any event or state of facts which occurrence or failure would, or would be likely to: a. cause any of its representations or warranties contained herein to be untrue or inaccurate on the date hereof or on the Effective Date; or b. result in the failure in any material respect to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder prior to the Effective Date. 1. Neither UPM nor Repap may seek to rely upon any conditions precedent contained in Sections 5.1, 5.2 or 5.3, or exercise any termination right arising therefrom, unless forthwith and in any event prior to the filing of the Articles of Amalgamation for acceptance by the Director, UPM or Repap, as the case may be, has delivered a written notice to the other specifying in reasonable detail all breaches of covenants, representations and warranties or other matters which UPM or Repap, as the case may be, are asserting as the basis for the non-fulfilment of the applicable condition precedent or the exercise of the termination right, as the case may be. If any such notice is delivered, provided that Repap or UPM, as the case may be, is proceeding diligently to cure such matter, if such matter is susceptible to being cured (for greater certainty, except by way of disclosure in the case of representations and warranties), the other may not terminate this Agreement as a result thereof until the later of the 30 days prior to the Outside Date and the expiration of a period of 30 days following such notice. If such notice has been delivered prior to the date of the Repap Meeting, such meetings shall, unless the parties agree otherwise, be postponed or adjourned until the expiry of such period. If such notice has been delivered prior to the filing of the Articles of Amalgamation with the Director, such filing shall be postponed until two Business Days after the expiry of such period. For greater certainty, in the event that such matter is cured within the time period referred to herein without a Material Adverse Effect on the curing party, this Agreement may not be terminated solely as a result of the cured breach. Section 5.5 Satisfaction of Conditions. The conditions precedent set out in Sections 5.1, 5.2 and 5.3 shall be conclusively deemed to have been satisfied, waived or released when, with the agreement of UPM and Repap, a Certificate of Amalgamation in respect of the Amalgamation is issued by the Director. ARTICLE 6 AMENDMENT AND TERMINATION Section 6.1 Amendment This Agreement and the Amalgamation Agreement may, at any time and from time to time before or after the holding of the Repap Meeting but not later than the Effective Date, be amended by mutual written agreement of the parties hereto, and any such amendment may, subject to applicable Laws, without limitation: a. change the time for performance of any of the obligations or acts of the parties; b. waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto; c. waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the parties; and/or d. waive compliance with or modify any conditions precedent herein contained. Section 6.2 [Intentionally Deleted] Section 6.3 Termination If any condition contained in Sections 5.1 or 5.2 is not satisfied at or before the Effective Date, then UPM may, subject to Section 5.4 and to Section 5.2(2) in the case of Section 5.2, by notice to Repap terminate this Agreement and the obligations of the parties hereunder (except as otherwise herein provided, including under Section 6.4), but without detracting from the rights of UPM arising from any breach by Repap but for which the condition would have been satisfied. If any condition contained in Sections 5.1 or 5.3 is not satisfied at or before the Effective Date, then Repap may, subject to Section 5.4 and to Section 5.3(2) in the case of Section 5.3, by notice to UPM terminate this Agreement and the obligations of the parties hereunder (except as otherwise herein provided, including under Section 6.4), but without detracting from the rights of Repap arising from any breach by UPM but for which the condition would have been satisfied. This Agreement may: a. be terminated by the mutual agreement of Repap and UPM (for greater certainty, without further action on the part of the Repap Shareholders if terminated after the holding of the Repap Meeting); b. be terminated by either Repap or UPM if there shall be passed any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; c. be terminated by UPM if (i) the Board of Directors of Repap shall have failed to recommend or shall have withdrawn, modified or changed in a manner adverse to UPM its approval or recommendation of this Agreement, the Amalgamation or the Amalgamation Resolution (unless the Repap Shareholders shall have approved the Amalgamation Resolution prior to such termination, or (ii) the Board of Directors of Repap shall have approved or recommended any Acquisition Proposal; or d. be terminated by either UPM or Repap if the Repap Shareholder approval shall not have been obtained by reason of the failure to obtain the required vote at the Repap Meeting; in each case, prior to the Effective Date. 1. If the Effective Date does not occur on or prior to the Outside Date, then, unless otherwise agreed in writing by the parties, this Agreement shall terminate. 2. If this Agreement is terminated in accordance with the foregoing provisions of this Section 6.3, no party shall have any further liability to perform its obligations hereunder except as provided in Section 6.4, Schedule D and as otherwise expressly contemplated hereby, and provided that neither the termination of this Agreement nor anything contained in this Section 6.3(5) shall relieve any party from any liability for any breach by it of this Agreement or Schedule D, including from any inaccuracy in its representations and warranties and any non-performance by it of its covenants made herein. Section 6.4 Break and Other Fees; Option If: a. (i) UPM shall terminate this Agreement pursuant to Section 6.3(3)(c); or (ii) either Repap or UPM shall terminate this Agreement pursuant to Section 6.3(1) or (2) as a result of the failure to satisfy the conditions specified in either Section 5.1(a) or Section 5.1(b) in circumstances where the requisite Repap Shareholder approval has not been obtained at the Repap Meeting or if either Repap or UPM shall terminate this Agreement pursuant to Section 6.3(3)(d); and b. (i) an Acquisition Proposal has been made, publicly announced or otherwise publicly disclosed by any Person other than UPM prior to the Repap Meeting; or (ii) the prospect of there being an Acquisition Proposal has been disclosed to holders of more than 20 percent of the Repap Shares prior to or during the Repap Meeting, Repap Shareholder approval of the Amalgamation is not obtained at the Repap Meeting and an Acquisition Proposal is made, publicly announced or otherwise publicly disclosed, prior to the expiration of six months following termination of this Agreement; and c. such Acquisition Proposal is consummated; then in any such case Repap shall pay to UPM $18 million (the "Break Fee") in immediately available funds to an account designated by UPM. Such payment shall be due concurrently with the consummation of an Acquisition Proposal. Repap shall not be obligated to make more than one payment pursuant to this Section 6.4(1). 1. On the date hereof, Repap granted to UPM the option to purchase Repap Common Shares upon the terms and subject to the conditions contained in the Option Agreement, a copy of which is attached as Schedule E. Section 6.5 Remedies Subject to Section 6.5(2), the parties hereto acknowledge and agree that an award of money damages would be inadequate for any breach of this Agreement by any party or its representatives and either such breach would cause the non-breaching party irreparable harm. Accordingly, the parties hereto agree that, in the event of any breach or threatened breach of this Agreement by one of the parties, the non-breaching party will also be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or equity to each of the parties. The parties agree that if Repap pays to UPM amounts required by Section 6.4(1) as a result of the occurrence of any of the events referenced in Section 6.4(1), UPM shall have no other remedy for any breach of this Agreement by Repap. ARTICLE 7 GENERAL Section 7.1 Notices All notices and other communications which may or are required to be given pursuant to any provision of this Agreement shall be given or made in writing and shall be deemed to be validly given if served personally or by facsimile, in each case addressed to the particular party at: a. If to UPM, at: UPM Kymmene Group Eteläesplanadi 2 P.O. Box 380 FIN-00101 Helsinki, Finland Attention: Reko Aalto-Setälä Facsimile No.: (358) 204 15 0304 with a copy to: Osler, Hoskin & Harcourt LLP P.O. Box 50 1 First Canadian Place Toronto, Ontario M5X 1B8 Attention: Dale Ponder Facsimile No.: (416) 862-6666 and with a copy to: White & Case LLP 1155 Avenue of the Americas New York, New York 10036 Attention: Timothy B. Goodell Facsimile No.: (212) 354-8113 b. If to Repap at: Repap Enterprises Inc. 300 Atlantic Street, Suite 200 Stamford, Connecticut 07901 Attention: Stephen Larson Facsimile No.: (203) 964-6183 with a copy to: Stikeman Elliott 1155 René-Lévesque Blvd. W. 40th Floor Montréal, Québec H3B 3V2 Attention: Pierre Raymond Facsimile No.: (514) 397-3222 and with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attention: Andrew Soussloff Facsimile No.: (212) 558-3588 or at such other address of which any party may, from time to time, advise the other party by notice in writing given in accordance with the foregoing. The date of receipt of any such notice shall be deemed to be the date of delivery or facsimile transmission thereof if prior to 5:00 p.m. local time on a Business Day in place of delivery or receipt, and if not received on a Business Day or after 5:00 p.m. on a Business Day then the date of receipt shall be deemed to be the next Business Day. Notice to the persons to be copied hereunder is not proper notice to the primary recipients. Section 7.2 Assignment No party hereto may assign its rights or obligations under this Agreement or the Amalgamation Agreement, except that UPM may assign all or part of its rights or obligations to a wholly-owned subsidiary thereof, provided that UPM remains jointly and severally liable hereunder with such wholly-owned subsidiary. Section 7.3 Binding Effect This Agreement shall be binding upon and shall enure to the benefit of the parties hereto and their respective successors and permitted assigns and no third party shall have any rights hereunder. Section 7.4 Waiver and Modification Each of Repap and UPM may waive or consent to the modification of, in whole or in part, any inaccuracy of any representation or warranty made to it hereunder or in any document to be delivered pursuant hereto and may waive or consent to the modification of any of the covenants herein contained for its respective benefit or waive or consent to the modification of any of the obligations of the other party hereto. Any waiver or consent to the modification of any of the provisions of this Agreement, to be effective, must be in writing executed by the party granting such waiver or consent. Section 7.5 Further Assurances Each party hereto shall, from time to time, and at all times hereafter, at the request of the other parties hereto, but without further consideration, do all such further acts and execute and deliver all such further documents and instruments as shall be reasonably required in order to fully perform and carry out the terms and intent hereof. Section 7.6 Expenses Subject to Section 6.4, the parties agree that all out-of-pocket expenses of the parties relating to the Amalgamation and the transactions contemplated hereby, including legal fees, accounting fees, financial advisory fees, regulatory filing fees, stock exchange fees, all disbursements of advisors and printing and mailing costs, shall be paid by the party incurring such expenses. Repap represents and warrants to UPM that, except for any amounts owing to those financial advisers referred to in Section 3.1(c)(iii) by Repap pursuant to and in accordance with the terms of written and executed agreements existing as at the date hereof and disclosed to UPM prior to the date hereof, no broker, finder or investment banker is or will be entitled to any brokerage, finder's or other fee or commission from Repap or any subsidiary of Repap in connection with the transactions contemplated hereby. Section 7.7 Consultation UPM and Repap agree to consult with each other as to the general nature of any news releases or public statements with respect to this Agreement or the transactions contemplated hereby, and to use their respective reasonable efforts not to issue any news releases or public statements inconsistent with the results of such consultations. Subject to applicable Laws, each party shall use its reasonable efforts to enable the other parties to review and comment on all such news releases prior to the release thereof. The parties agree to issue jointly the news release in the agreed form with respect to the Amalgamation as soon as practicable following the execution of this Agreement. UPM and Repap also agree to consult with each other in preparing and making any filings and communications in connection with any Regulatory Approvals or other regulatory approvals and in seeking any third party consents under leases, or other agreements. Section 7.8 Governing Laws This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated in all respects as a Ontario contract. Each party hereby irrevocably attorns to the jurisdiction of the courts of the Province of Ontario in respect of all matters arising under or in relation to this Agreement. Section 7.9 Time of Essence Time shall be of the essence in this Agreement. Section 7.10 Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF the parties hereto have executed this Acquisition Agreement as of the date first written above. UPM-KYMMENE CORPORATION By: "Juha Niemelä" Authorized Signing Officer By: "Reko Aalto-Setälä" Authorized Signing Officer   REPAP ENTERPRISES INC. By: "Harold (Hap) Stephen" Authorized Signing Officer     SCHEDULE A AMALGAMATION AGREEMENT THIS AMALGAMATION AGREEMENT is made as of l, 2000 BETWEEN: REPAP ENTREPRISES INC., a corporation existing under the Canada Business Corporations Act ("Repap") - and -   3796477 CANADA INC. , a corporation incorporated under the Canada Business Corporations Act ("Acquireco") RECITALS:   A. Repap and Acquireco have agreed to amalgamate pursuant to the Canada Business Corporations Act and upon the terms and conditions set forth in this Agreement; B. The authorized capital of Repap consists of an unlimited number of Repap Common Shares and an unlimited number of Preferred Shares of which, as of the date hereof, there are 743,960,637 Repap Common Shares (and no more) and 240,000 Preferred Shares, Series C and 400,000 Preferred Shares, Series F (and no more) and no Preferred Shares of any other series, issued and outstanding; C. The authorized capital of Acquireco consists of an unlimited number of common shares; and D. It is desirable that this amalgamation be effected.     NOW THEREFORE in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged) the parties agree as follows: 1. Interpretation   In this Agreement:   "Acquireco Common Shares" means the common shares in the capital of Acquireco;   "Act" means the Canada Business Corporations Act;   "Affiliate" means an affiliated body corporate within the meaning of section 1(2) of the Act;   "Agreement" means this amalgamation agreement, and the expressions "hereof", "herein", "hereto", "hereunder", "hereby" and similar expressions refer to this agreement;   "Amalco" means the corporation continuing as a result of the Amalgamation;   "Amalco Class A Redeemable Preferred Shares" means the Class A redeemable preferred shares in the capital of Amalco having the rights, privileges, restrictions and conditions set forth in Schedule 1.   "Amalco Class B Preferred Shares" means the Class B preferred shares in the capital of Amalco, issuable in series, having the rights, privileges, restrictions and conditions set forth in Schedule 1;   "Amalco Class B Preferred Shares, Series C" means the Class B preferred shares, series C in the capital of Amalco having the rights, privileges, restrictions and conditions set forth in Schedule 1;   "Amalco Class B Preferred Shares, Series F" means the Class B preferred shares, Series F in the capital of Amalco having the rights, privileges, restrictions and conditions set forth in Schedule 1;   "Amalco Common Shares" means the common shares in the capital of Amalco having the rights, privileges, restrictions and conditions set forth in Schedule 1;   "Amalgamating Corporations" means Repap and Acquireco;   "Amalgamation" means the amalgamation of the Amalgamating Corporations as contemplated in this Agreement;   "Business Day" means any day on which commercial banks are generally open for business in Toronto, Ontario and Helsinki, Finland other than a Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario or in Helsinki, Finland under applicable laws;   "Dissenting Shareholder" means a registered holder of Repap Shares who, in connection with the special resolution of the shareholders which approves and adopts this Agreement, has exercised the right to dissent under section 190 of the Act in compliance with the provisions thereof and thereby becomes entitled to receive the fair value of his or her Repap Shares;   "Effective Date" means the date shown on the certificate of amalgamation to be issued by the Director under the Act giving effect to the Amalgamation;   "Record Date" means the record date for the Meeting;   "Redemption Consideration" means Cdn. $.20 per Amalco Class A Redeemable Preferred Share; and   "Redemption Date" means the Effective Date;   "Repap Common Shares" means the common shares in the capital of Repap;   "Repap Meeting" means the special meeting of Repap shareholders to be held to consider the approval of the special resolution which approves and adopts this Agreement;   "Repap Preferred Shares, Series C" means the preferred shares, series C in the capital of Repap ;   "Repap Preferred Shares, Series F" means the preferred shares, series F in the capital of Repap;   "Repap Shares" means the Repap Common Shares, Repap Preferred Shares, Series C and Repap Preferred Shares, Series F. Words and phrases used but not defined in this Agreement and defined in the Act shall have the same meaning in this Agreement as in the Act unless the context or subject matter otherwise requires. 2. Agreement to Amalgamate The Amalgamating Corporations hereby agree to amalgamate as of the Effective Date and to continue as one corporation on the terms and conditions set out in this Agreement. 3. Name The name of Amalco shall be 3796477 Canada Inc. 4. Registered Office The registered office of Amalco shall be c/o Osler, Hoskin & Harcourt LLP, P.O. Box 50, 1 First Canadian Place, Toronto, Ontario, M5X 1B8. 5. Authorized Capital Amalco shall be authorized to issue an unlimited number of Amalco Common Shares, an unlimited number of Amalco Class A Redeemable Preferred Shares and an unlimited number of Amalco Class B Preferred Shares, issuable in series. The rights, privileges, restrictions and conditions attaching to each class of shares of Amalco shall be as described in Schedule 1 to this Agreement. 6. Private Company Restrictions Effective immediately upon UPM-Kymmene Corporation becoming the sole holder of shares of Amalco:   (a) the right to transfer shares of Amalco shall be restricted in that no share shall be transferred except with the consent of the board of directors of Amalco, to be expressed either by a resolution passed at a meeting of the board of directors or by an instrument or instruments in writing signed by a majority of the directors; and   (b) the number of shareholders of Amalco, exclusive of persons who are in its employment or the employment of an affiliate and exclusive of persons who, having been formerly in the employment of Amalco were, while in that employment, and have continued after the termination of that employment to be, shareholders of Amalco, shall be limited to not more than fifty. Two or more persons who are the joint registered owners of one of more shares shall be counted as one shareholder. Any invitation to the public to subscribe for securities of Amalco is prohibited. For the purposes hereof, the issuance of Amalco Class A Redeemable Preferred Shares, Amalco Class B Preferred Shares and Amalco Common Shares upon the Amalgamation shall not constitute an invitation to the public to subscribe for securities of Amalco. 7. Restrictions on Business There shall be no restrictions on the business which Amalco is authorized to carry on. 8. Number of Directors The board of directors of Amalco shall, until otherwise changed in accordance with the Act, consist of a minimum number of one and a maximum number of [5] directors. The number of directors of Amalco shall initially be [3] and the directors of Amalco shall be empowered to determine from time to time the number of directors of Amalco within the said minimum and maximum numbers provided for in the Articles of Amalco, as the same may be amended from time to time. 9. Initial Directors The first directors of Amalco shall be the persons whose names and residential addresses appear below; Name l Municipality of Residence l Resident Canadian [yes/no] Such directors shall hold office until the next annual meeting of shareholders of Amalco or until their successors are elected or appointed. 10. By-Laws The by-laws of Amalco, until repealed, amended or altered, shall be the by-laws of Repap. 11. Amalgamation   On the Effective Date:   (a) each issued and outstanding Repap Common Share (other than those held by Dissenting Shareholders and other than those held by Acquireco, if any) will be converted into one Amalco Class A Redeemable Preferred Share;   (b) each issued and outstanding Repap Common Share held by Acquireco will be cancelled;   (c) each issued and outstanding Acquireco Common Share will be converted into one Amalco Common Share;   (d) each issued and outstanding Repap Preferred Share, Series C will be converted into one Amalco Class B Preferred Share, Series C;   (e) each issued and outstanding Repap Preferred Share, Series F will be converted into one Amalco Class B Preferred Share, Series F; and   (f) Dissenting Shareholders will be entitled to be paid the fair value of their Common Shares. 12. Stated Capital Accounts There shall be added to the stated capital account in the accounting records of Amalco maintained for:   (a) the Amalco Class A Redeemable Preferred Shares, an amount equal to the number of Amalco Class A Redeemable Preferred Shares issued on the Amalgamation multiplied by Cdn. $.20;   (b) the Amalco Class B Preferred Shares, Series C, an amount equal to the aggregate stated capital of each Repap Preferred Share, Series C changed into an Amalco Class B Preferred Share, Series C on the Amalgamation;   (c) the Amalco Class B Preferred Shares, Series F, an amount equal to the aggregate stated capital of each Repap Preferred Share, Series F changed into an Amalco Class B Preferred Share, Series F on the Amalgamation; and   (d) the Amalco Common Shares, an amount equal to the amount by which the aggregate stated capital attributable to the Repap Common Shares (other than those held by Acquireco, if any) and the Acquireco Common Shares exceeds the amount added to the stated capital account maintained for the Amalco Class A Redeemable Preferred Shares in accordance with this section. The amount of stated capital attributable to the Amalco Common Shares shall be adjusted to reflect payments that may be made to Dissenting Shareholders. 13. Share Certificates No certificates shall be issued in respect of the Amalco Class A Redeemable Preferred Shares and such shares shall be evidenced by the certificates representing Repap Common Shares. No certificates shall be issued in respect of the Amalco Class B Preferred Shares, Series C or the Amalco Class B Preferred Shares, Series F and such shares shall be evidenced by certificates representing Repap Preferred Shares, Series C and Repap Preferred Shares, Series F respectively. 14. Contribution of Assets Each of Repap and Acquireco shall contribute to Amalco all its assets, subject to its liabilities, as such exist immediately before the Effective Date. 15. Property of Amalco Amalco shall posses all the property, rights, privileges and franchises and shall be subject to all the liabilities, contracts, disabilities and debts of each of the Amalgamating Corporations as such exist immediately before the Effective Date. 16. Rights of Creditors All rights of creditors against property, rights and assets of each of the Amalgamating Corporations and all liens upon their property, rights and assets shall be unimpaired by the Amalgamation and all debts, contracts, liabilities and duties of each of the Amalgamating Corporations shall thenceforth attach to Amalco and may be enforced against it. 17. General Conditions Precedent The respective obligations of the parties hereto to consummate the transactions contemplated hereby, and in particular the Amalgamation, are subject to the satisfaction, on or before the Effective Date, of the following conditions any of which may be waived by the mutual consent of such parties without prejudice to their rights to rely on any other or others of such conditions:   (a) this Agreement and the transactions contemplated hereby, including in particular the Amalgamation, shall have been approved by:   (i) the common shareholder of Acquireco; and   (ii) not less than two-thirds of the votes cast by the holders of Repap Shares who, being entitled to do so, vote in person or by proxy at the Repap Meeting in accordance with the provisions of the Act and in accordance with other applicable regulatory requirements; and   (b) there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement, including, without limitation, the Amalgamation. 18. Termination This Agreement may, prior to the issuance of a certificate of Amalgamation, be terminated by the board of directors of Repap or Acquireco notwithstanding the approval thereof by the shareholders of Repap and Acquireco. 19. Dissenting Shareholders Repap Shares which are held by a Dissenting Shareholder shall not be converted into Amalco Class A Redeemable Preferred Shares. However, in the event that a holder of Repap Shares fails to perfect or effectively withdraws such shareholder's claim under section 190 of the Act or forfeits such shareholder's rights to make a claim under section 190 of the Act or his rights as a shareholder of Repap are otherwise reinstated, (i) such shareholder's Repap Common Shares shall thereupon be deemed to have been converted as of the Effective Date into Amalco Class A Redeemable Preferred Shares, (ii) such shareholder's Repap Preferred Shares, Series C shall thereupon be deemed to have been converted as of the Effective Date into Amalco Class B Preferred Shares, Series C and (iii) such shareholder's Repap Preferred Shares, Series F shall thereupon be deemed to have been converted as of the Effective Date into Amalco Class B Preferred Shares, Series F, in each case, on the basis set forth in paragraph 11 hereof. 20. Filing Documents Upon the shareholders of each of the Amalgamating Corporations approving this Agreement by special resolution in accordance with the Act and subject to the other provisions of this Agreement, the Amalgamating Corporations shall jointly file with the Director under the Act articles of amalgamation and such other documents as may be required. 21. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 22. Counterparts This Agreement may be signed in counterparts and each such counterpart shall constitute an original document and such counterparts, taken together, shall constitute one and the same instrument.                 IN WITNESS WHEREOF the parties have executed this Agreement. REPAP ENTERPRISES INC. By: _______________________________ Authorized Signing Officer 3796477 CANADA INC. By: _______________________________ Authorized Signing Officer SCHEDULE B SPECIAL RESOLUTION OF THE REPAP SHAREHOLDERS RESOLVED AS A SPECIAL RESOLUTION THAT: 1. The amalgamation (the "Amalgamation") of Repap (the "Corporation") and 3796477 Canada Inc. ("Acquireco") under section 181 of the Canada Business Corporations Act, as more particularly described and set forth in the Management Information Circular (the "Circular") of Repap accompanying the notice of this meeting is hereby authorized and approved upon the terms and conditions set forth in the acquisition agreement (the "Acquisition Agreement") dated as of August 28, 2000 between the Corporation and UPM-Kymmene Corporation, the full text of which is set forth in Schedule l to the Circular; 2. The amalgamation agreement between the Corporation and Acquireco dated l , 2000, in the form set forth in Schedule A to the Acquisition Agreement, is hereby approved; 3. The board of directors of the Corporation is hereby authorized to revoke this resolution at any time prior to the Amalgamation becoming effective without further approval of the shareholders of the Corporation and to determine not to proceed with the Amalgamation; and 4. The directors and proper officers of the Corporation are hereby authorized to take all such steps as they deem necessary or desirable in connection with the Amalgamation of the Corporation and Acquireco. SCHEDULE C REGULATORY APPROVALS Canada * expiration or earlier termination of the waiting period under Part IX of the Competition Act (Canada) and receipt of an advance ruling certificate ("ARC") pursuant to the Competition Act (Canada) or, in the alternative to an ARC, a no-action letter from the Commissioner of Competition * determination by the Minister responsible for Investment Canada under the Investment Canada Act (Canada) that the Amalgamation is of "net benefit to Canada" for purposes of such Act on terms and conditions satisfactory to UPM, acting reasonably * any required government consents with respect to Crown timber licenses and agreements to which Repap or any of its affiliates is a party * approval for the listing of the Repap Common Shares issuable upon the exercise of the Option by The Toronto Stock Exchange United States expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 SCHEDULE D CONFIDENTIALITY PROVISIONS In connection with UPM's interest in the acquisition of Repap (the "Transaction"), Repap and Repap's affiliates are furnishing UPM or UPM's representatives with certain information which is either non-public, confidential or proprietary in nature. This information furnished to UPM or UPM's representatives, together with analyses, compilations, forecasts, studies or other documents prepared by UPM, its agents, representatives (including lawyers, accountants and financial advisors) or employees which contain or otherwise reflect such information is, subject to section 3 of this Schedule, hereinafter referred to as the "Information". In consideration of Repap furnishing UPM with the Information, UPM agrees that: 1. The Information shall be kept confidential and shall not, without Repap's prior written consent, be disclosed by UPM, or by UPM's agents, representatives or employees, in any manner whatsoever, in whole or in part, and shall not be used by UPM, UPM's agents, representatives or employees, other than, in each case, in connection with the Transaction. Moreover, UPM agrees to reveal the Information only to UPM's agents, representatives and employees who need to know the Information for the purposes of evaluating the Transaction, who are informed by UPM of the confidential nature of the Information and who shall agree to act in accordance with the terms and conditions of this Schedule. 2. Upon the termination of the Acquisition Agreement to which these provisions constitute Schedule D, all copies of the Information, except for that portion of the Information which consists of analyses, compilations, forecasts, studies or other documents prepared by UPM, UPM's agents, representatives or employees, will be, at UPM's option, returned to Repap or destroyed. That portion of the Information which consists of analyses, compilations, forecasts, studies or other documents prepared by UPM, UPM's agents, representatives or employees will be destroyed upon Repap's request and any oral Information will continue to be subject to the terms of this Schedule. Upon Repap's request, UPM shall provide Repap with a certificate certifying as to the complete return and destruction of all Information in accordance with the terms of this paragraph. Notwithstanding the foregoing, one copy of each document or other item constituting Information may be retained by counsel to UPM, permanently subject to the terms of this Schedule, for use only in connection with any dispute or litigation which has arisen at that time and for which such Information is necessary or desirable. 3. The term "Information" shall not include such portions of the Information which (i) are or become generally available to the public other than as a result of a disclosure by UPM, UPM's agents, representatives or employees in contravention of this Schedule, (ii) are received from an independent third party who had obtained the Information lawfully and was under no obligation of secrecy to Repap, (iii) UPM can show were in UPM's possession before UPM received such Information from Repap or (iv) UPM can show were independently developed by UPM or on UPM's behalf by persons having no access to the Information at the time of independent development. 4. UPM acknowledges that neither Repap nor any of Repap's affiliates makes any express or implied representation or warranty as to the accuracy or completeness of the Information, and each of Repap and Repap's affiliates expressly disclaims any and all liability that may be based on the Information, errors therein or omissions therefrom. UPM agrees that UPM is not entitled to rely on the accuracy or completeness of the Information and that UPM shall be entitled to rely solely on the representations and warranties made to UPM in the Acquisition Agreement. 5. If UPM or anyone to whom UPM transmits the Information becomes compelled by applicable legal or regulatory requirements (including, without limitation, the requirements of any applicable stock exchange) to disclose any of the Information, UPM will provide Repap with prompt notice so that Repap may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Schedule. If such protective order or other remedy is not obtained or Repap waives compliance with the provisions of this Schedule, UPM will furnish only that portion of the Information which UPM is advised, by written opinion of counsel, is required by such applicable legal or regulatory requirements and will exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded to the Information if such confidential treatment is available. 6. Without the prior written consent of Repap, for a period of two years from the date of this Agreement, neither UPM nor any of UPM's affiliates will solicit for employment, employ or otherwise contract for the services of any person who is now employed (either as an employee or full-time consultant) by Repap or any of its operating divisions or affiliates and with whom UPM or UPM's agents, representatives or employees communicate in connection with the Transaction, other than persons (i) whose employment by Repap or any of its operating divisions or affiliates, or any of their successors, shall have been terminated, (ii) who shall have voluntarily left the employ of Repap or its affiliate prior to the date of such solicitation, employment or other contractual arrangements, (iii) who shall have responded to general solicitation through advertising or (iv) who shall have responded to general solicitation by a recruiting or search firm (provided that such search firm has not been directed by UPM or any of UPM's affiliates to contact such persons). 7. Any provision in this Schedule which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Schedule or affecting the validity or enforceability of such provisions in any other jurisdiction. 8. UPM acknowledges that disclosure of the Information in contravention of this Schedule may cause significant damage and harm to Repap and its affiliates and that remedies at law may be inadequate to protect against breach of this Agreement, and UPM hereby in advance agrees to the granting of injunctive relief in Repap's favour without proof of actual damages, in addition to any other remedy to which Repap may be entitled. 9. The obligations described in this Schedule shall terminate two years from the date of this Schedule; provided, however, that sections 3, 8 and 10 of this Schedule shall survive indefinitely. 10. It is acknowledged and agreed that UPM is requesting access to the Information to permit it and its agents, representatives and employees to perform the above-described evaluation of Repap and/or any of its affiliates. It is understood that affiliated companies of UPM may be given access to the Information and that those affiliated companies of UPM which are given access to the Information will be informed of the confidential nature of the Information and UPM will make commercially reasonable efforts to cause the directors, officers, employees, agents and representatives of those affiliated companies to treat the Information on a confidential basis. The affiliated companies of UPM which are not given such access shall have no obligations under this Schedule. References in this Schedule to "UPM" shall be deemed to be references to UPM and/or such affiliated companies as may eventually be given access to the Information. 11. This Schedule constitutes the entire agreement between Repap and UPM with respect to the subject matter hereof. SCHEDULE E OPTION AGREEMENT

EXHIBIT 10.06   54   FORBEARANCE AGREEMENT             This FORBEARANCE AGREEMENT, is entered into as of the 6th day of June, 2000, between Paul-Son Gaming Supplies, a Nevada corporation ("Borrower") and Wells Fargo Bank Nevada, N.A., successor-in-interest to Norwest Bank Nevada, N.A. (hereinafter collectively referred to as "Lender"). WITNESSETH                 A.          On or about November 14, 1997, Lender extended to Borrower a loan (Loan No. 5965582834-18) in the original principal amount of One Million Eight Hundred Thousand and No/100 Dollars ($1,800,000.00) ("Credit Facility 1"). Credit Facility 1 is evidenced by a Promissory Note dated November 14, 1997 in the original princ ecorder of Clark County, Nevada. Note 1 is also secured, in part, by that certain Continuing Security Agreement dated November 14, 1997, executed by Borrower in favor of Bank ("Security Agreement").                B.          On or about or October 23, 1998, a second loan (Loan No. 5965582834-26) was extended to Borrower in the original principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) ("Credit Facility 2"). Credit Facility 2 is evidenced by a Promissory Note dated October 23, 1998 in the original principal amount of Five                C.          The terms of the loans evidenced by Notes 1 and 2 are further governed by various documents, including, but not limited to, that certain Letter Loan Agreement dated November 14, 1997 (the "Loan Agreement"), as amended. The Notes, the referenced Deeds of Trusts, the Loan Agreement, and the Continuing Security Agreement, and the other d                D.          As of June 1, 2000, there was outstanding under Credit Facility 1 the principal amount of $1,643,517.82. Interest at the non-default rate stated in Note 1 has accrued and remains unpaid as of June 1, 2000 in the amount of $6,886.98.                E.          As of June 1, 2000, there was outstanding under Credit Facility 2 the principal amount of $236,111.09. Interest at the non-default rate stated in Note 2 has accrued and remains unpaid as of June 1, 2000 in the amount of $667.54.                F.          As of the end of Borrower's fiscal year on May 31, 2000, Borrower is in default under the terms of the Loan Documents as Borrower is in violation of certain financial covenants (specifically the "profitability covenant") set forth in the Loan Agreement.                  G.          Notwithstanding that Borrower is in default under the Loan Documents, Borrower has requested that Lender forbear from enforcing its rights under the terms of the Loan Documents for a period of time, and Lender has agreed to forbear from exercising such rights according to the terms and conditions of this Agreement.           NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:                1.          The parties agree and acknowledge that under the terms of the Loan Documents governing Credit Facility 1 that there is presently due and owing the outstanding principal amount of $1,643,517.82, plus accrued and unpaid interest at the non-default rate stated in the Note as of June 1, 2000 in the amount of $6,886,98. The parties fu                2.          The parties agree and acknowledge that under the terms of the Loan Documents governing Credit Facility 2 that there is presently due and owing the outstanding principal amount of $236,111.09, plus accrued and unpaid interest at the non-default rate stated in the Note as of June 1, 2000 in the amount of $667.54. The parties furthe                3.          In addition to the amounts required to be paid to Lender under the Terms of Notes 1 and 2 (and the remaining Loan Documents), beginning on June 15, 2000 and continuing on or before the fifteenth (15th) day of each succeeding month until October 15, 2000, Borrower shall pay to Lender the amount of One Hund 00,000.00) to be applied to reduce the outstanding balance of Credit Facility 1. Beginning on October 15, 2000, and continuing on or before the fifteenth (15th) day of each succeeding month until February 15, 2001, Borrower shall pay to Lender the amount of One Hundred Twenty Five Thousand and No/100 Dollars ($125,000.00) to be applied to reduce the outstanding principal balance of Credit Facility 1. Beginning on February 15, 2001, and continuing on or before the fifteenth (15 e the outstanding principal balance of Credit Facility 1.                4.          Provided that Borrower makes all payments set forth in No. 3 above, and performs all of the remaining obligations set forth in the Loan Documents (excluding only the "profitability covenant"), Lender will forbear through the "Maturity Date(s)" of Notes 1 and 2 from enforcing its rights under the terms of the Loan Documents relating to the referenced default of the "profitability covenant." In the event that all of the obligations set forth herein (and in the Loan Documents, unless limited hereby) are not timely performed by Borrower, Lender may immediately 2 enforce all of its rights and remedies under the Loan Documents. Borrower and Lender agree that time is of the essence with respect to all of the obligations of Borrower arising hereunder and under the Loan Documents.                5.          Borrower does fully release, acquit and forever discharge Lender, its parent and affiliated corporations, and all of its officers, directors, shareholders, agents, employees, insurers, successors, and assigns (all of the foregoing being hereinafter included within the term "Lender"), of and from all known and unknown claims, actions, causes of action and suits for damages, at law or in equity, including loss of compensation, or any other claims of any kind or nature relating to the Notes 1 and 2, the Loan Agreement or any of the other Loan Documents and accruing in favor of Borrower (if any) prior to the date of the execution of this Agreement.                6.          Borrower and Lender hereby confirm and agree that present or future rights, remedies, benefits or powers belonging to Lender, whether arising under Notes 1 or 2, the Loan Agreement or under any other Loan Document, shall not be affected, prejudiced or restricted by this Agreement, unless specifically set forth herein.                7.          The provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.                8.          The laws of the State of Nevada shall govern the validity, construction, performance and effect of this Agreement.                9.          This Agreement may be executed in counterparts, all of which when considered together shall constitute an original document.                IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first above written. BORROWER:   LENDER: Paul-Son Gaming Supplies, a Nevada corporation   Wells Fargo Bank Nevada, N.A.   By: /s/ Eric P. Endy -------------------------------------- Eric P. Endy   By: /s/ Daron Thom --------------------------------------- Daron Thom Its: President   Its: Assistant Vice President 3 ACKNOWLEDGMENT, CONSENT AND RATIFICATION OF GUARANTORS            The undersigned Guarantor hereby consent to the terms of this Forbearance Agreement and acknowledges that its obligations arising under the Guarantee dated November 14, 1997, remain unaffected by the terms hereof. The undersigned Guarantor hereby ratifies and reaffirms all of the terms of the Guarantee dated November 14, 1997 and the Continuing Security Agreement signed by Guarantor in connection therewith on November 14, 1997.    Paul-Son Gaming Corporation, a Nevada corporation   By: /s/ Eric P. Endy ------------------------------------- Eric P. Endy Its: President 4

Exhibit 10.01 October 17, 2000 Doug Holden 1196 Eagle Valley Court San Jose, CA 95120 Dear Doug,     On behalf of Zamba, I am both extremely pleased and excited to offer you an opportunity to join us as President and Chief Executive Officer, reporting to the Board of Directors. You would be based in our Campbell, California office.     We would like to offer you an exempt, full time position, which includes: •Starting semi-monthly salary of $12,500 ($300,000 annualized). •You will be granted an option to purchase 1,500,000 shares of the company's common stock at a predetermined price. In accordance with the terms of our stock option plan, 25% of the initial grant will become vested at your one year anniversary date and 6.25% quarterly thereafter, and will be fully vested at the end of four years. •Participation in a bonus plan to be determined by the Compensation Committee of the Board of Directors. •The Board of Directors or the Compensation Committee will work with you to create a written employment agreement within thirty (30) days of your start date that will include provisions to (i) accelerate the vesting of all of your options upon a change of control and a second trigger, and (ii) six (6) months salary (or until you find a new job, if sooner) if you are terminated other than for cause. •Zamba will cover any liability and associated costs you may have with KPMG related to the creation and development of the team and concepts (company) that ended up integrating to Zamba. •Coverage under our existing Directors and Officers insurance policies.     This offer is contingent upon your executing the attached employment agreement before commencing your employment, the successful completion of your reference and background investigation, and compliance with the Immigration Reform Control Act of 1986 (IRCA). Also, if you are not a U.S. citizen, U.S. permanent resident, nor been granted asylee or refugee status, this offer is contingent upon your ability to meet Zamba's Immigration policy guidelines and INS approval of your right to reside and work in the United States (i.e., approval of appropriate work visa or status for Zamba, Minneapolis). Should you qualify, Zamba will pay the reasonable and usual costs to obtain the appropriate nonimmigrant classification.     This offer will remain valid for seven days from the date of this letter unless we notify you otherwise. You should understand that this offer does not constitute a contract of employment for any specified period of time but will create an "employment at will" relationship.     Please sign this letter, indicating acceptance of this offer and your anticipated start date. Return the signed copy in the enclosed envelope and keep a copy for your records. Please review and complete the enclosed forms. Bring these forms and the appropriate I-9 documentation with you on your first day of work. At orientation we will cover your benefits, review your forms and answer any questions you may have. --------------------------------------------------------------------------------     Doug, we believe that you will find Zamba a truly exciting and fulfilling place to work. We look forward to your joining us and contributing to our success. Sincerely, /s/ Paul Edelhertz Paul Edelhertz Chairman of the Board of Directors I accept this offer:       /s/ Doug Holden   10/17/00 NAME   Date Anticipated Start Date: 10/17/00 ENCL: •Benefits Summary •Proprietary Information and Invention Agreement/Confidential Disclosure Agreement/Terms of Employment •I-9 and W-4 Forms •Export Control Document •MN Child Support (MN residents only) •Background Release Form Indemnification Agreement --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document FORM OF CONSULTING AGREEMENT     This Consulting Agreement ("Agreement"), dated as of August 10, 2000 (the "Effective Date"), is by and between Microvision, Inc., a Washington corporation (the "Company"), and            ("Consultant").     WHEREAS, the Company desires to enter into a relationship with Consultant pursuant to which Consultant will provide certain business and financial consulting services to the Company, and Consultant is willing to provide such services to the Company;     NOW, THEREFORE, in consideration of the mutual promises and covenants set forth below, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1.  Services to be Provided.     1.1  Services.  During the term of this Agreement, Consultant will provide business and financial consulting services to the Company. The consulting services will include but not be limited to advising senior management of the Company on business development strategies, commercialization and application of the Company's technologies, strategic financial matters relating to the Company's financing activities, and strategic business alliances. During the first three years of the term, from time to time (but not less than once per calendar quarter) upon reasonable advance notice, Consultant will make herself reasonably available (in person, by telephone or by e-mail) to senior management for such consulting services. During the last two years of the term and during any Extension Period (as defined in Section 3.1(b)), Consultant will consult (in person, by telephone or by e-mail) with senior management on business and financial matters on a semi-annual basis, unless the parties otherwise mutually agree.     1.2  Consultant's Other Business Activities.  The Company acknowledges that Consultant's duties to the Company hereunder do not constitute the principal business activity of Consultant. Subject to Consultant's confidentiality and non-disclosure obligations set forth in Section 4 hereof, nothing in this Agreement or in the scope of the obligations of Consultant pursuant hereto shall be deemed or construed to limit or restrict in any way the right of Consultant to engage in any other business activity or activities, which may include activities that are directly or indirectly competitive with the business of the Company.     1.3  Effect of Consultant's Disability.  Consultant shall not be liable for loss or damage resulting from any delay or non-performance, or be held in breach hereof, in the event that Consultant is unable to provide consulting services hereunder by reason of any medically determinable physical or mental impairment, provided that Consultant gives the Company written notice of such disability and, upon the reasonable request of the Company, evidence thereof. 2.  Compensation and Expense Reimbursement.     2.1  Warrant.  In consideration of the execution and delivery of this Agreement by Consultant, upon execution hereof the Company will issue and deliver to Consultant a warrant, in substantially the form attached hereto at Annex A, to purchase 100,000 shares of the Company's common stock (the "Warrant Shares") at an exercise price of $34.00 per share (the "Warrant").     2.2  Registration Rights.  The Company shall grant registration rights to Consultant, pursuant to the terms and conditions set forth in that certain Registration Rights Agreement of even date herewith (the "Registration Rights Agreement"), with respect to the resale of the Warrant Shares. 1 --------------------------------------------------------------------------------     2.3  Lock-up.  From the Effective Date hereof until the expiration of the applicable lock-up period as set forth below, Consultant will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, that number of Warrant Shares as set forth below, or enter into a transaction that would have the same effect, without the prior written consent of the Company (the "Lock-Up"): Number of Warrant Shares Subject to Lock-Up --------------------------------------------------------------------------------   Lock-Up Period Expiration Date -------------------------------------------------------------------------------- 75,000   June 7, 2001 50,000   June 7, 2002 25,000   June 7, 2003 From and after the expiration of the applicable Lock-Up period, Consultant shall be entitled to sell or otherwise dispose of that number of Warrant Shares that are no longer subject to the Lock-Up (e.g., as of and from June 7, 2001, 50,000 Warrant Shares shall not be subject to the Lock-Up), provided that such sale or other disposition complies with applicable securities laws. Notwithstanding the foregoing, the Lock-Up shall be terminated and of no further force or effect in the event that this Agreement is terminated in the event of Consultant's death or pursuant to Section 3.3(b)(i) hereof.     2.4  Reimbursable Expenses.  The Company shall reimburse Consultant in accordance with the Company's travel expense policy for reasonable travel and entertainment expenses incurred on Company business in connection with performance of the services contemplated hereby, including but not limited to reimbursement for mileage, first-class airfare, hotel, meals and such other non-travel and entertainment expenses as may be approved in advance by the Company ("Reimbursable Expenses"). 3.  Term and Termination.     3.1  Term.       (a) This Agreement shall commence on the Effective Date and shall remain in effect for five years, unless extended pursuant to Section 3.1(b) or terminated pursuant to Section 3.3.     (b) If Consultant notifies the Company, in accordance with Section 1.3, that she is unable to provide consulting services by reason of any medically determinable physical or mental impairment, then the term of this Agreement shall be extended for a period equivalent to the period commencing on the date that Consultant so notifies the Company and ending on the date on which Consultant notifies the Company that she is no longer unable to provide consulting services (the "Extension Period"); provided, however, that the Extension Period shall not exceed six months for Consultant's cumulative period of disability, regardless of the number of disability notices that Consultant delivers to the Company in accordance with Section 1.3 or the duration of any particular disability period.     3.2  No Automatic Renewal.  This Agreement will not be subject to any implied or automatic renewals, and any relationship between the parties after the term hereof will be the subject of a new agreement. The parties may extend the term or any subsequent term of this Agreement by executing a separate written agreement of extension.     3.3  Termination.       (a) The Company may terminate this Agreement for any reason or for no reason upon thirty days written notice to Consultant. 2 --------------------------------------------------------------------------------     (b) This Agreement shall terminate upon Consultant's death. Consultant may terminate this Agreement for "cause" upon thirty days written notice to the Company. For purposes of this Section 3.3(b), "cause" shall mean:      (i) Consultant's permanent and total disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended);     (ii) if the Company (1) ceases to carry on business as a going concern; (2) commences a voluntary case or proceeding, or consents to the entry of an order for relief against it in an involuntary case or proceeding, pursuant to or within the meaning of applicable federal bankruptcy or state insolvency, creditors' rights or similar laws; (3) consents to the appointment under applicable bankruptcy, insolvency, creditors' rights or similar laws of a receiver, trustee, assignee, liquidator, sequestrator or similar official of it or for all or substantially all of its property; or (4) makes a general assignment for the benefit of its creditors;     (iii) if the development or commercialization of microdisplay technologies ceases to constitute a continuing material business of the Company;     (iv) the Company's breach of a material obligation to Consultant under this Agreement, the Warrant, or the Registration Rights Agreement, which breach remains uncured by the Company thirty (30) days after receipt by the Company of notice from Consultant asserting such breach;     (v) the completion of a tender offer, exchange offer, merger, consolidation, reorganization, or other business combination, sale of assets or contested election, or any combination of the foregoing, immediately subsequent to which not less than a majority of the directors of the Company prior to the transaction do not continue to serve as directors of the Company or its successor after the transaction; provided that, if such a transaction occurs during the first three years of the term of this Agreement, then Consultant shall give the Company or its successor not less than ninety days (and not thirty days) written notice of termination; or     (vi) the resignation or termination of Richard F. Rutkowski and Stephen R. Willey as executive officers of the Company.     (c) Consultant shall be entitled to payment for all Reimbursable Expenses incurred up to the date of termination.     (d) Upon termination of this Agreement by the Company pursuant to Section 3.3(a) or by Consultant pursuant to Section 3.3(b), Consultant shall have no further obligation to provide consulting services to the Company and, except as otherwise provided for in Section 12 hereof, shall have no liability to the Company with respect thereto. 4.  Confidential Information.     In the course of providing services to the Company under this Agreement, Consultant will be exposed to the Company's confidential and proprietary information. Consultant's use of all such Confidential Information (as defined below) of the Company shall be in accordance with this Section 4.     4.1  Definition of Confidential Information.  "Confidential Information" shall mean any trade secret of the Company or other information relating to the Company, its business or operations (including, but not limited to, any and all pricing, customer, business, financial or technical information, studies, rules, data or analyses, design specifications, and research and development plans), that is disclosed to Consultant by the Company (whether disclosed orally, in writing, or in electronic or other form) during the term of this Agreement. Confidential Information shall not include information that: (i) was 3 -------------------------------------------------------------------------------- generally known to the public as of the Effective Date; (ii) becomes generally known to the public after the Effective Date other than as a result of the act or omission of Consultant; (iii) was known to Consultant, without restriction on disclosure, prior to the disclosure thereof by the Company, as demonstrated by contemporaneous written evidence of such prior knowledge; (iv) is disclosed to Consultant by a third party without breach thereby of any confidentiality or non-disclosure obligation to the Company; or (v) is required to be disclosed by statute, regulation, court order, subpoena, request for production of documents, administrative order or other process of law; provided, however, that prior to disclosure under (v) above, Consultant shall notify the Company of the required disclosure, allow the Company adequate opportunity to seek, at the Company's expense, an appropriate protective order, injunction, or waiver of compliance, and disclose only such information as is necessary to comply with the required disclosure.     4.2  Ownership of Confidential Information.  The Company shall retain all right, title and interest to the Confidential Information, and disclosure thereof by the Company to Consultant shall not be deemed to grant to Consultant any license or right to use the Confidential Information except incidentally in connection with providing services to the Company hereunder.     4.3  Non-Disclosure Obligation.  Consultant acknowledges the competitive value and confidential nature of the Confidential Information and the damage that could result to the Company if the Confidential Information is disclosed to any third party. Consultant agrees to keep the Confidential Information confidential, to use the Confidential Information solely for the purpose of providing services to the Company as contemplated by this Agreement, and not to use the Confidential Information for Consultant's own purposes or in any manner detrimental to the Company.     4.4  Security Measures.  Consultant shall protect the Confidential Information with security safeguards at least as great as those to which Consultant accords to her own confidential business information. Consultant may disclose Confidential Information to Consultant's agents on a need-to-know basis, provided that Consultant has first executed appropriate written agreements with such agents sufficient to enable Consultant to comply with this Section 4.     4.5  Remedy for Breach.  It is understood and agreed that breach of this Section 4 by Consultant would cause irreparable harm to the Company and that money damages would be an inadequate remedy for any such breach. The Company shall be entitled to injunctive or other equitable relief as a remedy for any such breach or threatened breach. Consultant agrees to waive any requirement that the Company be required to post a bond or other security for the granting of any equitable relief. No failure or delay in exercising any right, power or privilege under this Section 4 shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.     4.6  Post-Termination Obligation.  Not later than thirty (30) days after the expiration of this Agreement or upon termination hereof, Consultant shall return to the Company all tangible embodiments of Confidential Information in Consultant's care, custody or control. 5.  Indemnification and Relationship of the Parties.     5.1  Limitation of Liability and Indemnification.  Each party hereto shall indemnify and hold the other (and, with respect to the Company as indemnitee, its directors, officers, agents, employees or subcontractors and, with respect to Consultant as indemnitee, her agents, employees or subcontractors) harmless for losses resulting from and to the extent of its own willful misconduct or gross negligence arising from or incident to the performance of services contemplated by this Agreement. Neither the Company nor Consultant shall be responsible for any incidental, indirect, consequential, punitive or special damages (including loss of profits or business interruption) sustained by the other. 4 --------------------------------------------------------------------------------     5.2  Damages for Failure to Provide Consulting Services.       (a) If, during the first three years of the term, Consultant fails to make herself reasonably available (in person, by telephone or by e-mail) to senior management from time to time (but not less once per calendar quarter) upon reasonable advance notice, for consulting services, then the Company shall be entitled to notify Consultant of such failure to perform hereunder. If Consultant continues to fail to make herself reasonably available (in person, by telephone or by e-mail) to senior management within thirty calendar days notice thereof, then Consultant shall deliver to the Company, not more than five business days after expiration of such thirty day period:      (i) that number of Warrants equal to the product of 75,000 (the number of Warrant Shares subject to the Lock-Up as of the Effective Date) and a fraction, the numerator of which shall be the number of calendar days between the date the Company notified Consultant of her failure to perform hereunder and the date of the third annual anniversary of the Effective Date, and the denominator of which shall be 1095 (the number of calendar days in the first three years of the term hereof) (the "Damages Warrants"), plus a bank certified or cashier's check in the amount of fifty thousand dollars ($50,000) (the "Damages Payment").     (ii) If Consultant does not own a sufficient number of Warrants to satisfy her obligation to deliver the Damages Warrants to the Company, then, in addition to the Damages Payment, Consultant shall deliver to the Company, not more than five business days after expiration of the thirty day period referenced in Section 5.2(a), (x) all Warrants then-owned by Consultant, and (y) the Adjusted Market Value (as defined below) of that number of shares of common stock of the Company equivalent to the number of Warrant Shares issued (or, if Consultant has transferred Warrants in accordance with the terms thereof, that would have been issuable) upon exercise of that number of Warrants equal to the Damages Warrants less the number of Warrants then-owned by Consultant (such shares of common stock are referred to herein as the "Damages Shares").     (b) For purposes of Section 5.2(a)(ii), "Adjusted Market Value" means:      (i) the product of (x) the Damages Shares and (y) the closing price of the Company's common stock on the Nasdaq National Market, or such other principal market or exchange on which the Company's common stock may then be listed or traded, on the date on which the Company first notifies Consultant of her non-performance in accordance with Section 5.2(a) (the "Market Price");     (ii) less the aggregate exercise price of the Warrants exercised (or, if Consultant has transferred Warrants in accordance with the terms thereof, that would have been exercisable) for the number of shares of common stock that constitute the Damages Shares; provided that the Consultant shall be entitled to subtract from the Adjusted Market Value the "Tax Cost," as determined herein, of including compensation in income upon exercise (or deemed exercise) of the Warrants and deducting the amount of the repayment of Adjusted Market Value to the Company.     (c) For purposes of Section 5.2(b), the "Tax Cost" shall be determined as follows:      (i) The receipt of income and the repayment of Adjusted Market Value shall be deemed to have occurred in the taxable year of repayment; and     (ii) The Tax Cost shall be the excess of (a) the federal income tax liability of the Consultant for the taxable year of repayment calculated with the income and repayment described in clause (i) above over (b) the federal income tax liability of Consultant for the 5 -------------------------------------------------------------------------------- taxable year of repayment calculated without the income and repayment described in clause (i) above.     (iii) In making the calculations described in clause (ii) above, the deduction for the repayment shall be a deduction which is not a "miscellaneous itemized deduction" as defined in Section 67(b) of the Internal Revenue Code of 1986, as amended, if Consultant is advised by her usual tax advisers or, upon the request of Consultant, other tax advisers reasonably selected by the Company, that she has a reasonable reporting position that the deduction is not a "miscellaneous itemized deduction." The calculation described in clause (ii) shall be provided to the Company for its approval and consent in advance of any subtraction from Adjusted Market Value. If the Company does not approve of nor consent to, the calculation of Tax Cost, the calculation shall be submitted to a nationally recognized firm of independent certified public accountants (other than the Company's independent auditors) reasonably selected and paid by the Company for a re-determination, consistent with clauses (i), (ii) and (iii) above, which shall be final and binding on Consultant and the Company; provided that, in the event that such re-determination discloses an error in the calculation of Tax Cost that would have resulted in an underpayment of Adjusted Market Value equal to or greater than twenty percent (20%) of the Adjusted Market Value required to be paid to the Company, then Consultant shall reimburse the Company for all reasonable expenses relating to the re-determination.     (d) Consultant may, in her discretion, pay the Adjusted Market Value to the Company (i) by bank certified or cashier's check or (ii) in shares of the Company's common stock (which number of shares shall be equal to the Adjusted Market Value divided by the Market Price).     (e) For purposes of Section 5.2(a), Consultant shall have "failed to make herself reasonably available to senior management of the Company" if, during any particular calendar quarter, she repeatedly and consistently is unavailable to provide consulting services as required pursuant to Section 1.1.     (f)  If, during the last two years of the term of this Agreement and any Extension Period, Consultant fails to consult (in person, by telephone or by e-mail) with senior management on business and financial matters on a semi-annual basis, then the Company shall be entitled to notify Consultant of such failure to perform hereunder. If Consultant fails to make herself reasonably available (in person, by telephone or by e-mail) to senior management within thirty calendar days of such notice, then Consultant shall deliver to the Company, not more than five business days after expiration of the thirty day performance period, a bank certified or cashier's check in the amount of fifty thousand dollars ($50,000), if the failure to perform occurs during the fourth year of the term, or twenty-five thousand dollars ($25,000), if the failure to perform occurs during the fifth year of the term or any Extension Period.     (g) This Section 5.2 shall constitute the Company's sole remedy for Consultant's failure to perform in accordance with Section 1.1 hereof, provided that the limitations set forth herein shall not affect the Company's right to any insurance proceeds arising as a result of Consultant's non-performance under Section 1.1. This Section 5.2 reflects the negotiated agreement of the parties, and Consultant's liability under Section 5.2 is intended to be proportional to the actual harm that the Company would incur in the event of Consultant's non-performance under Section 1.1.     5.3  Relationship of Parties.  The Company and Consultant agree that Consultant shall perform services hereunder as an independent contractor and that Consultant shall retain control over and responsibility for her own operations and personnel, if any. Nothing herein shall create any partnership, agency, employment or similar relationship between the parties. Consultant will not, by reason of this 6 -------------------------------------------------------------------------------- Agreement, be entitled to participate in workers' compensation, retirement, insurance or any benefit under any Company benefit or other employee plan. The Company will not withhold or pay any income or payroll taxes on behalf of Consultant. Neither party, nor their principals or employees, shall have authority to contract in the name of or bind the other, except as expressly agreed to in writing by the parties. 6.  Publicity.     Consultant shall permit the Company to use her name in press releases announcing her relationship with the Company, subject to Consultant's review and approval of the text of any proposed press release. 7.  Notices.     All notices, requests, and other communications hereunder shall be deemed to be duly given if hand delivered or sent by overnight courier with guaranteed next day delivery, by confirmed facsimile transmission, or by U.S. mail, postage prepaid, return receipt requested, addressed to the other party at the address as set forth below: To the Company:   Microvision, Inc. Attn: Richard Raisig 19910 North Creek Parkway Bothell, WA 98011-3008 Fax: (425) 481-1625   With a copy to:       Stoel Rives, LLP Attn: Christopher J. Voss One Union Square, Suite 3600 600 University Street Seattle, Washington 98101-3197 Fax: (206) 386-7500   To Consultant:           With a copy to:       Squadron, Ellenoff, Plesent & Sheinfeld, LLP Attn: Jeffrey W. Rubin 551 Fifth Avenue New York, NY 10176 Fax: (212) 697-6686             Any notice or other communication hereunder shall be effective upon actual delivery. Either party may change the address or facsimile number to which notices for such party shall be addressed by providing notice of such change to the other party in the manner set forth in this Section 7. 8.  Applicable Law and Forum.     This Agreement shall be governed by the laws of the State of Washington, without giving effect to its conflicts of law rules. Jurisdiction and venue for any action or proceeding hereunder shall lie in the state and federal courts located in Seattle, Washington. The parties expressly agree that all claims in respect of any such action or proceeding may be heard and determined in any such court and Consultant waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought. 7 -------------------------------------------------------------------------------- 9.  Severability.     If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 10. Waiver and Remedies.     No waiver of any term or condition of this Agreement shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement, by law or otherwise afforded, will be cumulative and not alternative. 11. No Third Party Beneficiary.     The terms and provisions of this Agreement are intended solely for the benefit of the parties hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other person or entity. 12. Survival.     The provisions of Sections 2.3 (except upon termination hereof pursuant to Section 3.3(b)(i)), 2.4, 4, 5.1, 5.2, 8 and 13 hereof shall survive expiration or termination of this Agreement. 13. Attorneys' Fees.     If any legal action or any arbitration or other proceeding is brought for the enforcement or interpretation of this Agreement, the Warrant, or the Registration Rights Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with or related to this Agreement, the Warrant, or the Registration Rights Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs in connection with that action or proceeding, in addition to any other relief to which a party may be entitled, including those incurred on appeal or in bankruptcy proceedings. 14. Assignment.     Consultant acknowledges that the services to be rendered are unique and may not be assigned by Consultant without the prior written consent of the Company. This Agreement will inure to the benefit of and be binding upon the parties and their permitted assigns and successors. 15. Entire Agreement and Amendments.     This Agreement, including Annex A hereto, and the Registration Rights Agreement, contain the entire agreement of the parties relating to the subject matter hereof. This Agreement shall terminate and supersede any prior written or oral agreements or understandings between the parties regarding the subject matter hereof. Any amendments or modifications to this Agreement must be in writing and executed by the party against whom enforcement is sought. 16. Counterparts.     This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument. 8 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date above written. Microvision, Inc.   Consultant   By:              --------------------------------------------------------------------------------              --------------------------------------------------------------------------------     Its:                  --------------------------------------------------------------------------------           SSN#:                  --------------------------------------------------------------------------------                                           9 -------------------------------------------------------------------------------- QUICKLINKS FORM OF CONSULTING AGREEMENT

Exhibit 10.22 MASTER LEASE AGREEMENT dated as of AUGUST 2, 2000 by and between COMDISCO LABORATORY AND SCIENTIFIC GROUP. A DIVISION OF COMDISCO, INC. ("Lessor") and EXELIXIS, INC. ("Lessee"). IN CONSIDERATION of the mutual agreements described below. the parties agree as follows (all capitalized terms are defined in Section 14.12): Property Leased. Lessor leases to Lessee all of the Equipment described on each Schedule. In the event of a conflict, the terms of a Schedule prevail over this Master Lease. Term. On the Commencement Date Lessee will be deemed to accept the Equipment, will be bound to its rental obligations for each item of Equipment and the term of a Schedule will begin and continue through the Initial Term and thereafter until terminated by either party upon prior written notice received during the Notice Period. No termination may be effective prior to the expiration of the Initial Term. Rent and Payment. Rent is due and payable in advance, in immediately available funds, on the first day of each Rent interval to the payee and at the location specified in Lessor's invoice. Interim Rent is due and payable when invoiced. If any payment is not made when due, Lessee will pay interest at the Overdue Rate. Selection and Warranty and Disclaimer of Warranties. Selection . Lessee acknowledges that it has selected the Equipment and Lessor will disclaims any reliance upon statements made by the Lessor. Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so long as Lessee is not in default, Lessor will not disturb Lessee's quiet and peaceful possession, and unrestricted use of the Equipment. To the extent permitted by the manufacturer, Lessor assigns to Lessee during the term of the Schedule any manufacturer's warranties for the Equipment. LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability, claim, loss, damage or expense of any kind (including strict liability in tort) caused by the Equipment except for any loss or damage caused by the negligent acts of Lessor. In no event is Lessor responsible for special, incidental or consequential damages. Title and Assignment. Title. Lessee holds the Equipment subject and subordinate to the rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor, as Lessee's agent, to prepare, execute and file in Lessee's name precautionary Uniform Commercial Code financing statements showing the interest of the Owner, Lessor, and any Assignee or Secured Party in the Equipment and to insert serial numbers in Schedules as appropriate. Except as provided in Sections 5.2 and 7.2, Lessee will, at its expense, keep the Equipment free and clear from any liens or encumbrances of any kind (except any caused by Lessor) and will indemnify and hold Lessor, Owner, any Assignee and Secured Party harmless from and against any loss caused by Lessee's failure to do so. Relocation or Sublease. Upon prior written notice, Lessee may relocate the Equipment to any location within the continental United States provided (i) the Equipment will not be used by an entity exempt from federal income tax, (ii) all additional costs (including any administrative fees, additional taxes and insurance coverage) are reconciled and promptly paid by Lessee. Lessee may sublease the Equipment upon the reasonable consent of the Lessor and the Secured Party provided Lessee meets the requirements under (i) and (ii) above. No relocation or sublease will relieve Lessee from any of its obligations under this Master Lease and the applicable Schedule. Assignment by Lessor. The terms and conditions of each Schedule have been fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its interest or grant a security interest in each Schedule and/or the Equipment to a Secured Party or Assignee. In that event the term Lessor will mean the Assignee and any Secured Party. However, any assignment. sale, or other transfer by Lessor will not relieve Lessor of its obligations to Lessee and will not materially change Lessee's duties or materially increase the burdens or risks imposed on Lessee. The Lessee consents to and will acknowledge such assignments in a written notice given to Lessee. Lessee also agrees that: The Secured Party will be entitled to exercise all of Lessor's rights, but will not be obligated to perform any of the obligations of Lessor. The Secured Party will not disturb Lessee's quiet and peaceful possession and unrestricted use of the Equipment so long as Lessee is not in default and the Secured Party continues to receive all Rent payable under the Schedule; Lessee will pay all Rent and all other amounts payable to the Secured Party, despite any defense or claim which it has against Lessor. Lessee reserves its right to have recourse directly against Lessor for any or claim; and Subject to and without impairment of Lessee's leasehold rights in Equipment. Lessee holds the Equipment for the Secured Party to the extent of the Secured Party's rights in that Equipment. Net Lease and Taxes and Fees. Net Lease . Each Schedule constitutes a net lease, Lessee's obligation to pay Rent and all other amounts is absolute and unconditional and is not subject to any abatement, reduction, set-off, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever. Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes, fees or any other charges (together with any related interest or penalties not arising from the negligence of Lessor) accrued for or arising during the term of each Schedule against Lessor, Lessee or the Equipment by any governmental authority (except only Federal, state and local taxes on the capital or the net income of Lessor). Lessor will file all personal property tax returns for the Equipment and pay all property taxes due. Lessee will reimburse Lessor for property taxes within thirty (30) days of invoice. Care, Use and Maintenance, Attachments and Reconfigurations, and Inspection by Lessor. Care, Use and Maintenance. Lessee will operate the Equipment in accordance with all laws and regulations and maintain the Equipment in good operating order and appearance, protect the Equipment from deterioration, other than normal wear and tear, and will not use the Equipment for any purpose other than that for which it was designed. If commercially available, Lessee will maintain in force a standard maintenance contract with the manufacturer of the Equipment and upon request will provide Lessor with a complete copy of that contract. With Lessor's prior written consent, Lessee may have the Equipment maintained by a party other than the manufacturer. Lessee agrees to pay any costs necessary for the manufacturer to bring the Equipment to original Equipment specifications at origination of lease, normal wear and tear excepted, and to re-certify the Equipment as eligible for manufacturer's maintenance at the expiration of lease term. The lease term will continue upon the same terms and conditions until recertification has been obtained Attachments and Reconfigurations. Upon Lessor's prior written consent, Lessee may reconfigure and install Attachments on the Equipment. In the event of such a Reconfiguration or Attachment, Lessee shall, upon return of the equipment at its expense, restore the Equipment to the original configuration specified on the Schedule in accordance with the manufacturer's specifications and in the same operating order, repair and appearance as when installed (normal wear and tear excluded). Alternatively, with Lessor's prior written consent which will not be unreasonably withheld. Lessee may return the Equipment with any Attachment or upgrade. Inspection by Lessor. Upon request, Lessee during reasonable business hours and subject to Lessee's security requirements, will make the Equipment and its related log and maintenance records, instruction manuals, published statements of calibration capabilities and technical specifications and certification. qualification and reports available to Lessor for inspection. Representations and Warranties of Lessee. Lessee represents and warrants that for the Master Lease and each Schedule: The execution, delivery and performance of the Lessee have been authorized by all necessary corporate action; The individual executing was duly authorized to do so; The Master Lease and each Schedule constitute legal, valid and binding agreements of the Lessee enforceable in accordance with their terms; The Equipment is personal property and when subjected to use by Lessee will not be or become fixtures under applicable law; and The Equipment will be for laboratory use only and will not be used in a clinical environment on patients. Delivery and Return of Equipment. Lessee assumes the full expense of transportation of the Equipment to its initial location, installation, deinstallation, and return to a location within the continental United States (including without limitation the expense of in-transit insurance) all pursuant to Lessor's instructions and manufacturer's specifications. Regarding deinstallation, Lessee will assure that the Equipment is deinstalled by the manufacturer in accordance with the manufacturer's recommended procedures and decontaminated for transport in accordance with any Environmental Law, and returned with a Verification of Decontamination in the same operating order, repair, condition and appearance as when originally installed (less normal wear and tear and depreciation) meeting all original equipment- manufacturer's specifications for continued manufacturers maintenance. and accompanied by all associated documents, manuals (including, but not limited to, those listed in Section 7.3), spare parts and accessories and maintenance records for the duration of the Schedule. In connection with deinstallation, Lessee will assure that any Contaminant removed from the Equipment will be removed and transported by a licensed waste removal transporter. Labeling. Upon request, Lessee will mark the Equipment indicating Lessors interest. Lessee will keep all Equipment free from any other marking or labeling which might be interpreted as a claim of ownership. Indemnity. Lessee will indemnify and hold Lessor, any Assignee and any Secured Party harmless from and against any and all claims, costs, expenses, damages and liabilities, including reasonable attorneys' fees, arising out of the ownership (for strict liability in tort only), selection, possession, leasing, operation, control, use, maintenance, delivery, return or other disposition of the Equipment including the handling or disposal of the Contaminants. However, Lessee is not responsible to a party indemnified hereunder for any claims, costs, expenses, damages and liabilities occasioned by the negligent acts of such indemnified party. Lessee agrees to carry death, bodily injury and property damage liability insurance during the term of the Master Lease in amounts and against risks customarily insured against by the Lessee on similar equipment owned by it. Any amounts received by Lessor under that insurance will be credited against Lessee's obligations under this Section. Risk of Loss. Effective upon delivery and until the Equipment is returned, Lessee relieves Lessor of responsibility for all risks of physical damage to or loss or destruction of the Equipment. Lessee will carry casualty insurance for each item of Equipment in an amount not less than the Casualty Value. All policies for such insurance will name the Lessor and any Secured Party as additional insured and as loss payee, and will provide for at least thirty (30) days prior written notice to the Lessor of cancellation or expiration. The Lessee will furnish appropriate evidence of such insurance. Lessee shall promptly repair any damaged item of Equipment unless such Equipment has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss, Lessee will provide written notice of that loss to Lessor and Lessee will, at Lessor's option, either (a) replace the item of Equipment with Like Equipment and marketable title to the Like Equipment will automatically vest in Lessor or (b) pay the Casualty Value and after that payment and the payment of all other amounts due and owing, Lessee's obligation to pay further Rent for the item of Equipment will cease. Default, Remedies and Mitigation. Default. The occurrence of any one or more of the following Events of Default constitutes a default under a Schedule: Lessee's failure to pay Rent or other amounts payable by Lessee when due if that failure continues for ten (10) days after written notice; or Lessee's failure to perform any other term or condition of the Schedule or the material inaccuracy of any representation or warranty made by the Lessee in the Schedule or in any document or certificate furnished to the Lessor hereunder if that failure or inaccuracy continues for fifteen (15) days after written notice; or An assignment by Lessee for the benefit of its creditors, the failure by Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee or the filing against Lessee of any petition under any bankruptcy or insolvency law or for the appointment of a trustee or other officer with similar powers. the adjudication of Lessee as insolvent, the liquidation of Lessee, or the taking of any action for the purpose of the foregoing; or The occurrence of an Event of Default under any Schedule or other agreement between Lessee and Lessor or its Assignee or Secured Party. Remedies. Upon the occurrence of any of the above Events of Default, Lessor, at its option, may: enforce Lessee's performance of the provisions of the applicable Schedule by appropriate court action in law or in equity; recover from Lessee any damages and or expenses, including Default Costs; with notice and demand, recover all sums due and accelerate and recover the present value of the remaining payment stream of all Rent due under the defaulted Schedule (discounted at the same rate of interest at which such defaulted Schedule was discounted with a Secured Party plus any prepayment fees charged to Lessor by the Secured Party or, if there is no Secured Party, then discounted at 6%) together with all Rent and other amounts currently due as liquidated damages and not as a penalty; with notice and process of law and in compliance with Lessee's security requirements, Lessor may enter on Lessee's premises to remove and repossess the Equipment without being liable to Lessee for damages due to the repossession, except those resulting from Lessor's, its assignees', agents' or representatives' negligence; and pursue any other remedy permitted by law or equity. The above remedies, in Lessor's discretion and to the extent permitted by law, are cumulative and may be exercised successively or concurrently. Mitigation . Upon return of the Equipment pursuant to the terms of Section 13.2, Lessor will use its best efforts in accordance with its normal business procedures (and without obligation to give any priority to such Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise dispose of all or any part of the Equipment at a public or private sale for cash or credit with the privilege of purchasing the Equipment. The proceeds from any sale, lease or other disposition of the Equipment are defined as either: if sold or otherwise disposed of, the cash proceeds less the Fair Market Value of the Equipment at the expiration of the Initial Term less the Default Costs; or if leased, the present value (discounted at three points over the prime rate as referenced in the Wall Street Journal at the time of the mitigation) of the rentals for a term not to exceed the Initial Term, less the Default Costs. Any proceeds will be applied against liquidated damages and any other sums due to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may recover, the amount by which the proceeds are less than the liquidated damages and other sums due to Lessor from Lessee. Additional Provisions. Entire Agreement . This Master Lease, Addendum and associated Schedules supersede all other oral or written agreements or understandings between the parties concerning the Equipment including, for example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED. No Waiver . No action taken by Lessor or Lessee shall be deemed to constitute a waiver of compliance with any representation, warranty or covenant contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach of any provision of this Master Lease or a Schedule will not operate or be construed as a waiver of any subsequent breach. Binding Nature . Each Schedule is binding upon, and inures to the benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS. Survival of Obligations . All agreements, obligations including, but not limited to those arising under Section 6.2, representations and warranties contained in this Master Lease, any Schedule or in any document delivered in connection with those agreements are for the benefit of Lessor and any Assignee or Secured Party and survive the execution, delivery, expiration or termination of this Master Lease. Notices . Any notice, request or other communication to either party by the other will be given in writing and deemed received upon the earlier of actual receipt or three days after mailing if mailed postage prepaid by regular or airmail to Lessor (to the attention of "Lease Administrator") or Lessee, at the address set out in the Schedule or, one day after it is sent by courier or facsimile transmission if receipt is verified by the receiving party. Applicable Law . THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE. Severability . If any one or more of the provisions of this Master Lease or any Schedule is for any reason held invalid, illegal or unenforceable, the remaining provisions of this Master Lease and any such Schedule will be unimpaired, and the invalid, illegal or unenforceable provision replaced by a mutually acceptable valid, legal and enforceable provision that is closest to the original intention of the parties. Counterparts . This Master Lease and any Schedule may be executed in any number of counterparts, each of which will be deemed an original, but all such counterparts together constitute one and the same instrument. If Lessor grants a security interest in all or any part of a Schedule, the Equipment or sums payable thereunder, only that counterpart Schedule marked "Secured Party's Original" can transfer Lessor's rights and all other counterparts will be marked "Duplicate". Licensed Products . Lessee shall obtain no title to Licensed Products which will at all times remain the property of the owner of the Licensed Products. A license from the owner may be required and it is Lessee's responsibility to obtain any required license before the use of the Licensed Products. Lessee agrees to treat the Licensed Products as confidential information of the owner, to observe all copyright restrictions, and not to reproduce or sell the Licensed Products. Additional Documents . Lessee will, upon execution of this Master Lease and as may be requested thereafter, provide Lessor with a secretary's certificate of incumbency and authority and any other documents reasonably requested by Lessor. Upon the execution of each Schedule with an aggregate Rent in excess of $2,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel regarding the representations and warranties in Section 8. Lessee will furnish, upon request, audited financial statements for the most recent period. Electronic Communications . Each of the parties may communicate with the other by electronic means under mutually agreeable terms. Definitions. Assignee - means an entity to whom Lessor has sold or assigned its rights as owner and Lessor of Equipment. Attachment - means any accessory, equipment or device and the installation thereof that does not impair the original function or use of the Equipment and is capable of being removed without causing material damage to the Equipment and is not an accession to the Equipment. Casualty Loss - means the irreparable loss or destruction of Equipment. Casualty Value - means the amount equal to the present value of the aggregate Rent remaining for the balance of the current term, plus the present value of the Fair Market Value (determined as of the expiration of the current term) of Like Equipment computed using an interest rate equal to the rate for Treasury Securities having a comparable term to the current term. However, if a Casualty Value Table is attached to the relevant Schedule its terms will control. Commencement Certificate - means the Lessor provided certificate which must be signed by Lessee within ten days of the Commencement Date as requested by Lessor. Commencement Date - is defined in each Schedule. Contaminant - means any material, substance or waste regulated or otherwise covered under any Environmental Law or other material or substance which has in the past or could in the future constitute a health, safety or environmental hazard to any person, property or natural resources. Default Costs - means reasonable attorney's fees and remarketing costs resulting from a Lessee default or Lessor's enforcement of its remedies. Environmental Law - means any federal, foreign, state or local law, rule or regulation pertaining to the protection of the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 1361 et seq.), and the Occupational Safety and Health Act (10 U. S.C. 651 et seq.), as these laws have been amended or supplemented, and any analogous foreign, state or local statutes, and the regulations promulgated pursuant thereto. Equipment - means the property described on a Schedule and any replacement for that property required or permitted by this Master Lease or a Schedule but not including any Attachment. Event of Default - means the events described in Subsection 13. 1. Fair Market Value - means the aggregate amount which would be obtainable in an arm's-length transaction between an informed and willing buyer/user purchasing the Equipment in place for its originally intended use and an informed and willing seller under no compulsion to sell. Initial Term - means the period of time beginning on the first day of the first full Rent Interval following the Commencement Date for all items of Equipment and continuing for the number of Rent Intervals indicated on a Schedule. Installation Date - means the day on which the Equipment is installed and qualified for a commercially available manufacturer's standard maintenance contract or warranty coverage, if available. Interim Rent - means the pro-rata portion of Rent due for the period from the Commencement Date through but not including the first day of the first full Rent Interval included in the Initial Term. Licensed Products - means any software or other licensed products attached to the Equipment. Like Equipment - means replacement Equipment which is lien free and of the same model, type, configuration and manufacture as Equipment. Notice Period - means the time period described in a Schedule during which Lessee may give Lessor notice of the termination of the term of that Schedule. Overdue Rate - means the lesser of 18% per year or the maximum rate permitted by the law of the state where the Equipment is located. Owner - means the owner of Equipment. Reconfiguration - means any change to Equipment that would upgrade or downgrade the performance capabilities of the Equipment in any way. Rent - means the rent, including Interim Rent, Lessee will pay for each item of Equipment expressed in a Schedule either as a specific amount or an amount equal to the amount which Lessor pays for an item of Equipment multiplied by a lease rate factor plus all other amounts due to Lessor under this Master Lease or a Schedule. Rent Interval - means a full calendar month or quarter as indicated on a Schedule. Schedule - means an Equipment Schedule which incorporates all of the terms and conditions of this Master Lease and, for purposes of Section 14.8, its associated Commencement Certificate(s). Secured Party - means an entity to whom Lessor has granted a security interest in a Schedule and related Equipment for the purpose of securing a loan. Verification of Decontamination - means a letter from the party performing the decontamination, stating that such party is licensed by the Occupational Safety and Health Agency or the appropriate officials and that the actual decontamination was completed both in accordance with manufacturers specifications and procedures, and any governmental permit required for the operation of the Equipment and the disposal of any Contaminants. IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as of the day and year first above written. EXELIXIS, INC as Lessee COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO, INC. as Lessor By: By: Title: Title: rev. 12/99 --------------------------------------------------------------------------------

3Rd Amended and Restated 1993 STOCK OPTION PLAN OF SUNRISE MEDICAL INC.   SUNRISE MEDICAL INC., a corporation organized under the laws of the State of Delaware, adopted the 1993 Stock Option Plan of Sunrise Medical Inc. by the action of its Board of Directors as of August 24, 1993 and the approval of its Stockholders as of November 15, 1993; which Plan was first amended and restated by the Board of Directors as of November 13, 1997; and was amended and restated for a second time by action of the Board of Directors as of April 28, 1998; and is hereby amended and restated for a third time by action of the Board of Directors as of February 28, 2000. The purposes of this Plan are as follows: (1)  To further the growth, development and financial success of the Company by providing additional incentives to certain of its executive and other key Associates who have been or will be given responsibility for the management or administration of the Company's business affairs, by assisting them to become owners of the Company's Common Stock and thus to benefit directly from its growth, development and financial success. (2)  To enable the Company to obtain and retain the services of the type of professional, technical and managerial Associates considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of the Company's Common Stock under options, including options that are intended to qualify as "incentive stock options" under Section 422 of the Code. (3)  To provide for appropriate compensation for Non-Associate Directors for service as members of the Board, by providing such Non-Associate Directors a financial stake and interest in the Company's performance.   ARTICLE I DEFINITIONS   Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.1 - Administrator "Administrator" shall mean the entity that conducts the administration of the Plan (including the grant of Options) as provided herein. With reference to the administration of the Plan with respect to an Option granted or to be granted to Non-Associate Directors, the term "Administrator" shall refer to the Board. With reference to the administration of the Plan with respect to an Option granted or to be granted to Associates, the term "Administrator" shall refer to the Committee, unless and to the extent (a) the Board has assumed the authority for administration of all or any part of the Plan as permitted in Section 6.2 or (b) the Committee has delegated the authority for administration of all or part of the Plan as permitted by Section 6.5. Section 1.2 - Associate "Associate" shall mean any Employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation which is then a Parent Corporation or a Subsidiary, whether such Employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan. Section 1.3 - Board "Board" shall mean the Board of Directors of the Company, as constituted from time to time. Section 1.4 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.5 - Committee "Committee" shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 6.1. Section 1.6 - Company "Company" shall mean Sunrise Medical Inc. In addition, "Company" shall mean any corporation assuming, or issuing new stock options in substitution for, Options outstanding under the Plan.  Section 1.7 - Director "Director" shall mean a member of the Board. Section 1.8 - Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. Section 1.9 - Executive Officers "Executive Officers" shall mean in any one of the Company's fiscal years (a) the Chief Executive Officer of the Company (or the individual acting in such capacity) and (b) the four most highly compensated Officers of the Company (other than the Chief Executive Officer) whose total compensation is required to be reported to the Company's stockholders under the Exchange Act. Section 1.10 - Incentive Stock Option "Incentive Stock Option" shall mean an Option which qualifies under Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. Section 1.11 - Non-Associate Director "Non-Associate Director" shall mean a Director who is not an Associate. Section 1.12 - Non-Qualified Option "Non-Qualified Option" shall mean an Option which is not an Incentive Stock Option and which is designated as a Non-Qualified Option by the Administrator. Section 1.13 - Officer "Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future. Section 1.14 - Option "Option" shall mean an option to purchase Common Stock of the Company, granted under the Plan. "Options" includes both Incentive Stock Options and Non-Qualified Options. Section 1.15 - Optionee "Optionee" shall mean an Associate or a Non-Associate Director to whom an Option is granted under the Plan. Section 1.16 - Parent Corporation "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.17 - Plan "Plan" shall mean this Third Amended and Restated 1993 Stock Option Plan of Sunrise Medical Inc., as amended and/or restated from time to time. Section 1.18 - Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. Section 1.19 - Secretary "Secretary" shall mean the Secretary of the Company.\ Section 1.20 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. Section 1.21 - Subsidiary "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.22 - Termination of Directorship "Termination of Directorship" shall mean the time when a Director ceases to be a member of the Board for any reason, including, but not by way of limitation, a termination by resignation, expiration of term, removal (with or without cause), retirement or death. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship. Section 1.23 - Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between the Associate and the Company, a Parent Corporation or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or retirement, but excluding (i) terminations where there is a simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary, (ii) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former Associate. The Administrator, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Associate's employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.   ARTICLE II SHARES SUBJECT TO PLAN Section 2.1 - Shares Subject to Plan (a) The shares of stock subject to Options shall be shares of the Company's $1.00 par value Common Stock. The aggregate number of such shares which may be issued upon exercise of Options shall not exceed 300,000; provided, however, that on the last business day of each fiscal year of the Company beginning with July 1, 1994 such maximum number shall be increased by a number equal to 1.5% of the number of shares of Common Stock issued and outstanding as of the close of business on such day; provided, further, that the aggregate number of shares which may be issued upon exercise of Options granted to the Executive Officers as a group in any fiscal year of the Company under the Plan shall not exceed 60% of the shares which may be issued upon exercise of all Options granted in such fiscal year under the Plan. (b) In no event shall the aggregate number of shares which may be issued upon exercise of Options under the Plan exceed 4,000,000. All shares remaining available for grant as of the termination or expiration of this Plan shall be and become available for option grant under the Company's Year 2000 Non-Qualified Stock Option Plan, as the same may be amended and/or restated from time to time. Section 2.2 - Unexercised Options; Retained or Surrendered Shares If any Option expires or is canceled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be optioned hereunder, subject to the overall limitation of section 2.1(b) but not subject to the limitations of Section 2.1(a). Shares of stock which are received or retained by the Company upon the exercise of options pursuant to Section 5.3(b) or Sections 5.3(c) and 5.4(d) may also again be optioned hereunder, subject to the overall limitation of section 2.1(b) but not subject to the limitations of Section 2.1(a). Section 2.3 - Changes in Company's Shares In the event that the outstanding shares of Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, appropriate adjustments shall be made by the Administrator in the number and kind of shares for the purchase of which Options may be granted, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued on exercise of Options.   ARTICLE III GRANTING OF OPTIONS   Section 3.1 - Eligibility Any executive or other key Associate of the Company or of any corporation which is then a Parent Corporation or a Subsidiary, including the Executive Officers, shall be eligible to be granted Options. Non-Associate Directors may be granted Non-Qualified Options as provided in Section 3.4. Section 3.2 - Qualification of Incentive Stock Options No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. Incentive Stock Options shall not be granted to Non-Associate Directors, but may, in the discretion of the Administrator, be granted to Directors who are also Associates.   Section 3.3 - Granting of Options to Associates   (a)  In the case of Options to be granted to Associates, the Administrator shall from time to time, in its absolute discretion: > (1)  Determine which Associates are executive or other key Associates and > select from among the executive or other key Associates (including the > Executive Officers and those executive or other key Associates to whom Options > have been previously granted under the Plan) such of them as in its opinion > should be granted Options; and > > (2)  Determine the number of shares to be subject to such Options, and > determine whether such Options are to be Incentive Stock Options or > Non-Qualified Options; and (3)  Determine the terms and conditions of such Options, consistent with the Plan; and > (4)  Instruct the Secretary to issue such Options and may impose such > conditions on the grant of such Options as it deems appropriate. Section 3.4 - Granting of Non-Qualified Options to Non-Associate Directors (a)  In the case of Options to be granted to Non-Associate Directors, the Administrator shall from time to time, in its absolute discretion: > (1)  Determine which Non-Associates Directors should be granted Options; and > > (2)  Determine the number of shares to be subject to such Options; and > > (3)  Determine the terms and conditions of such Options, consistent with the > Plan; provided, however, that only Non-Qualified Options may be granted to > Non-Associate Directors; and > > (4)  Instruct the Secretary to issue such Options and may impose such > conditions on the grant of such Options as it deems appropriate. ARTICLE IV TERMS OF OPTIONS   Section 4.1 - Option Agreement Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Administrator shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as "incentive stock options" under Section 422 of the Code. Section 4.2 - Option Price (a)  The price of the shares subject to each Option shall be set by the Administrator; provided, however, that, in the case of an Incentive Stock Option granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation, the price per share shall not be less than 110% of the fair market value of such shares on the date such Option is granted. (b)  For purposes of the Plan, the fair market value of a share of the Company's Common Stock as of a given date shall be: (i) the closing price of a share of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on the trading day previous to such date, or, if shares were not traded on the trading day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if such Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Company's Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Company's Common Stock on the trading day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Company's Common Stock, on the trading day previous to such date, as determined in good faith by the Administrator; or (iv) if the Company's Common Stock is not publicly traded, the fair market value established by the Administrator acting in good faith. Section 4.3 - Commencement of Exercisability (a)  Options shall become exercisable at such times and in such installments (which may be cumulative) as the Administrator shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised. (b)  Except as provided in the applicable Stock Option Agreement executed hereunder, no portion of an Option which is unexercisable at Termination of Employment or Termination of Directorship, as applicable, shall thereafter become exercisable. (c)  To the extent that the aggregate fair market value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company, any Subsidiary and any Parent Corporation) exceeds $100,000, such options shall be taxed as Non-Qualified Options. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For purposes of this Section 4.3(c), the fair market value of stock shall be determined as of the time that the option with respect to such stock is granted. Section 4.4 - Expiration of Options (a)  No Option may be exercised to any extent by anyone after the first to occur of the following events: > (1)  The expiration of ten years from the date the Option was granted; or > > (2)  With respect to an Incentive Stock Option granted to an Optionee owning > (within the meaning of Section 424(d) of the Code) at the time the Incentive > Stock Option was granted, more than 10% of the total combined voting power of > all classes of stock of the Company, any Subsidiary or any Parent Corporation, > the expiration of five years from the date the Incentive Stock Option was > granted. (b)  Subject to the provisions of Section 4.4(a), the Administrator shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable. Without limiting the generality of the foregoing, the Administrator may provide in the terms of individual Options that said Options expire immediately upon a Termination of Employment or Termination of Directorship, as applicable, for any reason. (c)  Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Administrator may extend the term of any outstanding Option in connection with any Termination of Employment or Termination of Directorship of the Optionee, or amend any other term or condition of such Option relating to such a termination. Section 4.5 - Consideration In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ (or, in the case of a Non-Associate Director, as a Director) of the Company, a Parent Corporation or a Subsidiary for a period of at least one year after the Option is granted. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ or as a Director of the Company, any Parent Corporation or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Parent Corporation and Subsidiaries, which are hereby expressly reserved, to discharge (or, in the case of a Non-Associate Director, to remove) any Optionee at any time for any reason whatsoever, with or without cause. Section 4.6 - Adjustments in Outstanding Options In the event that the outstanding shares of the stock subject to Options are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company or of another corporation by reason of merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, the Administrator shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in Option price per share; provided, however, that, in the case of Incentive Stock Options, each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Administrator shall be final and binding upon all Optionees, the Company and all other interested persons. Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution Notwithstanding the provisions of Section 4.6, in its absolute discretion, and on such terms and conditions as it deems appropriate, in the event of the merger or consolidation of the Company with or into another corporation, the acquisition by another corporation, person or group of persons of all or substantially all of the Company's assets or 40% or more of the Company's then outstanding voting stock, or the liquidation or dissolution of the Company or any other transaction deemed by the Board to involve a change in control of the Company (a "Corporate Transaction"), the Administrator may, but is not obligated to, provide by the terms of any Option or by that a resolution adopted prior to the occurrence of such Corporate Transaction that (i) upon such Corporate Transaction, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3 and/or any installment provisions of such Option, or (ii) such Option cannot be exercised and is terminated after the Corporate Transaction, and if the Administrator so provides, it must on such terms and conditions as it deems appropriate, also provide that for some period of time prior to such Corporate Transaction that such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3 and/or any installment provisions of such Option. ARTICLE V EXERCISE OF OPTIONS Section 5.1 - Person Eligible to Exercise During the lifetime of the Optionee, only the Optionee, or any permitted transferee pursuant to Section 7.1 hereof, may exercise an Option (or any portion thereof) granted to the Optionee. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise At any time and from time to time prior to the time when any exercisable Option or exercisable portion thereof becomes unexercisable under the Plan or the applicable Stock Option Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Administrator may, by the terms of the Option, require any partial exercise to be with respect to a specified minimum number of shares. Section 5.3 - Manner of Exercise An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or his office of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement: > (a)  Notice in writing signed by the Optionee or other person then entitled to > exercise such Option or portion, stating that such Option or portion is > exercised, such notice complying with all applicable rules established by the > Administrator; and > > (b)  (1) Full payment (in cash or by check) for the shares with respect to > which such Option or portion is thereby exercised; or > > > (2)  With the consent of the Administrator, (A) shares of the Company's > > Common Stock owned for at least six months by the Optionee, duly endorsed > > for transfer to the Company or (B) shares of the Company's Common Stock > > issuable to the Optionee upon exercise of the Option, in either case, with a > > fair market value (as determined under Section 4.2(b)), on the date of > > option exercise equal to the aggregate Option price of the shares with > > respect to which such Option or portion is thereby exercised; or > > > > (3)  With the consent of the Administrator, allow payment, in whole or in > > part, through the delivery of a notice that the Optionee has placed a market > > sell order with a broker with respect to the shares of Common Stock then > > issuable upon exercise of the Option, and that the broker has been directed > > to pay a sufficient portion of the net proceeds of the sale to the Company > > in satisfaction of the Option exercise price, provided that payment of such > > proceeds is then made to the Company upon settlement of such sale; > > > > (4)  With the consent of the Administrator, any combination of the > > consideration provided in the foregoing subsections (1), (2) and (3); and > > (c)  The payment to the Company (or other employer corporation) of all amounts > which it is required to withhold under federal, state or local law in > connection with the exercise of the Option, which in the discretion of the > Administrator, may be in the form of consideration used by the Optionee to pay > for such shares pursuant to Section 5.3(b); and > > (d)  Such representations and documents as the Administrator, in its absolute > discretion, deems necessary or advisable to effect compliance with all > applicable provisions of the Securities Act and any other federal or state > securities laws or regulations. The Administrator may, in its absolute > discretion, also take whatever additional actions it deems appropriate to > effect such compliance including, without limitation, placing legends on share > certificates and issuing stop-transfer orders to transfer agents and > registrars; and > > (e)  In the event that the Option or portion thereof shall be exercised > pursuant to Section 5.1 by any person or persons other than the Optionee, > appropriate proof of the right of such person or persons to exercise the > Option or portion thereof. Section 5.4 - Conditions to Issuance of Stock Certificates The shares of the Company's Common Stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: > (a)  The admission of such shares to listing on all stock exchanges on which > such series or class of stock is then listed; and > > (b)  The completion of any registration or other qualification of such shares > under any state or federal law or under the rulings or regulations of the > Securities and Exchange Commission or any other governmental regulatory body, > which the Administrator shall, in its absolute discretion, deem necessary or > advisable; and > > (c)  The obtaining of any approval or other clearance from any state or > federal governmental agency which the Administrator shall, in its absolute > discretion, determine to be necessary or advisable; and > > (d)  The payment to the Company (or other employer corporation) of all amounts > which it is required to withhold under federal, state or local law in > connection with the exercise of the Option, which in the discretion of the > Administrator, may be in the form of consideration used by the Optionee to pay > for such shares pursuant to Section 5.3(b); and > > (e)  The lapse of such reasonable period of time following the exercise of the > Option as the Administrator may establish from time to time for reasons of > administrative convenience. Section 5.5 - Rights as Stockholders The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. Section 5.6 - Transfer Restrictions The Administrator, in its absolute discretion, may impose such other restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such other restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Administrator may require an Associate to give the Company prompt notice of any disposition of shares of stock, acquired by exercise of an Incentive Stock Option, within two years from the date of granting such Option or one year after the transfer of such shares to such Associate. The Administrator may direct that the certificates evidencing shares acquired by exercise of an Incentive Stock Option refer to such requirement to give prompt notice of disposition. ARTICLE VI ADMINISTRATION   Section 6.1 - Committee The Compensation Committee of the Board (or another committee or a subcommittee of the Board assuming the functions of the Administrator under this Plan) shall serve as the Committee and shall consist of two or more Directors appointed by and holding office at the pleasure of the Board, provided, however, that grants to Associates who are considered reporting persons under Section 16 of the Exchange Act are to be administered by a committee or subcommittee consisting of two or more Directors each of whom satisfies the applicable requirements of Rule 16b-3 and Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. Section 6.2 - Duties and Powers of Administrator It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such interpretations and rules in regard to (a) Incentive Stock Options shall be consistent with the basic purpose of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan, except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Section 6.3 - Majority Rule The Administrator shall act by a majority of its members in office. The Administrator may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Administrator. Section 6.4 - Compensation; Professional Assistance; Good Faith Actions Members of the Administrator shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities incurred by members of the Administrator in connection with the administration of the Plan shall be borne by the Company. The Administrator may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Administrator, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Administrator shall be fully protected by the Company in respect to any such action, determination or interpretation. Section 6.5 - Delegation of Authority to Grant Awards The Committee may, but need not, delegate from time to time some or all of its authority to grant (and administer the terms of) Options under the Plan to a committee consisting solely of one or more members of the Committee or consisting solely of one or more Officers of the Company; provided, however, that the Committee may not so delegate its authority to grant Options (or administer the Plan with respect to Options granted) to any individual (i) who is subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (ii) who is an Executive Officer or (iii) who is an Officer. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 6.5 shall serve in such capacity at the pleasure of the Committee. ARTICLE VII OTHER PROVISIONS   Section 7.1 - Transferability of Options (a)  No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by will or by the applicable laws of descent and distribution, or permitted transfers pursuant to the Section 7.1(b) hereof. (b)  Notwithstanding the foregoing provisions of this Section 7.1, the Administrator, in its sole discretion, may determine to grant an Option, which, by its terms or by resolution of the Administrator after its grant, may be transferred by the Optionee, in writing and with prior written notice to the Administrator, by (i) gift or contribution, to a "family member" of the Optionee (as defined under the instructions to use of Form S-8), or (ii) pursuant to a domestic relations order, provided, that an Option that has been so transferred shall continue to be subject to all of the terms and conditions as applicable to the original Optionee, and the transferee shall execute any and all such documents requested by the Administrator in connection with the transfer, including without limitation to evidence the transfer and to satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws. Section 7.2 - Amendment, Suspension or Termination of the Plan The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. However, without approval of the Company's stockholders given within 12 months before or after the action by the Board, no action of the Board may, except as provided in Section 2.3, increase any limit imposed in Section 2.1 on the maximum number of shares which may be issued on exercise of Options or amend or modify the Plan in a manner requiring stockholder approval under Section 422 of the Code. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the first to occur of the following events: > (a)  The expiration of ten years from the date the Plan is adopted by the > Board; or > > (b)  The expiration of ten years from the date the Plan is approved by the > Company's stockholders under Section 7.3. Section 7.3 - Approval of Plan by Stockholders This Stock Option Plan was originally approved by the Stockholders of the Company as of November 15, 1993. Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company, any Parent Corporation or any Subsidiary (a) to establish any other forms of incentives or compensation for Associates of the Company, any Parent Corporation or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 7.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. Section 7.6 - Conformity to Securities Laws The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.   * * * *   I hereby certify that the Plan was previously approved by the stockholders of Sunrise Medical Inc. on November 15, 1993, and the first amended and restated Plan was duly adopted by the Board of Directors of Sunrise Medical Inc. on November 13, 1997; and the Second Amended and Restated Plan was duly adopted by the Board of Directors of Sunrise Medical Inc. on April 28, 1998; and this Third Amended and Restated Plan was duly adopted by the Board of Directors of Sunrise Medical Inc. on February 28, 2000.   Executed as of _______________, 2000.     > > > > > > > __________________________________________ > > > > > > > > > > > > > > Steven A. Jaye, Secretary > > > > > > > > > > > > > > > > > > >   * * * *

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Apex Inc., a Washington corporation ("Employer" or "Apex"), Avocent Corporation, a Delaware corporation, and Samuel F. Saracino (the "Employee"). RECITALS     WHEREAS, Avocent Corporation and its affiliates including Apex and Cybex Computer Products Corporation ("Cybex") (Avocent Corporation and its affiliates are collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee and Employer entered into that certain Employment and Noncompetition Agreement dated March 7, 2000 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Apex and to serve Avocent and Apex as their Senior Vice President of Legal and Corporate Affairs, General Counsel, and Secretary. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Apex as shall be necessary to perform the duties of the Senior Vice President of Legal and Corporate Affairs, General Counsel, and Secretary of Avocent and Apex. The Employee shall report to the Executive Vice President of Avocent, to the President of Avocent, and to the Boards of Directors of Avocent and Apex, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of Legal and Corporate Affairs, General Counsel, and Secretary. The Employee's principal place of business with respect to his services to Avocent and Apex shall be within the vicinity of the city of Redmond, Washington. The Employee shall function as the principal legal officer of Avocent and its affiliates with responsibility for legal and corporate affairs (including the legal aspects of Avocent's mergers and acquisitions, business development strategy, intellectual property affairs, and other legal matters). Employee will work with key managers and individuals located in Huntsville, Alabama, Shannon, Ireland, and Acton, Massachusetts, and work closely with the Executive Vice President on business development activities. --------------------------------------------------------------------------------     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include (i) any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination and (ii) any attempt to relocate outside of the vicinity of Redmond, Washington: (x) the Employee, (y) the Employee's duties and responsibilities, or (z) the Employer's office at which Employee is employed. Notwithstanding the foregoing, Employee agrees that a change in his duties and responsibilities shall not result in a constructive termination under this Section 2.1(b) unless such change results in a substantial diminution of Employee's duties and responsibilities.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Apex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Apex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Apex's, or Avocent Corporation's securities 2 -------------------------------------------------------------------------------- would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Apex's stockholders approve:     (1) any consolidation or merger of Apex in which Apex is not the continuing or surviving corporation or pursuant to which shares of Apex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Apex (including a merger of Apex into Avocent Corporation) in which the holders of Apex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Apex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Apex is owned, directly or indirectly, by a holding company, and the holders of Apex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Apex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the 3 -------------------------------------------------------------------------------- Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a 4 -------------------------------------------------------------------------------- participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $214,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Seattle, Washington, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual 5 -------------------------------------------------------------------------------- amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a)  THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Apex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Apex, which was February 23, 1998.     (b)  VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c)  LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d)  REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation 6 -------------------------------------------------------------------------------- shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or the Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time (a "Competing Business"). Notwithstanding the foregoing, (i) the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5, and (ii) the Employee's performance of services in any capacity for any consulting firm, public accounting firm, or law firm that has as a client any company or business that is a Competing Business shall not violate the prohibitions of this Section 5 so long as the Employee does not perform any services directly for such Competing Business. 7 --------------------------------------------------------------------------------     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof.     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement and the Section 1 of that certain Proprietary Information and Non-Competition Agreement dated February 16, 1998, between the Employee and Apex, which such section shall be of no further force or effect (although the other sections of such Proprietary Information and Non-Competition Agreement shall remain in full force and effect), and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Apex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent:   Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to: General Counsel   If to the Employee:       Samuel F. Saracino [          ] [          ] 8 --------------------------------------------------------------------------------     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Seattle, King County, Washington, for any lawsuit arising from or relating to this Agreement.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Seattle, Washington, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws. 9 --------------------------------------------------------------------------------     6.14  AMENDMENT OF STOCK OPTION LETTER AGREEMENTS.       (a)  ACCELERATED VESTING.  The parties agree that, effective immediately prior to the closing of the Apex Merger described in the Reorganization Agreement, Section 6 of that certain Nonstatutory Stock Option Letter Agreement dated March 12, 1999, between the Employer and the Employee is/are hereby amended by deleting the existing language and substituting therefor the following new language:     6.  Vesting.  Your option shall vest and become exercisable in full immediately prior to the closing of the Apex Merger described in that certain Agreement and Plan of Reorganization dated March 8, 2000, by and among the Company, Cybex Computer Products Corporation, and Avocent Corporation. Specifically, immediately prior to the closing of the Apex Merger (as defined in such Agreement and Plan of Reorganization), your entire option grant (all 75,000 shares) will become fully vested and immediately available for exercise. You may exercise your option on vested option shares; however, you may only exercise your option for whole shares.     (b)  REMAINING TERMS UNCHANGED.  Except as specifically set forth in this Section 6.14, the remaining terms and conditions of the Nonqualified Stock Option Letter Agreement dated March 12, 1999, shall remain unchanged and in full force and effect.     6.15  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax. 10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     APEX INC.:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Vice President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ SAMUEL F. SARACINO    -------------------------------------------------------------------------------- Samuel F. Saracino 11 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

EXHIBIT 10.1 FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT           THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and effective as of June 1, 2000, by and between Ronald J. Mittelstaedt (the "Employee") and Waste Connections, Inc., a Delaware corporation (the "Company"), and amends and restates in its entirety that certain Employment Agreement dated as of October 1, 1997, by and among the Employee, the Company, J. Bradford Bishop, Frank W. Cutler and James N. Cutler, Jr.           The Company desires to engage the services and employment of the Employee for the period provided in this Agreement, and the Employee is willing to accept employment by the Company for such period, on the terms and conditions set forth below.           NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions herein, the Company and the Employee agree as follows: 1.       Employment. The Company agrees to employ the Employee, and the Employee agrees to accept employment with the Company, for the Term stated in Section 3 hereof and on the other terms and conditions herein. 2.       Position and Responsibilities. During the Term, the Employee shall serve as Chief Executive Officer and President of the Company, and shall perform such other duties and responsibilities as the Board of Directors (the "Board") of the Company may reasonably assign to the Employee from time to time. In addition, the Employee shall serve as a member of the Board. While the Employee is a member of the Board, he shall serve on the Executive and Finance Committees of the Board. The Employee shall devote such time and attention to his duties as are necessary to the proper discharge of his responsibilities hereunder. The Employee agrees to perform all duties consistent with (a) policies established from time to time by the Company and (b) all applicable legal requirements. 3.       Term. The period of the Employee's employment commenced on October 1, 1997 and shall continue through May 31, 2003, unless terminated earlier as provided herein or extended by the vote of a majority of the Board (the "Term"). On each anniversary of the date of this Agreement, commencing June 1, 2001, this Agreement shall be extended automatically an additional year, thus extending the Term of this Agreement to three years from such date, unless either party shall have given the other notice of termination hereof as provided herein. 4.       Compensation, Benefits and Reimbursement of Expenses. The Company shall compensate the Employee during the Term of this Agreement as follows:           (a)      Base Salary. The Employee shall be paid a base salary ("Base Salary") of not less than Two Hundred Fifty Thousand Dollars ($250,000) per year in installments consistent with the Company's usual practices. The Board shall review the Employee's Base Salary on October 1 of each year or more frequently, at the times prescribed in salary administration practices applied generally to management employees of the Company.           (b)      Performance Bonus. The Employee shall be entitled to an annual cash bonus (the "Bonus") based on the Company's attainment of reasonable financial objectives to be determined -------------------------------------------------------------------------------- annually by the Board. The maximum annual Bonus will equal one hundred percent (100%) of the applicable year's ending Base Salary and will be payable if the Board determines, in its sole and exclusive discretion, that that year's financial objectives have been fully met. The Bonus shall be paid in accordance with the Company's bonus plan, as approved by the Board; provided that in no case shall any portion of the Bonus with respect to any fiscal year be paid more than seventy-five (75) days after the end of that fiscal year.           (c)      Grant of Options. The Employee shall be eligible for annual grants of management stock options (“Options”) commensurate with his position and with option grants to chief executive officers of similarly situated businesses and other senior management employees of the Company, as approved by the Board. The terms of the Options shall be described in more detail in Stock Option Agreements to be entered into between the Employee and the Company.           (d)     Other Benefits. During the Term, the Employee shall be entitled to a vehicle allowance of Five Thousand Dollars ($5,000) per year net after payment of all taxes. In addition, the Company shall pay or reimburse the Employee for all fuel and maintenance on Employee's vehicle. During the Term, the Company shall provide the Employee with a cellular telephone and will pay or reimburse the Employee's monthly service fee and costs of calls attributable to Company business. During the Term, the Company will also pay for the cost of a fax line to Employee's residence. During the Term, the Employee shall be entitled to receive all other benefits of employment generally available to other management employees of the Company and those benefits for which management employees are or shall become eligible, including, without limitation and to the extent made available by the Company, medical, dental, disability and prescription coverage, life insurance and tax-qualified retirement benefits. The Employee shall be entitled to four (4) weeks of paid vacation each year of his employment.           (e)     Reimbursement of Other Expenses. The Company agrees to pay or reimburse the Employee for all reasonable travel and other expenses incurred by the Employee in connection with the performance of his duties under this Agreement on presentation of proper expense statements or vouchers. All such supporting information shall comply with all applicable Company policies relating to reimbursement for travel and other expenses.           (f)     Withholding. All compensation payable to the Employee hereunder is subject to all withholding requirements under applicable law. 5.       Confidentiality. During the Term of his employment, and at all times thereafter, the Employee shall not, without the prior written consent of the Company, divulge to any third party or use for his own benefit or the benefit of any third party or for any purpose other than the exclusive benefit of the Company, any confidential or proprietary business or technical information revealed, obtained or developed in the course of his employment with the Company and which is otherwise the property of the Company or any of its affiliated corporations, including, but not limited to, trade secrets, customer lists, formulae and processes of manufacture; provided, however, that nothing herein contained shall restrict the Employee's ability to make such disclosures during the course of his employment as may be necessary or appropriate to the effective and efficient discharge of his duties to the Company. 6.       Property. Both during the Term of his employment and thereafter, the Employee shall not remove from the Company's offices or premises any Company documents, records, notebooks, files, correspondence, reports, memoranda and similar materials or property of any 2 -------------------------------------------------------------------------------- kind unless necessary in accordance with the duties and responsibilities of his employment. In the event that any such material or property is removed, it shall be returned as promptly as possible. The Employee shall not make, retain, remove or distribute any copies, or divulge to any third person the nature or contents of any of the foregoing or of any other oral or written information to which he may have access, except as disclosure shall be necessary in the performance of assigned duties. On the termination of his employment with the Company, the Employee shall leave with or return to the Company all originals and copies of the foregoing then in his possession or subject to his control, whether prepared by the Employee or by others. 7.       Termination By Company.           (a)     Termination for Cause. The employment of the Employee may be terminated for Cause at any time by the vote of a majority of the Board; provided, however, that before the Company may terminate the Employee's employment for Cause for any reason that is susceptible to cure, the Company shall first send the Employee written notice of its intention to terminate this Agreement for Cause, specifying in such notice the reasons for such Cause and those conditions that, if satisfied by the Employee, would cure the reasons for such Cause, and the Employee shall have 60 days from receipt of such written notice to satisfy such conditions. If such conditions are satisfied within such 60-day period, the Company shall so advise the Employee in writing. If such conditions are not satisfied within such 60-day period, the Company may thereafter terminate this Agreement for Cause on written Notice of Termination (as defined in Section 9(a)) delivered to the Employee describing with specificity the grounds for termination. Immediately on termination pursuant to this Section 7(a), the Company shall pay to the Employee in a lump sum his then current Base Salary under Section 4(a) on a prorated basis to the Date of Termination (as defined in Section 9(b)). On termination pursuant to this Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(b) for the year in which such termination occurs, and (ii) all unvested Options and other options, warrants and rights relating to capital stock of the Company. For purposes of this Agreement, Cause shall mean:                    (1) a material breach of any of the terms of this Agreement that is not immediately corrected following written notice of default specifying such breach;                    (2) repeated intoxication with alcohol or drugs while on Company premises during its regular business hours to such a degree that, in the reasonable judgment of the other managers of the Company, the Employee is abusive or incapable of performing his duties and responsibilities under this Agreement;                    (3) conviction of a felony; or                    (4) misappropriation of property belonging to the Company and/or any of its affiliates.           (b)     Termination Without Cause. The employment of the Employee may be terminated without Cause at any time by the vote of a majority of the Board on delivery to the Employee of a written Notice of Termination (as defined in Section 9(a)). On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the Company shall pay to the Employee in a lump sum in lieu of payments under Section 4(a), 4(b) and 4(d) for the remainder of the Term an amount equal to the sum of (i) all Base Salary payable under Section 3 -------------------------------------------------------------------------------- 4(a) through the termination date, (ii) a pro-rated portion of the maximum Bonus available to the Employee under Section 4(b) for the year in which the termination occurs, (iii) an amount equal to three times the Employee’s Total Compensation for the twelve months preceding the termination date, and (iv) one million three hundred thirty three thousand three hundred thirty three dollars and thirty four cents ($1,333,333.34). In addition, provided that Employee has complied with the provisions of Section 12 hereof, on each of the first and second anniversaries of the Date of Termination of the Employee’s employment, the Company shall pay the Employee in a lump sum one million three hundred thirty three thousand three hundred thirty three dollars and thirty three cents ($1,333, 333.33). For purposes of this section 7(b), the Employee's Total Compensation shall equal the sum of the Base Salary, maximum Bonus of 100% of such Base Salary (whether or not the entire amount was actually earned or paid to the Employee), vehicle allowance and other benefits and expense reimbursements described in Sections 4(d) and 4(e), and director's fees paid to the Employee by the Company, provided that solely for the purpose of computing Total Compensation, if at the date of termination the Employee’s Base Salary is less than $250,000 per year, then the Employee’s Base Salary shall be deemed to be $250,000 for the purpose of such computation. In addition, on termination of the Employee under this Section 7(b), all of the Employee's unvested Options and other options, warrants and rights relating to capital stock of the Company shall immediately vest and become exercisable. The term of any such options (including the Options), warrants and rights shall be extended to the fifth anniversary of the Employee's termination. The Employee acknowledges that extending the term of any incentive stock option pursuant to this Section 7(b), or Section 7(c), 7(d) or 8(a), could cause such option to lose its tax-qualified status under the Internal Revenue Code of 1986, as amended (the "Code"), and agrees that the Company shall have no obligation to compensate the Employee for any additional taxes he incurs as a result.           (c)      Termination on Disability. If during the Term the Employee should fail to perform his duties hereunder on account of physical or mental illness or other incapacity which the Board shall in good faith determine renders the Employee incapable of performing his duties hereunder, and such illness or other incapacity shall continue for a period of more than six (6) consecutive months ("Disability"), the Company shall have the right, on written Notice of Termination (as defined in Section 9(a)) delivered to the Employee to terminate the Employee's employment under this Agreement. During the period that the Employee shall have been incapacitated due to Disability, the Employee shall continue to receive the full Base Salary provided for in Section 4(a) hereof at the rate then in effect until the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of Termination pursuant to this Section 7(c), the Company shall pay to the Employee in a lump sum an amount equal to (i) the Base Salary remaining payable to the Employee under Section 4(a) for the full remaining Term, plus (ii) a pro-rated portion of the maximum Bonus available to the Employee under Section 4(b) for the year in which the termination occurs. In addition, on such termination, all of the Employee's unvested Options and other options, warrants and rights relating to capital stock of the Company shall immediately vest and become exercisable. The term of any such options (including the Options), warrants and rights shall be extended to the fifth anniversary of the Employee's termination.           (d)     Termination on Death. If the Employee shall die during the Term, the employment of the Employee shall thereupon terminate. On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the Company shall pay to the Employee's estate the payments and other benefits applicable to termination without Cause set forth in clauses (i), (ii) 4 -------------------------------------------------------------------------------- and (iii) of Section 7(b) hereof. In addition, on termination of the Employee under this Section 7(d), all of the Employee's unvested Options and other options, warrants and rights relating to capital stock of the Company shall immidiately vest and become exercisable. The term of any such options (including the Options), warrants and rights shall be extended to the fifth anniversary of the Employee's termination. The provisions of this Section 7(d) shall not affect the entitlements of the Employee's heirs, executors, administrators, legatees, beneficiaries or assigns under any employee benefit plan, fund or program of the Company. 8.       Termination By Employee.           (a)     Termination for Good Reason. The Employee may terminate his employment hereunder for Good Reason (as defined below). On the Date of Termination pursuant to this Section 8(a), the Employee shall be entitled to receive, and the Company agrees to pay and deliver, the payments and other benefits applicable to termination without Cause set forth in Section 7(b) hereof at the times and subject to the conditions set forth therein. In addition, on termination of the Employee under this Section 8(a), all of the Employee's Options and other options, warrants and rights relating to capital stock of the Company shall immediately vest and become exercisable. The term of any such options (including the Options), warrants and rights shall be extended to the fifth anniversary of the Employee's termination.      For purposes of this Agreement, "Good Reason" shall mean:                    (1) assignment to the Employee of duties inconsistent with his responsibilities as they existed on the date of this Agreement; a substantial alteration in the title(s) of the Employee (so long as the existing corporate structure of the Company is maintained); or a substantial alteration in the status of the Employee in the Company organization as it existed on the date of this Agreement;                    (2) the relocation of the Company's principal executive office to a location more than fifty (50) miles from its present location;                    (3) a reduction by the Company in the Employee's Base Salary without the Employee’s approval;                    (4) a failure by the Company to continue in effect, without substantial change, any benefit plan or arrangement in which the Employee was participating or the taking of any action by the Company which would adversely affect the Employee's participation in or materially reduce his benefits under any benefit plan (unless such changes apply equally to all other management employees of Company);                    (5) any material breach by the Company of any provision of this Agreement without the Employee having committed any material breach of his obligations hereunder, which breach is not cured within twenty (20) days following written notice thereof to the Company of such breach; or                    (6) the failure of the Company to obtain the assumption of this Agreement by any successor entity. 5 --------------------------------------------------------------------------------           (b)     Termination Without Good Reason. The Employee may terminate his employment hereunder without Good Reason on written Notice of Termination delivered to the Company setting forth the effective date of termination. If the Employee terminates his employment hereunder without Good Reason, he shall be entitled to receive, and the Company agrees to pay on the effective date of termination specified in the Notice of Termination, his current Base Salary under Section 4(a) hereof on a prorated basis to such date of termination. On termination pursuant to this Section 8(b), the Employee shall forfeit (i) his Bonus under Section 4(b) for the year in which such termination occurs, and (ii) all unvested Options and other options, warrants and rights relating to capital stock of the Company. 9.       Provisions Applicable to Termination of Employment.           (a)     Notice of Termination. Any purported termination of Employee's employment by the Company pursuant to Section 7 shall be communicated by Notice of Termination to the Employee as provided herein, and shall state the specific termination provisions in this Agreement relied on and set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment ("Notice of Termination"). If the Employee terminates under Section 8, he shall give the Company a Notice of Termination.           (b)     Date of Termination. For all purposes, "Date of Termination" shall mean, for Disability, thirty (30) days after Notice of Termination is given to the Employee (provided the Employee has not returned to duty on a full-time basis during such 30-day period), or, if the Employee's employment is terminated by the Company for any other reason or by the Employee, the date on which a Notice of Termination is given.           (c)     Benefits on Termination. On termination of this Agreement by the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all profit-sharing, deferred compensation and other retirement benefits payable to the Employee under benefit plans in which the Employee then participated shall be paid to the Employee in accordance with the provisions of the respective plans. 10.      Change In Control.           (a)     Payments on Change in Control. Notwithstanding any provision in this Agreement to the contrary, unless the Employee elects in writing to waive this provision, a Change in Control (as defined in Section 11(d) below) of the Company shall be deemed a termination of the Employee without Cause, and the Employee shall be entitled to receive and the Company agrees to pay to the Employee the amount determined under Section 7(b) that is payable to the Employee on termination without Cause up to a maximum of five million five hundred thousand dollars ($5,500,000) provided, however, that such amount shall be paid in a lump sum on the Date of Termination and not in installments as provided in Section 7(b). In addition, on a Change of Control, all of the Employee's unvested Options and other options, warrants and rights relating to capital stock of the Company shall immediately vest and become exercisable, and the term of any such options (including the Options), warrants and rights shall be extended to the fifth anniversary of the Employee's termination.           After a Change in Control, if any option (including the Options), warrant or right (the "Terminated Option") relating to the Company's capital stock does not remain outstanding, the successor to the Company or its then Parent (as defined in Section 10 below) shall either: 6 --------------------------------------------------------------------------------                     (i)      Issue an option, warrant or right, as appropriate (the "Successor Option"), to purchase common stock of such successor or Parent in an amount such that on exercise of the Successor Option the Employee would receive the same number of shares of the successor's/Parent's common stock as the Employee would have received had the Employee exercised the Terminated Option immediately prior to the transaction resulting in the Change in Control and received shares of such successor/Parent in such transaction. The aggregate exercise price for all of the shares covered by such Successor Option shall equal the aggregate exercise price of the Terminated Option; or                     (ii)     Pay the Employee a bonus within ten (10) days after the consummation of the Change in Control, in an amount agreed to by the Employee and the Company. Such amount shall be at least equivalent to an after-tax basis to the net after-tax gain that the Employee would have realized if he had been issued a Successor Option under clause (i) above and had immediately exercised such Successor Option and sold the underlying stock, taking into account the different tax rates that apply to such bonus and to such gain, and such amount shall also reflect other differences to the Employee between receiving a bonus under this clause (ii) and receiving a Successor Option under clause (i) above.           (b)     Definitions. For the purposes of this Agreement, a Change in Control shall be deemed to have occurred if (i) there shall be consummated (aa) any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction, (bb) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or if (ii) any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company's outstanding voting securities (except that for purposes of this Section 10(b), "person" shall not include any person (or any person that controls, is controlled by or is under common control with such person) who as of the date of this Agreement owns ten percent (10%) or more of the total voting power represented by the outstanding voting securities of the Company, or a trustee or other fiduciary holding securities under any employee benefit plan of the Company, or a corporation that is owned directly or indirectly by the stockholders of the Company in substantially the same percentage as their ownership of the Company) or if (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least one-half of the membership thereof unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least one-half of the directors then still in office who were directors at the beginning of the period.           The term "Parent" means a corporation, partnership, trust, limited liability company or other entity that is the ultimate "beneficial owner" (as defined above) of fifty percent (50%) or more of the Company's outstanding voting securities. 7 -------------------------------------------------------------------------------- 11.     Gross Up Payments. If all or any portion of any payment or benefit that the Employee is entitled to receive from the Company pursuant to this Agreement (a "Payment") constitutes an "excess parachute payment" within the meaning of Section 280G of the Code, and as such is subject to the excise tax imposed by Section 4999 of the Code or to any similar Federal, state or local tax or assessment (the "Excise Tax"), the Company or its successors or assigns shall pay to the Employee an additional amount (the "Gross-Up Payment") with respect to such Payment. The amount of the Gross-Up Payment shall be sufficient that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c) any interest and penalties imposed in respect of the Excise Tax, the Employee shall retain an amount equal to the full amount of the Payment. For the purpose of determining the amount of any Gross-Up Payment, the Employee shall be deemed to pay Federal income taxes at the highest marginal rate applicable in the calendar year in which the Gross-Up Payment is made, and state and local income taxes at the highest marginal rate applicable in the state and locality where the Employee resides on the date the Gross-Up Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from deducting such state and local taxes.           The Gross-Up Payment with respect to any Payment shall be paid to the Employee within ten (10) days after the Internal Revenue Service or any other taxing authority issues a notice stating that an Excise Tax is due with respect to the Payment, unless the Company undertakes to challenge the taxing authority on the applicability of such Excise Tax and indemnifies the Employee for (a) any amounts ultimately determined to be payable, including the Excise Tax and any related interest and penalties, (b) all expenses (including attorneys' and experts' fees) reasonably incurred by the Employee in connection with such challenge, as such expenses are incurred, and (c) all amounts that the Employee is required to pay to the taxing authorities during the pendency of such challenge (such amounts to be repaid by the Employee to the Company if they are ultimately refunded to the Employee by the taxing authority). 12.      Non-Competition and Non-Solicitation.           (a)      In consideration of the provisions hereof and the payments provided under Sections 7 and 10(a), for the Restricted Period (as hereinafter defined), the Employee will not, except as specifically provided below, anywhere in any county in the State of California or anywhere in any other state in which the Company is engaged in business as of such termination date (the "Restricted Territory"), directly or indrectly, acting individually or as the owner, shareholder, partner or management employee of any entity, (i) engage in the operation of a solid waste collection, transporting or disposal business, transfer facility, recycling facility, materials recovery facility or solid waste landfill; (ii) enter the employ as a manager of, or render any personal services to or for the benefit of, or assist in or facilitate the solicitation of customers for, or receive remuneration in the form of management salary, commissions or otherwise from, any business engaged in such activities in such counties; or (iii) receive or purchase a financial interest in, make a loan to, or make a gift in support of, any such business in any capacity, including without limitation, as a sole proprietor, partner, shareholder, officer, director, principal agent or trustee; provided, however, that the Employee may own, directly or indirectly, solely as an investment, securities of any business traded on any national securities exchange or quoted on any NASDAQ market, provided the Employee is not a controlling person of, or a member of a group which controls, such business and further provided that the Employee does not, in the aggregate, directly or indirectly, own two percent (2%) or more of any class of securities of such 8 -------------------------------------------------------------------------------- business. The term “Restricted Period” shall mean the earlier of (i) the maximum period allowed under applicable law and (ii)(x) in the case of a Change of Control, until the fifth anniversary of the effective date of the Change of Control, (y) in the case of a termination by the Company without Cause pursuant to Section 7(b) or by the Employee for Good Reason pursuant to Section 8(a) and provided the Company has made the payments required under Section 7(b) or 8(a), as the case may be, until the third anniversary of the Date of Termination, or (z) in the case of Termination for Cause by the Company pursuant to Section 7(a) or by the Employee without Good Reason pursuant to Section 8(b), until the first anniversary of the Date of Termination.           (b)     During the Restricted Period, the Employee shall not (i) solicit any residential or commercial customer of the Company to whom the Company provides service pursuant to a franchise agreement with a public entity in the Restricted Territory (ii) solicit any residential or commercial customer of the Company to enter into a solid waste collection account relationship with a competitor of the Company in the Restricted Territory, (iii) solicit any such public entity to enter into a franchise agreement with any such competitor, (iv) solicit any officer of the Company to enter into an employment agreement with a competitor of the Company or otherwise interfere in any such relationship, or (v) solicit on behalf of a competitor of the Company any prospective customer of the Company in the Restricted Territory that the Employee called on or was involved in soliciting on behalf of the Company during the Term, provided, however, that nothing herein shall prevent the Employee from soliciting any of the following officers of the Company to be employed in a business that is not competitive with the business of the Company (i) at time after any such officer’s employment is terminated by the Company, (ii) at any time after any such officer’s employment is terminated by the officer for Good Reason (as defined in the officer’s employment agreement) and (iii) at any time after the expiration the number of months indicated after each officer’s name from the date such officer notifies the Company of his intention to terminate his employment other than for Good Reason: Darrell Chambliss (twelve (12) months), David Hall (twelve (12) months), Michael Foos (six (6) months) and Eric Moser (six (6) months).           (c)     If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 12 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specified words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 13.     Indemnification. As an employee and agent of the Company, the Employee shall be fully indemnified by the Company to the fullest extent permitted by applicable law in connection with his employment hereunder. 14.     Board Representation. The Company agrees that during the Term, the Employee may recommend nominees (in addition to himself) for election to the Board, such that at all times that there are five (5) or fewer members of the Board, the Employee shall have recommended at least two (2) nominees for election to such Board, and at all times that there are more than five (5) members of the Board, the Employee shall have recommended at least three (3) nominees for election to such Board (in each case in addition to the Employee). This Section 14 shall no longer be effective following, and shall terminate, a Change of Control. 9 -------------------------------------------------------------------------------- 15.     Survival of Provisions. The obligations of the Company under Section 12 of this Agreement shall survive both the termination of the Employee's employment and this Agreement. 16.     No Duty to Mitigate; No Offset. The Employee shall not be required to mitigate damages or the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other sources or offset against any other payments made to him or required to be made to him pursuant to this Agreement. 17.      Assignment; Binding Agreement. The Company may assign this Agreement to any parent, subsidiary, affiliate or successor of the Company. This Agreement is not assignable by the Employee and is binding on him and his executors and other legal representatives. This Agreement shall bind the Company and its successors and assigns and inure to the benefit of the Employee and his heirs, executors, administrators, personal representatives, legatees or devisees. The Company shall assign this Agreement to any entity that acquires its assets or business. 18.     Notice. Any written notice under this Agreement shall be personally delivered to the other party or sent by certified or registered mail, return receipt requested and postage prepaid, to such party at the address set forth in the records of the Company or to such other address as either party may from time to time specify by written notice. 19.     Entire Agreement; Amendments. This Agreement contains the entire agreement of the parties relating to the Employee's employment and supersedes all oral or written prior discussions, agreements and understandings of every nature between them. This Agreement may not be changed except by an agreement in writing signed by the Company and the Employee. 20.     Waiver. The waiver of a breach of any provision of this Agreement shall not operate or as be construed to be a waiver of any other provision or subsequent breach of this Agreement. 21.     Governing Law and Jurisdictional Agreement. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California. The parties irrevocably and unconditionally submit to the jurisdiction and venue of any court, federal or state, situated within Sacramento County, California, for the purpose of any suit, action or other proceeding arising out of, or relating to or in connection with, this Agreement. 22.     Severability. In case any one or more of the provisions contained in this Agreement is, for any reason, held invalid in any respect, such invalidity shall not affect the validity of any other provision of this Agreement, and such provision shall be deemed modified to the extent necessary to make it enforceable. 23.     Enforcement. It is agreed that it is impossible to measure fully, in money, the damage which will accrue to the Company in the event of a breach or threatened breach of Section 5 or 6 of this Agreement, and, in any action or proceeding to enforce the provisions of Section 5 or 6 hereof, the Employee waives the claim or defense that the Company has an adequate remedy at law and will not assert the claim or defense that such a remedy at law exists. The Company is 10 -------------------------------------------------------------------------------- entitled to injunctive relief to enforce the provisions of such sections as well as any and all other remedies available to it at law or in equity without the posting of any bond. 24.     Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute one and the same instrument. 25.      Due Authorization. The execution of this Agreement has been duly authorized by the Company by all necessary corporate action.        IN WITNESS WHEREOF, the parties have executed and delivered this First Amended and Restated Employment Agreement as of the day and year set forth above.     WASTE CONNECTIONS, INC., a Delaware corporation             By:         --------------------------------------------------------------------------------     Name:         --------------------------------------------------------------------------------     Title:         --------------------------------------------------------------------------------             EMPLOYEE:                     --------------------------------------------------------------------------------     Ronald J. Mittelstaedt 11 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 LONG-TERM PERFORMANCE INCENTIVE PLAN FISCAL YEARS 2001-2003 PLAN DESCRIPTION 21 -------------------------------------------------------------------------------- Highlights     This booklet explains the plan provisions of the Sara Lee Corporation Long-Term Performance Incentive Plan covering fiscal years 2001 through 2003 ("Performance Cycle"). The following pages provide detailed information relating to the grant of restricted stock units that you have received under the Plan.     The key features of this plan are summarized below. In some countries other than the United States, variations in plan design may occur in order to comply with local laws and tax provisions. Restricted Stock Units •Restricted stock units (RSUs) are granted at the beginning of the Performance Cycle. At the end of the Performance Cycle, based upon the actual performance results, the appropriate number of RSUs are converted to shares of Sara Lee stock, on a one-for-one basis, and issued in your name. •The number of shares, if any, that will be released to you is dependent upon the extent to which the pre-established performance goals are achieved during the Performance Cycle. •An opportunity to earn additional shares is possible if performance results exceed the Superior performance level. •You do not have voting rights on RSUs during the Performance Cycle. Dividend Equivalents •Dividend equivalents are accrued on your behalf through the Performance Cycle. •Interest on accrued dividend equivalents is credited at the same rate as provided for under the Sara Lee Corporation Executive Deferred Compensation Plan. •Accrued dividend equivalents and interest is distributed to you to the extent that shares are earned at the end of the Performance Cycle. No dividend equivalents or interest are paid in arrears on shares earned in excess of the Superior performance level. Performance Measures •The following Sara Lee Corporation performance measures apply to this performance cycle: •3-Year Cumulative Diluted Earnings Per Share •3-Year Average Return on Invested Capital Purpose     Sara Lee Corporation ("SLC") has adopted the Long-Term Performance Incentive Plan ("LTPIP") for Fiscal Years 2001-2003 for eligible executives. The LTPIP exists in order to: •Focus senior management's attention on the long-term performance results of Sara Lee Corporation •Provide incentive compensation opportunities commensurate with the achievement of earnings per share and return on invested capital targets •Enhance the competitiveness of the SLC's long-term compensation program and aid in attracting and retaining highly qualified and motivated executives. 22 -------------------------------------------------------------------------------- Restricted Stock Units     LTPIP awards are authorized under the Sara Lee Corporation 1998 Long-Term Incentive Stock Plan ("Stock Plan"). LTPIP awards are initially granted as restricted stock units ("RSUs") at the beginning of the Performance Cycle. At the end of the Performance Cycle, any RSUs that are earned will be converted to shares of Sara Lee common stock. Dividend equivalents that are earned on RSUs during the Performance Cycle are accrued on your behalf and credited with interest at the same rate paid under SLC's Executive Deferred Compensation Plan.     RSUs have special restrictions that are based upon both your continued service and SLC's performance against the financial goals that have been established. These restrictions prohibit the transfer of the RSUs during the Performance Cycle. The financial goals and their respective weightings are shown in Appendix I. Any shares not earned at the end of the Performance Cycle are forfeited.     SLC may substitute or offer alternative incentive forms, such as restricted cash units or stock options with special provisions, in the event it either determines that tax or legal regulations in some countries provide more favorable treatment for these alternatives or as an elective alternative to RSUs. Dividend Equivalents     During the Performance Cycle, dividend equivalents that are payable on the RSUs will be accrued on your behalf. Interest on the accrued amounts will be credited at the same time and in the same manner as under SLC's Executive Deferred Compensation Plan. No dividend equivalents or interest are paid in arrears on any additional shares issued for performance above the Superior performance level.     Amounts credited to the accrued dividend equivalent account at the end of the Performance Cycle are distributed in the same proportion as the restrictions on the RSUs lapse. For example, if 75% of the RSUs are earned, then 75% of the balance in the accrued dividend equivalent account will be paid at the same time the RSUs/Sara Lee shares of common stock are released. Any remaining balance in the dividend equivalent account will be forfeited. Performance Standards     Performance under the LTPIP is measured using the corporate financial measures described below. Both of these financial measures are independent of one another for purposes of measuring results and determining how many, if any, of the RSUs are earned. •Cumulative Diluted Earnings Per Share (Diluted EPS) •Three-year average SLC Return on Invested Capital (ROIC)     Definitions of these measures are included in Appendix II.     The performance levels for Diluted EPS and ROIC targets are shown in Appendix I.     The performance levels and the percentage of RSUs that will be distributed are as follows: Performance Level --------------------------------------------------------------------------------   % of Shares Distributed -------------------------------------------------------------------------------- Threshold   0% Good   50% Superior   100% Outstanding   125% 23 --------------------------------------------------------------------------------     Interpolations are used for results that fall between performance levels. For performance above Superior, additional shares are issued after the end of the Performance Cycle. No dividend equivalents or interest are paid in arrears on any additional shares issued for performance above the Superior performance level. No shares are earned for performance results at or below the Threshold performance level. Award Grant Notice     Each Participant will receive a Restricted Stock Unit Grant Notice ("Grant Notice") specifying the number of RSUs that have been granted, and the specific terms and conditions applicable to the grant. The Grant Notice should be retained by the Participant along with his or her other important legal documents. A second copy of the Grant Notice will be kept on file in SLC's Corporate Compensation Department. Tax Consequences United States     Under current United States tax legislation, a Participant receives no taxable income from RSUs awarded, dividend equivalents escrowed or interest credited thereon. The date ("Vesting Date") when the Committee reviews the performance results for the Performance Cycle and determines the number of shares earned by Participants serves as the date when the taxable event will occur, except to the extent any Participant has elected to defer distribution of the shares until a later date ("Deferred Vesting Date"). The market value of SLC common stock on the Vesting Date or the Deferred Vesting Date, as the case may be, will determine the amount of taxable income. When the number of shares actually earned has been determined, the market value of the shares on the Vesting Date or the Deferred Vesting Date, as well as the proportionate dividend equivalents and interest thereon are considered income to the Participant. This amount is then subject to applicable federal, state and local withholding. Amounts necessary to settle the tax-withholding obligation will be withheld from the cash and/or shares otherwise to be distributed to the Participant or by a personal check from the Participant. Countries other than the United States     Tax laws vary significantly from country to country, so advice should be obtained from appropriate counsel concerning the tax consequences of this grant in your country. In most cases, Participants incur no taxable income from RSUs when initially awarded, on accrued dividend equivalents and interest credited on the dividend equivalents, until the Vesting Date. When the shares are earned, both the market value of the shares on the Vesting Date as well as the dividends and interest distributed are typically considered income. For those individuals residing outside the U.S. and not subject to U.S. tax laws, no tax withholding will be made by SLC in Chicago. Any required withholding tax should be withheld at the local operating unit level. Each Participant is responsible for compliance with the relevant legal and tax regulations in his or her tax jurisdiction. Impact on Other Benefits     Any shares, dividend equivalents or interest ultimately earned under the LTPIP are not considered compensation for purposes of any retirement plan, severance arrangement or other benefit plans in which you may participate in now or become eligible to participate in at a later date. 24 -------------------------------------------------------------------------------- Administrative Guidelines     The following guidelines apply to the FY01-03 LTPIP. Additional Administrative Guidelines may be adopted, as needed, during the Performance Cycle for the efficient administration of the Plan. •The Committee is responsible for administering the Plan and has full power and authority to interpret the Plan and to adopt rules, regulations and guidelines for carrying out the Plan, as it deems necessary. •The Committee functions as the Plan Administrator and its decisions are binding on all persons. •The Committee reserves the right, in its absolute discretion, to reduce the awards earned by any Participant. In determining whether to reduce awards, the Committee may take into account the positive effect of the Exclusions specified in Appendix II. •The Committee reserves the right, in its absolute discretion, to make further adjustments in reported performance (for purposes of measuring results vs. the goals) or in awards earned by reference to that performance with respect to any Participant who is not an SLC Executive Officer during FY03. •The Committee reserves the right to change any terms and conditions of the FY01-03 LTPIP award to Executive Officers, including the definitions of Diluted EPS and ROIC, if deemed necessary on advice of counsel to meet the requirements for a "performance-based exemption" under the regulations or rulings of §162(m) of the Internal Revenue Code. •The Committee may make additional changes that it deems appropriate for the effective administration of the LTPIP, including the establishment of appropriate performance measure weights for newly created executive levels. However, other than as described above, these changes may not reduce the benefits to which Participants are entitled under the LTPIP, nor change the pre-established performance measures and goals that have been approved. •The Committee may, as it deems appropriate, delegate some or all of its power to the Chief Executive Officer or other executive officer of the Corporation. However, the Committee may not delegate its power concerning the grant, timing, pricing or amount of an award to any person who is a corporate officer or Key Executive. •The SLC Controller's Department will be responsible for providing financial results under the LTPIP. The Committee will approve the awards when granted at the beginning of the Performance Cycle and ratify distributions to be made at the end of the Performance Cycle for all Corporate Officers and Key Executives. The portion of the shares earned along with the related balance of the accrued dividend equivalents account will be distributed as soon as practicable after the completion of the final accounting for the FY01-03 Performance Cycle and after ratification of the recommended share distributions by the Committee. •Awards may be made to new Participants during the first year of the Performance Cycle. The number of RSUs awarded may be adjusted to reflect that the executive is not a Participant for the entire Performance Cycle. •Awards may be made to Participants who change positions during the first year of the Performance Cycle, if such a change would have resulted in qualifying for an increased level of award. •The impact of Major Acquisitions and Divestitures made during the Performance Cycle will be excluded from the performance results for the entire three-year Performance Cycle. The impact of all other acquisitions and divestitures will be included in the performance results. •In the event of death, total disability or retirement under a retirement plan of SLC prior to the last day of fiscal year 2003, the restrictions may lapse on a pro-rata number of the RSUs which are earned under the provisions described in this plan, subject to approval of the Committee. Only periods of active service are recognized for purposes of computing any prorated distribution. If applicable, the shares and related dividend equivalents and interest will be distributed at the normal payout time. 25 -------------------------------------------------------------------------------- •A Participant who resigns or is terminated during the Performance Cycle generally forfeits the rights to all RSUs and any accrued dividend equivalents and interest. Participants may be eligible for a prorated distribution, subject to Committee approval. Eligibility for a prorated distribution and the number of shares that may be recommended for distribution would be dependent upon the circumstances resulting in the individual's termination; the number of shares distributed to a participant under these circumstances would never exceed the amount distributed in the event of his or her retirement, death or total disability. In order to be considered for any prorated distribution under this Plan provision, a Participant must be actively employed at least through one-half, i.e. 18 months, of the Performance Cycle. If employment ceases before the end of that time, all RSUs granted under that Performance Cycle would be forfeited. Following the same procedures applicable to retirement, death or total disability, only periods of active service will be recognized for purposes of computing any prorated distribution. This means that any period of time during which services may be provided to the company but the individual is not then a regular, full-time employee of the company, will be disregarded for purposes of calculating any prorated distribution. •In the event of a sale, closing, spin-off or other disposition of the Participant's business unit which results in the termination of the Participant's employment with the Company, the Participant may be eligible for a prorated distribution of shares. Only periods of active service from the beginning of the Performance Cycle will be considered and payout will occur at the end of the Performance Cycle. •Should a change in control occur (as defined in the Stock Plan), the Committee will decide what effect, if any, this should have on the awards which are outstanding under this Plan. •If any statement in this Plan Description or any oral representation differs from the Stock Plan, the Stock Plan document prevails. The Stock Plan, Grant Notice and Plan Description collectively comprise all terms and conditions applicable to the FY01-03 LTPIP. •Any stock dividend, stock split, combination or exchange of securities, merger, consolidation, recapitalization, spin-off or other distribution of any or all of the assets of the Company will be handled as provided for in the Stock Plan. •Nothing in the LTPIP shall confer on a Participant any right to continue in the employ of SLC or in any way affect SLC's right to terminate the Participant's employment in accordance with applicable laws. 26 -------------------------------------------------------------------------------- Appendix II FY01-03 LTPIP Definitions a)Adjustments means changes to the goal to appropriately reflect the effect of stock splits or combinations, stock dividends and spin-offs or special distributions to stockholders other than normal cash dividends. b)The Committee means the Compensation and Employee Benefits Committee of the Sara Lee Corporation Board of Directors. c)Award Date means the date upon which the Board of Directors or the Committee approved the awards under this Plan. In this case the Award Date may mean either April 27, 2000, August 31, 2000 or January 25, 2001, unless an alternate date was required for tax and/or legal reasons in locations outside the United States. d)Company or Corporation means Sara Lee Corporation or any entity that is directly or indirectly controlled by Sara Lee Corporation, and its subsidiaries. e)Deferred Vesting Date means the Distribution Date specified under the Sara Lee Corporation Executive Deferred Compensation Plan, in the event the Participant elected to defer his or her LTPIP award. f)Dividend Equivalents has the same meaning as in the Stock Plan. g)Earnings Before Interest and Amortization ("EBIA") means SLC pre-tax income adjusted to add back the following: after-tax interest expense, non-cash amortization including that on goodwill and trademarks, and the change in deferred taxes from the consolidated statement of cash flow; this value is then reduced by the tax provision on the consolidated income statement. h)Earnings Per Share ("EPS") means reported diluted earnings per share for the fiscal years in the Performance Cycle subject to applicable Adjustments and Exclusions as defined in this section. i)Exclusions means the automatic exclusion of the following from relevant financial data for purposes of measuring performance (subject to the Committee's use of negative discretion): —  extraordinary or unusual charges (accounting definition) —  revisions to the U.S. Internal Revenue Code —  changes in generally accepted accounting principles —  gains or losses from discontinued operations (accounting definition) —  changes in definition of diluted earnings per share —  restructuring charges —  any other extraordinary or unusual charges that are quantified and identified separately on the face of the Income Statement. —  Major Acquisitions and Divestitures (i.e. those with a purchase or sale price of $500 million or more) made during the Performance Cycle will be excluded for the entire Performance Cycle, while all other acquisitions and divestitures will be included in the financial data for purposes of measuring corporate performance during the Performance Cycle. i)Grant Notice means the document provided to each Participant evidencing the number of restricted stock units awarded and the basic terms and conditions of the award. j)Key Executive means an employee whose salary, when expressed in U.S. dollars, is above the midpoint of salary grade 39. k)Participant means an executive of the company who has been determined to be an eligible Participant and who has received a Grant Notice specifying the basic terms of participation in this Plan. Participants for the FY01-03 Performance Cycle include Senior Vice Presidents and above of the Corporation. 27 -------------------------------------------------------------------------------- l)Performance Cycle is the three-year period consisting of SLC's fiscal years 2001 through and including 2003. m)Restricted Stock Units has the same meaning as "performance units" as that term is used in the Stock Plan. n)Return on Invested Capital ("ROIC") means the ratio of SLC EBIA to SLC average total capital (on a two-point basis) as defined byFirst Boston. The Average ROIC is calculated as the simple average of ROIC for each of the three fiscal years in the Performance Cycle, subject to the applicable Adjustments and Exclusions defined above. o)Stock Plan means the Sara Lee Corporation 1998 Long-Term Incentive Stock Plan or its successor plan or plans. p)Total Disability is defined in the Key Executive Long-Term Disability Plan of SLC. q)Vesting means the determination made at the end of the Performance Cycle as to how many, if any, of the RSUs are actually earned by a Participant based upon actual performance results. r)Vesting Date means the date on which the Committee approves the distribution of shares at the end of the Performance Cycle. 28 -------------------------------------------------------------------------------- QUICKLINKS FY01-03 LTPIP

EXHIBIT 10.6 EMPLOYMENT AGREEMENT SAKS INCORPORATED EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is entered into as of the 1st day of November 2000, by and between Saks Incorporated (the "Company"), and Donald E. Wright ("Executive").     Company and Executive agree as follows:     1. Employment. Company hereby employs Executive as Senior Vice President of Finance and Accounting of Company or in such other capacity with Company and its subsidiaries as Company's Board of Directors shall designate.     2. Duties. During his employment, Executive shall devote substantially all of his working time, energies, and skills to the benefit of Company's business. Executive agrees to serve Company diligently and to the best of his ability and to use his best efforts to follow the policies and directions of Company's Board of Directors.     3. Compensation. Executive's compensation and benefits under this Agreement shall be as follows:         (a) Base Salary. Company shall pay Executive a base salary ("Base Salary") at a rate of no less than $334,750 per year. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law.         (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus with a target maximum of 50% of Base Salary based upon his performance in accordance with specific annual objectives, set in advance, all as approved by the Board of Directors.         (c) New Option Grant. Executive is granted a non-qualified option ("Option") to purchase 225,000 shares of Company common stock at an option price equal to the closing price of the stock at the close of business on November 1, 2000 (the "Grant Date"), as reported in the Wall Street Journal. The Option is granted pursuant to the Company's 1994 Amended and Restated Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable at the following times: to the extent of 20% on May 1, 2001, 20% on November 1, 2001, 20% on November 1, 2002, 20% on November 1, 2003, and 20% on November 1, 2004. The Option may be exercised up to ten (10) years from the Grant Date; provided, however, that 100% of the option shall be exercisable at the time the closing price of the Company common stock reaches $22 per share on any day, and Executive shall then have 6 months to exercise the option or it shall expire.         (d) Vesting of Restricted Stock Grants. Company has declared earned the 8,332 unvested shares of restricted stock granted under the TARSAP programs in 1998. One third of those shares shall vest on each of the first three anniversaries of this Agreement provided that Executive remains employed by Company on those dates.         (e) Change of Control. In accordance with the policy set by the Human Resources Committee of the Board, all options and restricted stock shall vest upon a change of Control, as defined below.     4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position.     5. Term. The term of this Agreement shall be for three years, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid in one lump sum.     In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any employee benefit arrangement or plan maintained by Company.     6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for cause, in which event no salary or bonus shall be paid after termination for cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's willful and continual material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors.     (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate.     7. Change in Control . If Executive's employment is terminated by Executive for "Good Reason" after a Change in Control, or by Company in any way connected with a Change in Control of Company or a Potential Change in Control of Company, as defined below, Executive shall receive a sum equal to three times his Base Salary then in effect, continuation in the Company's health plans for three years at no cost, and vesting in Company's Supplemental Savings Plan at the retirement rate. The phrase "Good Reason" shall mean: (1) a mandatory relocation from the Birmingham, Alabama area, (2) a reduction in duties or status within the combined company as a result of or after the Change in Control, or (3) any time during the 13th month after a Change in Control the Executive terminates employment and deems it to be for Good Reason. If any payment, right or benefit provided for in this Agreement or otherwise paid to Executive by Company is treated as an "excess parachute payment" under Section 280(G)(b) of the Internal Revenue Code of 1986, as amended, (the "Code"), Company shall indemnify and hold harmless and make whole, on an after-tax basis, Executive for any adverse tax consequences, including but not limited to providing to Executive on an after-tax basis the amount     As used herein, the term "Change in Control" means the happening of any of the following:         (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or         (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or         (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period.     As used herein, the term "Potential Change in Control" means the happening of any of the following:         (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or         (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement.     8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement (but not less than six months), whichever period is shorter. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year.     9. Non-competition; Unauthorized Disclosure.         (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of one year thereafter, Executive:             (i) shall not engage in any activities, whether as employer, proprietor, partner, stockholder (other than the holder of less than 5% of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (i) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (ii) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period;             (ii) shall not do business with any vendor that is one of the top 100 vendors of the businesses conducted by Company or its affiliates at the date hereof or at any time during the term of this Agreement; and             (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or his employment relationship.         (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of one year thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive).         (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9:             (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company or its affiliates or subsidiaries are actively engaged in the conduct of business while Executive is employed under this Agreement;             (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; provided, however, Company shall be entitled to injunctive relief only to protect itself from unfair competition of the type protected under Tennessee law.             (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and             (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company.     10. General Provisions.         (a) Notices. Any notice to be given hereunder by either party to the other may be effected in writing by personal delivery, mail, electronic mail, overnight courier, or facsimile. Notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt.         If to Executive: Donald E. Wright                                         750 Lakeshore Parkway                          Birmingham, AL 35211         If to Company:   Office of General Counsel                                                           750 Lakeshore Parkway                          Birmingham, AL 35211         (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way.         (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee.         (d) Entire Agreement. Except for any prior grants of options, restricted stock, or other forms of incentive compensation evidenced by a written instrument or by an action of the Board or Directors, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged.         (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach.         (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof.         (g) Attorney's Fees. If Executive brings any action to enforce his purported rights under this Agreement after a Change in Control, Company shall reimburse Executive for his reasonable costs, including attorney's fees, incurred. Company shall reimburse Executive as the costs are incurred and without regard to the outcome of the action.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.                     Saks Incorporated                       BY: _____________________                                                          Brian J. Martin                         Executive Vice President                           _____________________                                                          Donald E. Wright                         Executive

FOURTH AMENDMENT TO LOAN AGREEMENT         THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered into effective as of the 30th day of October, 2000, by LMI AEROSPACE, INC., formerly known as Leonard’s Metal, Inc., a Missouri corporation, LMI FINISHING, INC., a Missouri corporation, LMI ACQUISITION, INC., a Missouri corporation, and PRECISE MACHINE COMPANY, a Missouri corporation, as co-obligors and co-borrowers and not as sureties or accommodation parties (said corporations being jointly and severally referred to herein as “Borrower”), and UNION PLANTERS BANK, N.A., a national banking association, successor to Magna Bank, National Association, (“Lender”). W I T N E S S E T H:         WHEREAS, Borrower and Lender have heretofore entered into that certain Loan Agreement dated August 15, 1996, as amended by that certain First Amendment to Loan Agreement dated January 15, 1997, that certain Second Amendment to Loan Agreement dated November 1, 1997 and that certain Third Amendment to Loan Agreement dated March 30, 1998 (the “Loan Agreement”; all capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the Loan Agreement as amended by this Amendment); and         WHEREAS, Borrower and Lender desire to amend the Loan Agreement to reduce the amount of available Revolving Credit Loans, extend the Revolving Credit Period, add Precise Machine Company as a co-obligor and to modify certain other provisions of the Loan Agreement;         NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows:   1.     All references in the Loan Agreement and the other Transaction Documents to the "Borrower" and any other references of similar import shall henceforth mean collectively LMI Aerospace, Inc., LMI Finishing, Inc., LMI Acquisition, Inc. and Precise Machine Company, whose liability with respect to all of Borrower's Obligations shall be joint and several.   2.     The definition of "Revolving Credit Period" in Section 2 of the Loan Agreement is hereby amended to provide as follows:          Revolving Credit Period shall mean the period commencing on March 30, 1998 and ending October 30, 2001.   3.     Section 4.01A of the Loan Agreement is hereby amended to provide as follows:   4.01A.     Revolving Credit Loans.   (a)      Subject to the terms and conditions of this Agreement, during the Revolving Credit Period of this Agreement, and so long as no Default or Event of Default under this Agreement has occurred and is continuing, Lender hereby agrees to make such loans (individually, a “Revolving Credit Loan” and collectively, the “Revolving Credit Loans”) to Borrower as Borrower may from time to time request pursuant to Section 4.02A. The aggregate principal amount of Revolving Credit Loans which Lender shall be required to have outstanding under this Agreement at any one time shall not exceed the lesser of (A) $7,000,000.00 or (B) the Borrowing Base. Subject to the terms and conditions of this Agreement, Borrower may borrow, repay and reborrow such sums from Lender, provided, however, that in no event may the aggregate outstanding principal amount of Revolving Credit Loans on any given day exceed the applicable amount specified in the preceding sentence. All Revolving Credit Loans not paid prior to the last day of the Revolving Credit Period, together with all accrued and unpaid interest thereon, shall be due and payable on the last day of the Revolving Credit Period.   (b)     For purposes of this Agreement, the "Borrowing Base" shall mean the sum of:   (i)     Eighty-Five Percent (85%) of the face amount of all then existing Eligible Accounts; plus   (ii)      the sum of (A) Fifty Percent (50%) of the Eligible Inventory of Borrower consisting of finished goods, (B) Thirty Percent (30%) of the Eligible Inventory of Borrower consisting of work in process, and (C) Sixty-Five Percent (65%) of the Eligible Inventory of Borrower consisting of raw materials.   (c)      Borrower shall deliver to Lender monthly by the fifteenth (15th) day of each month (calculated as of the close of business of the prior month) a collateral report in the form of Exhibit F attached hereto and incorporated herein by reference (or in such other form as Lender shall require from time to time) (a “Collateral Report”) setting forth:   (i)      the Borrowing Base and its components as of the end of the immediately preceding month;   (ii)      the aggregate principal amount of all Revolving Credit Loans outstanding as of the end of the immediately preceding month; and   (iii)      the difference, if any, between the Borrowing Base and the aggregate principal amount of all Revolving Credit Loans outstanding as of the end of the immediately preceding month.   The Borrowing Base shown in such Collateral Report shall be and remain the Borrowing Base hereunder until the next Collateral Report is delivered to Lender, at which time the Borrowing Base shall be the amount shown in such subsequent Collateral Report. Each Collateral Report shall be certified as to truth and accuracy by the president or the chief financial officer of Borrower.   (d)      If at any time the aggregate outstanding principal amount of the Revolving Credit Loans is greater than the Borrowing Base as shown on the most recent Collateral Report, Borrower shall be automatically required (without demand or notice of any kind by Lender, all of which are hereby expressly waived by Borrower) to immediately repay the Revolving Credit Loans in an amount sufficient to reduce the aggregate outstanding principal amount of the Revolving Credit Loans to the amount of the Borrowing Base.   4.      Sections 4.03A, 4.04A and 4.05A of the Loan Agreement are hereby amended to provide as follows:   4.03A.      Revolving Credit Note. (a) The Revolving Credit Loans of Lender to Borrower shall be evidenced by a Promissory Note of Borrower dated October 30, 2000 and payable to the order of Lender in the principal amount of $7,000,000.00, which Promissory Note shall be in substantially the form of Exhibit A to the Fourth Amendment to this Agreement (as the same may from time to time be amended, modified extended or renewed, the “Revolving Credit Note”).   (b)      Lender shall record the date, amount, type and maturity of each Revolving Credit Loan made by it and the date and amount of each payment of principal made by Borrower with respect thereto in Lender’s books and records. The books and records of Lender showing the account between Lender and Borrower shall be admissible in evidence in any action or proceeding and shall constitute prima facie proof of the items therein set forth.   4.04A.      Interest Rates. (a) So long as no Event of Default under this Agreement has been declared by Lender and is continuing, all Revolving Credit Loans shall bear interest prior to maturity at a rate per annum equal to LIBOR plus two and one-fourth percent (2.25%) (fluctuating as and when LIBOR shall change). So long as any Event of Default under this Agreement has been declared by Lender and is continuing, each Revolving Credit Loan shall bear interest prior to maturity at a rate per annum equal to Two Percent (2.0%) over and above the rate applicable immediately preceding such Event of Default. Interest on Revolving Credit Loans shall be payable monthly in accordance with the terms of the Revolving Credit Note, and at the maturity of the Revolving Credit Note, whether by reason of acceleration or otherwise. From and after the maturity of the Revolving Credit Note, whether by reason of acceleration or otherwise, each Revolving Credit Loan shall bear interest payable on demand until paid at a rate per annum equal to Two Percent (2.0%) over and above the rate applicable immediately preceding maturity.   (b)      Lender shall calculate the interest accrued with respect to each Revolving Credit Loan hereunder and its determination thereof shall be conclusive in the absence of manifest error.   4.05A.      Collateral for Revolving Credit Loans. The Revolving Credit Loans shall be secured by the Collateral, which shall include, but not be limited to, the accounts receivable and inventory of the Borrower, and the proceeds and products thereof, as more particularly described in the form of Security Agreement attached to the Fourth Amendment to this Agreement as Exhibit B (the “Security Agreement (Receivables and Inventory)”).   5.      Section 8.01(i) of the Loan Agreement is hereby amended to provide in its entirety as follows:   (i)      Financial Covenants. Borrower will:        (i)     Maintain a Consolidated Tangible Net Worth of at least $41,000,000.00, which minimum Consolidated Tangible Net Worth shall increase as of the end of each fiscal year of Borrower, commencing with the fiscal year ending December 31, 2000, by an amount equal to Seventy-Five (75%) of the after-tax net income shown on Borrower's consolidated financial statements for such fiscal year, such required increases to be cumulative for each fiscal year;        (ii)     Have Consolidated EBITDA of at least $1,000,000.00 for each fiscal year of Borrower;         (iii)     Deliver a certificate of the principal financial officer of Borrower containing the financial calculations required in clauses (i) and (ii) above simultaneously with the financial statements referred to in Sections 8.01(a)(i) and (ii).          6.      Borrower shall execute and deliver to Lender the Revolving Credit Note, the Security Agreement (Receivables and Inventory) and such UCC-1 financing statements as Lender shall require. In addition, Borrower will execute any and all further agreements, documents and instruments, and take any and all further actions which may be required under applicable law, or which Lender may from time to time reasonably request, in order to effectuate the transactions herein contemplated.          7.      Borrower hereby agrees to reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by Lender in the preparation, negotiation and execution of this Amendment and all other agreements, documents, instruments and certificates relating to the amendment of Borrower’s existing credit facilities with Lender (collectively, the “Loan Documents”).          8.      All references in the Loan Agreement and the other Transaction Documents to “the Agreement” and any other references of similar import shall henceforth mean the Loan Agreement as amended by this Amendment. All references in the Loan Agreement and the other Transaction Documents to the “Revolving Credit Note” and any other references of similar import shall henceforth mean the Revolving Credit Note referred to in this Amendment. All references in the Loan Agreement and the other Transaction Documents to the “Security Agreement” and any other references of similar import shall henceforth mean the Security Agreement (Receivables and Inventory) referred to in this Amendment.          9.      Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Loan Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed.          10.      This Amendment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations hereunder.          11.     Borrower hereby represents and warrants to Lender that:            (a)      the execution, delivery and performance by Borrower of this Amendment are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, or filing with, any governmental or regulatory body, agency or official;            (b)      this Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and           (c)      as of the date of this Amendment, all of the representations and warranties of Borrower set forth in the Loan Agreement and the other Transaction Documents are true and correct in all material respects and no Default or Event of Default under or within the meaning of the Loan Agreement has occurred and is continuing.          12.      In the event of any inconsistency or conflict between this Amendment and the Loan Agreement, the terms, provisions and conditions contained in this Amendment shall govern and control.          13.     This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Missouri (without reference to conflict of law principles).          14.      ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM.          IN WITNESS WHEREOF, Borrower and Lender have executed this Fourth Amendment to Loan Agreement effective as of October 30, 2000. LMI AEROSPACE, INC. (formerly known as Leonard’s Metal, Inc.) By: /s/ Lawrence E. Dickinson                              Title:  Chief Financial Officer LMI FINISHING, INC. By: /s/ Lawrence E. Dickinson                             Title:  Chief Financial Officer LMI ACQUISITION, INC. By: /s/ Lawrence E. Dickinson                              Title:  Chief Financial Officer PRECISE MACHINE COMPANY By: /s/ Lawrence E. Dickinson                             Title:  Chief Financial Officer UNION PLANTERS BANK, N.A. By: /s/ Patricia A. O'Herin                              Title:  Executive Vice President -------------------------------------------------------------------------------- EXHIBIT A REVOLVING CREDIT NOTE REVOLVING NOTE -------------------------------------------------------------------------------- $7,000,000.00St. Louis, Missouri October 30, 2000 For value received, the undersigned, LMI AEROSPACE, INC., a Missouri corporation, LMI FINISHING, INC., a Missouri corporation, LMI ACQUISITION, INC., a Missouri corporation, and PRECISE MACHINE COMPANY, a Missouri corporation (collectively, the “Borrower”), hereby jointly and severally promise to pay on the last day of the Revolving Credit Period under the Loan Agreement (defined below), to the order of UNION PLANTERS BANK, N.A., a national banking association (the “Lender”), at its main office in St. Louis, Missouri, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Seven Million Dollars ($7,000,000.00) or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower under the Loan Agreement (defined below) together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Loan Agreement dated August 15, 1996 (as the same has been and may hereafter be amended, supplemented or restated from time to time, the “Loan Agreement”) by and between the Lender and the Borrower. The principal hereof and interest accruing thereon shall be due and payable as provided in the Loan Agreement. This Note may be prepaid only in accordance with the Loan Agreement. This Note is issued pursuant, and is subject, to the Loan Agreement, which provides, among other things, for acceleration hereof. This Note is the Revolving Credit Note referred to in the Loan Agreement. This Note is secured, among other things, pursuant to the Security Agreement as therein defined, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements. The Borrower hereby agrees to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced. Presentment or other demand for payment, notice of dishonor and protest are expressly waived. LMI AEROSPACE, INC. (formerly known as Leonard’s Metal, Inc.) By:                                                       Title: LMI FINISHING, INC. By:                                                       Title LMI ACQUISITION, INC. By:                                                       Title PRECISE MACHINE COMPANY By:                                                       Title: -------------------------------------------------------------------------------- EXHIBIT B SECURITY AGREEMENT (ACCOUNTS RECEIVABLE AND INVENTORY)          I.      Grant of Security Interest. The undersigned, (“Borrower”), for value received, sells, assigns, transfers, conveys and mortgages to UNION PLANTERS BANK, N.A. (“Secured Party”) and grants Secured Party a continuing security interest in all of Borrower’s right, title and interest in and to the following described property and any and all additions, accessions and substitutions thereto or therefor (hereinafter collectively referred to as the “Collateral”):           (a)       All accounts, contract rights, chattel paper, documents, instruments, general intangibles and other forms of obligation and other rights to the payment of money and all of Borrower's rights in, to and under all purchase orders received by Borrower, now owned or which may hereafter be created by Borrower (hereinafter collectively referred to as "Accounts"),           (b)       All of Borrower's inventory, including without limitation all goods, merchandise, materials, raw materials, components, work in progress, finished goods and other tangible personal property, now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts for services or used or consumed in Borrower's business, and all additions, accessions and substitutions thereto or therefor and any documents of title representing any thereof (hereinafter collectively referred to as "Inventory"), and           (c)       All proceeds, including without limitation proceeds which constitute property of the types described in (a) and (b) above and insurance proceeds, and all products, of (a) and (b) above, and any indemnities, warranties and guaranties payable by reason of loss or damage to or otherwise with respect to any of the foregoing items; to secure the payment of (i) any and all indebtedness, liabilities and obligations of Borrower to Secured Party under any note or notes of Borrower evidencing any loan or advance now or hereafter made by Secured Party to Borrower, (ii) any and all indebtedness, liabilities and obligations of Borrower under this Agreement, (iii) any and all other indebtedness, liabilities and obligations of Borrower to Secured Party of every kind and character, now existing or hereafter arising, absolute or contingent, joint or several or joint and several, otherwise secured or unsecured, due or not due, direct or indirect, expressed or implied in law, contractual or tortious, liquidated or unliquidated, at law or in equity, or otherwise, and whether heretofore or hereafter incurred or given by Borrower as principal, surety, endorser, guarantor or otherwise, and whether created directly or acquired by Secured Party by assignment or otherwise and (iv) any and all costs of collection, legal expenses and attorneys’ fees and expenses incurred by Secured Party upon the occurrence of an Event of Default under this Agreement, in collecting or enforcing payment of any such indebtedness, liabilities or obligations or in preserving, protecting or realizing on the Collateral hereunder or in representing Secured Party in connection with bankruptcy or insolvency proceedings (hereinafter collectively referred to as the “Obligations”).       II.     Covenants.  Borrower hereby represents, warrants, covenants and agrees that:           (a)      Borrower is a corporation and (i) it is duly organized, validly existing and in good standing under the laws of the State of Missouri, (ii) it has full corporate power and authority to borrow money from Secured Party and to grant to Secured Party a security interest in the property hereby stated to be granted, (iii) the officer(s) of Borrower executing this Agreement have been duly elected and qualified and have been duly authorized and empowered to execute, deliver and perform the terms of this Agreement on behalf of Borrower and (iv) the execution, delivery and performance of this Agreement by Borrower do not and will not violate any of the terms or provisions of the Articles or Certificate of Incorporation or By-Laws of Borrower; (b) the execution, delivery and performance of this Agreement by Borrower do not and will not violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower or the terms of any indenture, agreement, document, instrument or undertaking to which Borrower is a party or by which it is bound; (c) no financing statement (other than any which may be filed on behalf of Secured Party) covering any of the Collateral is now or will be on file in any public office during the term of this Agreement; (d) all information furnished to Secured Party by Borrower concerning the Collateral or the financial condition of Borrower for the purposes of obtaining credit hereunder is, or will be, at the time furnished, true, correct and complete; (e) that except for the security interest granted hereby, Borrower is, or, as to Collateral acquired after the date hereof, will be, the sole and absolute owner of the Collateral, free and clear of any and all liens, claims, security interests and encumbrances, and Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein; (f) Borrower's principal place of business and the location of the office where it keeps its books and records respecting the Accounts is that given at the end of this Agreement and all other places of business of Borrower or locations of its Inventory are listed on Exhibit A attached hereto and incorporated herein by reference. If Borrower changes its principal place of business, or the location of any of the Inventory, or the location of the office where it keeps its books and records respecting the Accounts, or acquires any other places of business, it will immediately notify Secured Party in writing; and (g) none of the Accounts is evidenced by a promissory note or other instrument.       III.     Collection, Preservation and Disposition of Collateral. Until such time as Secured Party shall notify Borrower of the revocation of such power and authority (which right of revocation Secured Party may exercise only after the occurrence of an Event of Default hereunder), Borrower:           (a)       May, in the ordinary course of its business, at its own expense, sell, lease or furnish under contracts for service any of the Inventory normally held by Borrower for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by Borrower for such purpose;           (b)      Will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any Accounts, and shall take such action with respect to collection of Accounts as Secured Party may reasonably request or, in the absence of such request, as Borrower may deem advisable; and           (c)      May grant, in the ordinary course of business, to any party obligated on any Account (an "Account Debtor"), any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to an Account. Secured Party may, however, at any time after the occurrence of an Event of Default hereunder, notify any Account Debtor to make payment to Secured Party of any amounts due or to become due thereunder and enforce collection of any of the Accounts by suit or otherwise and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of Secured Party (which request may be made only after the occurrence of an Event of Default hereunder), Borrower will, at its own expense, notify any Account Debtor to make payment to Secured Party of any amounts due or to become due thereunder.         At all times after the occurrence of an Event of Default hereunder, unless Secured Party shall otherwise direct Borrower in writing, Borrower will:           (a)      Forthwith upon receipt transmit and deliver to Secured Party, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by Secured Party) which may be received by Borrower at any time in full or partial payment or otherwise as proceeds of any of the Collateral. Except as Secured Party may otherwise consent in writing, any such items which may be received by Borrower will not be commingled with any other of Borrower's funds or property, but will be held separate and apart from Borrower's own funds and property and upon express trust for Secured Party until delivery is made to Secured Party. Borrower will comply with the terms and conditions of any consent given by Secured Party pursuant to the provisions of this paragraph; and           (b)      Deposit to the credit of a deposit account (herein called the "Collateral Account") of Borrower with Secured Party as security for payment of the Obligations all items or amounts which are delivered by Borrower to Secured Party on account of partial or full payment or otherwise as proceeds of any of the Collateral. Borrower shall have no right to withdraw any funds deposited in the Collateral Account. Secured Party may, from time to time, in its discretion, apply all or any of the then balance, representing collected funds in the Collateral Account, toward payment of the Obligations whether or not then due, in such order of application as Secured Party may determine, and Secured Party may, from time to time, in its discretion (but without any obligation to do so), release all or any of such balance to Borrower.          IV.      Adjustments and Returned and Repossessed Goods. After the occurrence of an Event of Default hereunder, in the event Borrower obtains possession (by return, repossession or otherwise) of any goods, the sale or lease of which shall have given rise to any Account, Borrower will not later than ten (10) days thereafter, pay to Secured Party the greater of the unpaid purchase price of such goods or the amount of any rebate, refund or allowance granted by Borrower in connection with obtaining possession of such goods. After the occurrence of an Event of Default hereunder, in the event Borrower grants to any Account Debtor any other rebate, refund or allowance (other than any allowance which has been deducted in computing the net amount of such invoice), Borrower will not later than ten (10) days thereafter, pay to Secured Party the amount of such rebate, refund or allowance so granted.          V.      Certificates, Schedules and Reports. Borrower will from time to time, as Secured Party may request, prepare and deliver to Secured Party at Borrower’s expense (i) schedules identifying each Account and (ii) such additional schedules, certificates, test verifications, and reports respecting the Collateral and the proceeds thereof as Secured Party may request. Any such schedule, certificate or report shall be executed by a duly authorized officer or partner, as the case may be, of Borrower and shall be in such form and detail as Secured Party may specify. Any such schedule identifying any Account shall be accompanied (if Secured Party so requests) by the originals or true and correct copies (as Secured Party requests) of the invoice and other documents evidencing such Account and evidence of shipment or performance. Borrower shall immediately notify Secured Party of the occurrence of any event causing loss or depreciation in value of any of the Inventory, and the amount of such loss or depreciation.          VI.     Additional Agreements of Borrower.   Borrower covenants and agrees that:           (a)      It will, upon request of Secured Party, execute such financing statements and other documents (and pay the cost of filing or recording the same in all public offices deemed necessary by Secured Party) and do such other acts and things as Secured Party may from time to time request or deem necessary to establish and maintain a valid first priority security interest in the Collateral, this agreement of Borrower to include its execution of applications and certificates of title naming Secured Party as a secured party and the delivery of such to Secured Party;           (b)      It will keep all Inventory at the locations named in Article II(f) hereof unless Secured Party shall otherwise consent in writing;           (c)       It will keep its books and records concerning Accounts at the place stated in Article II(f) hereof, which books and records will be of such character as will enable Secured Party or its designees to determine at any time the status thereof, and Borrower will not, unless Secured Party shall otherwise consent in writing, duplicate any such books or records at any other address;           (d)       It will furnish Secured Party such information concerning Borrower, the Collateral and the Account Debtors as Secured Party may from time to time reasonably request;           (e)       It will permit Secured Party and its designees, from time to time, to inspect the Inventory and to inspect, audit and make copies of and extracts from all books and records and all other papers in the possession of Borrower, and will, upon request of Secured Party, deliver to Secured Party all of such books, records and papers which pertain to the Collateral and the Account Debtors;           (f)       It will, upon request of Secured Party, stamp on its books and records concerning the Collateral, a notation, in form and substance satisfactory to Secured Party, of the security interest of Secured Party hereunder;           (g)       Except for the sale or lease of Inventory in the ordinary course of its business, it will not sell, lease, assign or create or permit to exist any lien or encumbrance upon or security interest in any Collateral to or in favor of anyone other than Secured Party;           (h)       It will at all times keep all Collateral insured against loss, damage, theft and other risks, in such amounts and companies and under such policies and in such form, all as shall be satisfactory to Secured Party, which policies shall provide that loss thereunder shall be payable to Secured Party (and Secured Party may apply any proceeds of such insurance which may be received by it toward payment of Obligations, whether or not due, in such order of application as Secured Party may determine) and shall provide for thirty (30) days' minimum written notice of cancellation or amendment to Secured Party and that coverage in favor of Secured Party will not be impaired in any way by any act, omission or default of Borrower or any other person and, if Secured Party so requests, such policies and certificates thereof shall be deposited with Secured Party;           (i)       It will reimburse Secured Party for all expenses, including without limitation reasonable attorneys' fees and expenses, incurred by Secured Party in seeking to collect or enforce any rights under this Agreement or incurred by Secured Party in seeking to collect or enforce any of the Obligations;           (j)       To the extent, if any, it shall have advised Secured Party that any of the Collateral is being acquired with any advance made by Secured Party, such proceeds may be disbursed by Secured Party directly to the seller of such Collateral;           (k)       It will pay promptly when due all taxes and assessments on the Collateral, or for its use or operation, or upon this Agreement or any of the Obligations, or with respect to the perfection of any security interest or other lien hereunder (except as otherwise required by law);           (l)       It will keep, store and hold all Inventory strictly in accordance with the terms of any insurance policy covering the same;           (m)       It shall notify Secured Party in writing at least fifteen (15) days in advance of its new name and the effective date of its name change before changing its name;           (n)       It will at all times keep the Inventory in first class order and repair, excepting any loss, damage or destruction which is fully covered by proceeds of insurance, and will not use the Collateral in violation of any law, regulation or insurance policy;           (o)       Secured Party may from time to time at its option, perform any agreement of Borrower hereunder which Borrower shall fail to perform and take any other action which Secured Party deems necessary for the maintenance or preservation of any of the Collateral or the interest of Secured Party therein (including, without limitation, the discharge of taxes or liens of any kind against the Collateral or the procurement of insurance or the payment of warehousing charges, landlord's bills or other charges), and Borrower agrees to forthwith reimburse Secured Party, on demand, for all expenses of Secured Party in connection with the foregoing, together with interest thereon at a rate per annum equal to the highest rate then applicable to Borrower's Obligations under the Loan Agreement from the date incurred until reimbursed by Borrower. Any amounts not so reimbursed shall be added to and become a part of the Obligations. Secured Party may, for the foregoing purposes, act in its own name or that of Borrower and may also so act for the purpose of adjusting, settling or canceling any policy of insurance on the Collateral or endorsing any draft received in connection therewith in payment of a loss or otherwise for all of which purposes Borrower hereby grants to Secured Party its power of attorney, irrevocable during the term of this Agreement. This power of attorney shall not be affected by the subsequent disability or incapacity of Borrower and shall in all respects constitute a durable power of attorney.          VII.      Defaults. The occurrence of any one of the following events shall constitute a default (“Event of Default”) by Borrower under this Agreement: (a) non-payment of any principal of or interest on any of the Obligations owed by Borrower to Secured Party as and when the same shall become due and payable, whether by reason of demand, acceleration or otherwise; (b) default by Borrower in the due performance or observance of any of the terms, provisions, covenants or agreements contained in this Agreement; (c) any representation or warranty made by Borrower in this Agreement shall prove to be untrue or incorrect in any material respect; (d) any Obligor (which term, as used herein, shall mean Borrower and each other party primarily or secondarily liable to Secured Party on any of the Obligations) shall become insolvent in either the equity or bankruptcy sense of the term; (e) any Obligor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official of such Obligor or of all or a substantial part of its assets, (ii) be unable, or admit in writing its inability, to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy or seek an arrangement with creditors, or take advantage of any bankruptcy, reorganization or insolvency law or file an answer admitting the material allegations of a petition filed against such Obligor in any bankruptcy, reorganization or insolvency proceedings, or (vi) take any action to effectuate any of the foregoing; (f) loss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon; (g) death of any Obligor who is a natural person or of any partner of any Obligor which is a partnership; (h) dissolution, termination of existence or operations, merger, consolidation or transfer of a substantial part of the property of any Obligor which is a corporation or partnership; (i) any event which results in the acceleration of the maturity of any present or future indebtedness of Borrower to any other creditor under any note, indenture, agreement or undertaking; or (j) any Obligor shall be declared by Secured Party to be in default on, or pursuant to the terms of, (i) any other present or future obligation to Secured Party, including without limitation any loan, line of credit, revolving credit, guaranty or letter of credit reimbursement obligation, or (ii) any other present or future agreement purporting to convey to Secured Party a lien or encumbrance upon, or a security interest in, any of the property or assets of such Obligor.          VIII.      Remedies. Upon the occurrence of an Event of Default:   (a) notwithstanding any provision contained in any agreement secured hereby to the contrary, Secured Party shall be under no further obligation to make any further advances required by such agreement; (b) Secured Party may, by written notice to Borrower effective upon mailing or delivery, declare the principal of and the interest on all of the Obligations of Borrower to Secured Party to be forthwith due and payable, whereupon all such indebtedness, liabilities and other obligations shall become forthwith due and payable, notwithstanding any other terms thereof or hereof; (c) whether or not such indebtedness, liabilities or other obligations are declared to be forthwith due and payable, Secured Party shall have the right to take immediate possession of the Collateral covered hereby, and, for that purpose may pursue the same wherever said Collateral may be found, and may enter upon any of the premises of Borrower with or without force or process of law, wherever said Collateral may be or may be supposed to be, and search for the same, and, if found, take possession of and remove and sell and dispose of said Collateral, or any part thereof; (d) Secured Party may notify any Account Debtor or all Account Debtors to make payments under the Accounts directly to Secured Party and demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose and realize on the Accounts as Secured Party may determine; (e) Secured Party may exercise any one or more of the rights and remedies accruing to a secured party under the Uniform Commercial Code of the relevant state or states and any other applicable law upon default by a debtor; and (f) Secured Party may enter, with or without process of law and without breach of the peace, any premises where the books and records of Borrower pertaining to the Accounts or the Inventory are or may be located, and without charge or liability on the part of Secured Party therefor seize and remove said books and records from said premises or remain upon said premises and use the same for the purpose of collecting, preparing and disposing of the Accounts and for the purpose of identifying and locating any of the Inventory. Borrower shall, upon Secured Party’s request, assemble the Collateral and make the Collateral available to Secured Party at any place designated by Secured Party which is reasonably convenient to Borrower.          IX.      Foreclosure. Foreclosure on the Collateral covered hereby may be had at public or private sale or sales, disposing of such portion or portions of the Collateral at each such sale, for cash or on credit, on such terms, at such place or places and with or without the Collateral being present at such sale, all as Secured Party in its absolute discretion shall determine from time to time. In the case of public sale, notice thereof shall be deemed and held to be adequate and reasonable if such notice shall appear three (3) times in a newspaper published in the City or County wherein the sale is to be held, the first such publication being at least ten (10) days before such sale and the last such publication being not more than three (3) days before such sale. In the case of a private sale, notice thereof shall be deemed and held to be adequate and reasonable if such notice shall be mailed to Borrower at its last known address at least ten (10) days before such sale. The enumeration of these methods of notice shall not be deemed or construed to render unreasonable any other method of notice which would otherwise be reasonable under the circumstances.          X.      Application of Proceeds and Deficiency. Secured Party may apply the net proceeds of any sale, lease or other disposition of the Collateral, after deducting all costs and expenses of every kind incurred therein or incidental to the retaking, holding, preparing for sale, selling, leasing or the like of the Collateral on Borrower’s premises, or elsewhere, or in any way related to Secured Party’s rights thereunder (including, without limitation, attorneys’ fees and expenses, court costs, bonds and other legal expenses, insurance, security guard and alarm expenses incurred in connection with the holding of the Collateral, advertisements of sale of the Collateral and rental and utilities expense on the premises or elsewhere in connection with storage and sale of the Collateral) to the payment, in whole or in part, of the Obligations of Borrower to the Secured Party, whether due or not due, absolute or contingent, and only after payment by Secured Party of any other amounts required by any existing or future provision of law (including Section 9-504(1)(c) of the Uniform Commercial Code or any comparable statutory provision of any jurisdiction in which any of the Collateral may at the time be located) need Secured Party account to Borrower for the surplus, if any. Borrower shall remain liable to Secured Party for the payment of any deficiency, with interest.          XI.      Secured Party’s Care of Collateral. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as Borrower requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care and no failure of Secured Party to preserve or protect any rights with respect to such Collateral against prior parties or to do any act with respect to the preservation of such Collateral not so requested by Borrower shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral.          XII.      Amendment and Waiver. Secured Party shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver whatsoever shall be valid unless in writing signed by Secured Party, and then only to the extent therein set forth. A waiver by Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Secured Party would otherwise have had on any future occasion. This Agreement may not be amended except by a writing duly executed by Borrower and Secured Party.          XIII.      Durable Power of Attorney. Borrower hereby makes, constitutes and appoints Secured Party the true and lawful agent and attorney-in-fact of Borrower with full power of substitution (a) to receive, open and dispose of all mail addressed to Borrower relating to the Collateral, (b) if an Event of Default has occurred, to notify and direct the United States Post Office authorities by notice given in the name of Borrower and to sign on behalf of Borrower, to change the address for delivery of all mail addressed to Borrower relating to the Collateral to an address to be designated by Secured Party, and to cause such mail to be delivered to such designated address where Secured Party may open all such mail and remove therefrom any notes, checks, acceptances, drafts, money orders or other instruments included in the Collateral in which Secured Party has a security interest under the terms of this Agreement, with full power to endorse the name of Borrower upon any such notes, checks, acceptances, drafts, money orders, instruments or other documents relating to the Collateral or security of any kind and to effect the deposit and collection thereof, and Secured Party shall have the further right and power to endorse the name of Borrower on any documents relating to the Collateral, (c) to sign the name of Borrower to drafts against its debtors, to notices to such debtors, to assignments and notices of assignments, financing statements or other public records or notices and all other instruments and documents, (d) to do any and all things necessary and take such actions in the name and on behalf of Borrower to carry out the intent of this Agreement, including, without limitation, the grant of the security interest granted under this Agreement and to perfect and protect the security interest granted to Secured Party in respect to the Collateral and Secured Party’s rights created under this Agreement. Borrower agrees that neither Secured Party nor any of its agents, designees or attorneys-in-fact will be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law in respect to the exercise of the power of attorney granted under this Section. The power of attorney granted under this Section shall be irrevocable during the term of this Agreement. This power of attorney shall not be affected by the subsequent disability or incapacity of the Borrower and shall in all respects constitute a durable power of attorney.          XIV.      Notices. All notices provided for herein shall be in writing and shall be deemed to have been given when delivered personally or when deposited in the United States mail, registered or certified mail, return receipt requested and postage prepaid, addressed as follows, or to such other address as may hereafter be designated in writing by the respective parties hereto: (a) if to Secured Party to 8182 Maryland Avenue, St. Louis, Missouri 63105, Attention: Patricia A. O'Herin, and (b) if to Borrower, to the address of the principal place of business of Borrower listed at the end of this Agreement.          XV.      Remedies Cumulative. All rights, remedies and powers granted to Secured Party herein or in any other agreement given to Secured Party shall be cumulative and may be exercised singly or concurrently.          XVI.      Applicable Law and Severability. It is the intention of the parties hereto that this Agreement is entered into pursuant to the provisions of the Uniform Commercial Code as it is in force in the State of Missouri (the “Code”). Any applicable provisions of the Code, not specifically included herein, shall be deemed a part of this Agreement in the same manner as if set forth herein at length; and any provisions of this Agreement that might in any manner be in conflict with any provision of the Code shall be deemed to be modified so as not to be inconsistent with the Code. In all respects this Agreement and all transactions, assignments and transfers hereunder, and all the rights of the parties, shall be governed as to validity, construction, enforcement and in all other respects by the laws of the State of Missouri. To the extent any provision of this Agreement is not enforceable under applicable law, such provision shall be deemed null and void and shall have no effect on the remaining portions of this Agreement. The headings of the paragraphs hereof shall not be considered in the construction or interpretation of this Agreement.          XVII.      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower and Secured Party and their respective heirs, executors, administrators, personal representatives, successors and assigns, except that Borrower may not assign any of its rights or delegate any of its obligations under this Agreement.          XVIII.      Other Obligations. Nothing contained in this Agreement shall be deemed or held to impair or limit in any way the enforcement of the terms of any instrument evidencing any indebtedness, liability or other obligation of Borrower to Secured Party. Secured Party shall have no obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Borrower thereunder or to take any action to collect or enforce any claim for payment included in the Collateral.          XIX.      Duration of Security Interest. This Agreement shall continue in full force and effect and the security interest granted hereby and all of the representations, warranties, covenants and agreements of Borrower hereunder and all of the terms, conditions and provisions hereof relating thereto shall continue to be fully operative until such time as (a) Borrower shall have paid or caused to be paid, or otherwise discharged, all Obligations to Secured Party and (b) there shall be no remaining obligation of Secured Party to advance funds to Borrower under any loan agreement or credit agreement or otherwise. Borrower expressly agrees that to the extent a payment or payments to Secured Party, or any part thereof, are subsequently invalidated, declared to be void or voidable or set aside and are required to be repaid to a trustee, custodian, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made.          XX.      Miscellaneous. If more than one party shall execute this Agreement, the term “Borrower” shall mean all parties signing this Agreement and each of them, and all such parties shall be jointly and severally obligated hereunder. The neuter pronoun, when used herein, shall include the masculine and feminine and also the plural. If this Agreement is not dated when executed by Borrower, Secured Party is authorized, without notice to Borrower, to date this Agreement. To the extent of any inconsistencies between the terms and provisions of this Agreement and the terms and provisions of the Loan Agreement, the terms and provisions of the Loan Agreement shall govern and control.         IN WITNESS WHEREOF, Borrower has executed this Security Agreement at St. Louis, Missouri effective as of October 30, 2000.         IN THE EVENT ANY OF THE OBLIGATIONS SECURED HEREBY IS PAYABLE ON DEMAND, NEITHER THIS AGREEMENT NOR ANYTHING CONTAINED HEREIN SHALL BE DEEMED TO ALTER OR IMPINGE UPON THE DEMAND CHARACTER OF SUCH OBLIGATION.                                                                    (Borrower) By:                                                              Title:                                                  Address of Principal Place of Business of Borrower and Location of Books and Records: 3600 Mueller Road St. Charles, Missouri -------------------------------------------------------------------------------- EXHIBIT A ADDITIONAL LOCATIONS OF PLACES OF BUSINESS OR INVENTORY 1. 3030 North Highway 94 St. Charles, Missouri 2. 2629-2635 Esthner Court Wichita, Kansas 3. 204 H. Street Auburn, Washington 4. 2104 North 170th Street East Avenue Tulsa, Oklahoma 74116 5. 2201 River Hill Road Irving, Texas 65061

AGREEMENT Chris Hopson (AMr. Hopson@) has been a creative industrious employee of MTS, Inc. (AMTS@) for more than thirty years. There have also been issues which have arisen over those thirty years that MTS and Mr. Hopson would like to resolve. MTS desires to compensate Mr. Hopson for some of his past contributions which may not have been fully recognized at the time. MTS and Mr. Hopson also desire to resolve any and all outstanding issues between them that arise from, or relate to, his employment by, or association with, MTS. This agreement should not be read, however, to imply that a termination of Mr. Hopson=s employment is an intended result. 1. Construction of Agreement. This Agreement provides compensation for services rendered on or before June 15, 2000. Significant portions of the consideration paid by MTS to Mr. Hopson are for the express purpose of obtaining the release described below as to past events. Other consideration provided for under this Agreement allows Mr. Hopson to Acash out@ accrued vacation, resolve ownership issues or is in exchange for Mr. Hopson=s agreement to resolve various issues through arbitration . No portion of the payments provided for in this Agreement are, or should be construed to be, payment for future services, consulting or other work to be performed in the future. If applicable, any arrangements for future compensation above and beyond that provided for in Mr. Hopson=s current employment relationship shall be addressed by separate written agreement. 2. Scope of Disputes Resolved. Mr. Hopson and MTS, through this Agreement, intend to resolve all disputes and claims between them of whatsoever kind or nature, irrespective of whether those claims or disputes are known at the time of this Agreement. The parties agree that their execution of this Agreement conclusively establishes the resolution of all issues, disputes or claims between them, based upon the terms specifically described in this Agreement, and that this Agreement constitutes a fully integrated, complete and total description of all terms of the Agreement. 3. General Release. Mr. Hopson, on behalf of himself and future heirs, hereby releases, and forever discharges MTS and all of its parent corporations, subsidiaries, predecessors and successors in interest, agents, employees, owners, partners, officers, directors, members and shareholders from any and all suits, claims, attorneys= fees, damages (including punitive damages), liabilities, and any other cause of action in law or equity, that Mr. Hopson has or may have, or might in any manner acquire, which arises out of, relates to, or is a connection with his employment or affiliation with MTS, or any other act, occurrence, or omission, known or unknown, which occurred or failed to occur, on or before the date this Agreement is executed. The sole exceptions to the this comprehensive general release are that it shall not apply to workers compensation claims or claims for disability, health, medical or retirement benefits under any employee benefit plan established or maintained by MTS and that as to any claims covered by this exception no fiduciary, administrator or service provider to any such plan is entitled to claim that any action or claim which Mr. Hopson makes for benefits are barred by this release. 4. Release of Unknown Claims. Mr. Hopson expressly waives protection of Section 1542 of the California Civil Code, which provides: A A general release does not extend to claims which a creditor does not know or suspect to exist in his favor at the time of executing a release, which, if known by him, must have materially affected the settlement with the debtor.@ Mr. Hopson acknowledges that the affect of his release of rights under California Civil Code ' 1542 is that in the event he were to discover or acquire a claim against MTS arising from events which predate the effective date of this Agreement, any such claim discovered or acquired, would be unavailable to him as a function of his execution of this release. 5. Waiver of Claims Under the Age Discrimination in Employment Act (AADEA@). The resolution of this dispute includes a knowing and voluntary waiver of claims under federal age discrimination laws. The parties therefore acknowledge that: a. Mr. Hopson is waiving all rights to claims based on conduct preceding the effective date of this Settlement Agreement including those based on Chapter 14 of Title 29, including 29 U.S.C. '  621, et seq., commonly referred to as the Age Discrimination in Employment Act, as amended; b. They have drafted this Agreement in a manner calculated to be understood by Mr. Hopson and Mr. Hopson represents that he does, in fact, understand the terms of this Agreement; c. Mr. Hopson agrees that his waiver of rights or claims of federal age discrimination are made in exchange for consideration in addition to anything of value to which he is already entitled; d. Mr. Hopson has been advised to consult with an attorney prior to executing this Agreement, and he has, in fact, consulted with an attorney of his choosing whom he believes to be competent to provide him with advice regarding the desirability and consequences of waiving his rights or claims relating to federal age discrimination; e. Mr. Hopson has been given a reasonable period of time of not less than 21 days within which to consider the Settlement Agreement and its consequences, and the amount of time has been sufficient for him to consult any attorneys he chooses to consult on the settlement issue as well as to make any decisions which he desires to make regarding the advisability of the settlement and the costs and benefits to him of entering into this Agreement. Mr. Hopson has also been advised that as to this release of federal age discrimination claims, he may revoke his acceptance within eight days of his execution of the Agreement by providing written notice to that effect to the President of MTS. 6. Payments to Mr. Hopson. Mr. Hopson and MTS, as a result of lengthy discussions and the resolution of a number of different issues between them, have developed a structured series of payments, debt forgiveness, compensation and procedures for resolution of disputed claims. Mr. Hopson and MTS jointly represent that they have each conducted an independent determination that the Agreement, on the whole, is supported by adequate consideration. Moreover, although the Agreement was negotiated as a comprehensive package, Mr. Hopson and MTS also acknowledge that even if the items of compensation, releases and resolution of disputes described below were considered separately, adequate consideration would support each individual portion of the Agreement. a. Value Added Bonus. MTS desires to recognize Mr. Hopson=s contribution over his years of service to the Company by providing a one-time bonus in the amount of $400,000.00, which shall be paid no later than August 10, 2000. b. Compensation for General Release. As noted above, Mr. Hopson is providing a general release of all known and unknown claims to as well as to compensate Mr. Hopson for expenses or losses he may have sustained as an employee which were either not submitted to the Company for reimbursement, or which were not recognized as being subject to reimbursement over the years. In consideration for this general release, MTS will pay Mr. Hopson the sum of $500,000 no later than August 10, 2000. c. ADEA Release Compensation. MTS and Mr. Hopson have also separately resolved any and all issues between them that may be actionable under the Age Discrimination in Employment Act, 29 U.S.C. ' 621, et seq., as it pertains to any claim that arises from any act or omission that occurred or failed to occur prior to the execution of this Agreement. This release includes any age discrimination aspects of Mr. Hopson=s treatment under MTS employee benefit plans. In consideration of this release of federal age discrimination claims, MTS shall pay Mr. Hopson $500,000.00, which Mr. Hopson acknowledges and recognizes is a sum in excess of any other amounts that he is owed or entitled to receive from MTS for whatsoever reason. This payment shall be made on the later of the ninth day following Mr. Hopson=s execution of the Agreement or August 10, 2000, but only if the age discrimination release is not revoked within eight days of his execution of this Agreement. d. Resolution of TR Ownership Dispute. Mr. Hopson and MTS acknowledge a historical dispute over Mr. Hopson=s ownership interest, if any, in TR Services. The resolution of that dispute is expressly contemplated within the general release language described above. However, the parties recognize that the issues involved in the resolution of that issue were such that an identification of separate consideration for Mr. Hopson=s waiver of claims as to TR Services was appropriate. Accordingly, as part of the consideration for Mr. Hopson=s waiver of any claim of ownership with respect to TR Services, MTS shall forgive that certain note it holds secured by a deed of trust to the real property located at 6425 Rio Bonito Drive, Carmichael, California 95608, and shall, in addition, pay Mr. Hopson an additional sum of $264,746.00. Upon execution of the Agreement, MTS shall promptly execute a deed of reconveyance of the deed of trust encumbering the real property so that it can be filed on or about August 10, 2000. The parties expressly recognize and agree that the additional cash payment is not compensation for any services performed or to be construed as wages. e. Merchandise Account Balance. MTS and Mr. Hopson have examined the remaining balance in Mr. Hopson=s merchandise account and determined that after payments by Mr. Hopson have been accounted for, the remaining balance of $18,150.84 is, in fact, more appropriately characterized as advertising expense and shall be re-characterized as such. After that re-characterization, the account has a zero balance and Mr. Hopson agrees that he shall not make any further charges to that account for the duration of his employment. 7. Resolution of Disability-Related Issues. Mr. Hopson and MTS recognize, that Mr. Hopson has a condition which may constitute a disability under the Americans with Disabilities Act (ADA) and the California Fair Employment and Housing Act (FEHA). Mr. Hopson and MTS also recognize that the nature of that condition is such that it may, at some point, preclude him from performing the regular and essential functions of his current position with MTS, render him unable him to perform his own occupation, and potentially may preclude him from gainful employment in any occupation. Mr. Hopson and MTS further recognize the potential for a dispute as to the nature and scope of Mr. Hopson=s abilities to perform and the date on which he ceases to be able to fully perform the essential functions of his current position. Mr. Hopson, in turn, has acknowledged that he does not desire, nor would he accept, a transfer to a different position or a change in job functions or responsibilities as an accommodation. The parties therefore agree to address the ADA/FEHA disability issue through the procedure described below. a. Mr. Hopson and the President of MTS (or his designee) shall discuss the status of Mr. Hopson=s condition and his ability to continue performing the essential functions of his position with MTS, as circumstances dictate. In the event a significant dispute arises as to whether Mr. Hopson=s condition precludes him from performing the essential functions of his current position in a manner satisfactory to MTS, the parties agree to submit that issue either to a mutually agreeable third party who may be a physician or another employee of MTS, or to binding arbitration pursuant to the procedure generally applicable to disputes arising under the Agreement described below. b. In the event either Mr. Hopson or MTS management believes a significant disagreement exists regarding Mr. Hopson=s ability to continue performing the essential functions of his position, written notice shall be provided invoking this section of the Agreement. Notice to MTS may be provided either to its President or its Vice President of Compensation and Benefits. In the event the parties are unable to identify a mutually agreeable third party to resolve the issue within five working days from the date of the notice, the matter shall automatically be referred to arbitration. Regardless of whether the issue is resolved by an agreed upon third party, or by arbitrator, the decision rendered shall be final and binding, both on Mr. Hopson and MTS, but shall not preclude subsequent requests for reconsideration of the disability status issue at reasonable intervals. c. The parties recognize that under the unique circumstances of both Mr. Hopson=s condition and his high level position with MTS, that resolution of issues surrounding Mr. Hopson=s fitness for duty through arbitration is of significant benefit to MTS. In specific consideration for Mr. Hopson=s agreement to resolve all issues regarding his fitness for duty and the date, if ever, on which he shall cease to be capable of performing the essential functions of his position through arbitration, MTS shall provide significant medical benefits which Mr. Hopson expressly agrees is adequate consideration for waiving rights he may have to have this issue resolved, either by a court of competent jurisdiction. Those benefits shall be provided as follows: (i.) MTS shall provide medical coverage for Mr. Hopson and his spouse under the terms of the MTS group health plan, until such time as Mr. Hopson and his spouse become eligible to receive benefits through the federal Medicare program; (ii.) Any other dependents currently enrolled in the MTS group health plan, shall remain enrolled in the plan until such time as they cease to be of an age eligible to participate in the MTS group health plan under the definition of dependent generally applicable to all participants in the plan. (iii.) Mr. Hopson and MTS contemplate that MTS will maintain the current or a comparable level of benefits, at least as to those benefits relevant to Mr. Hopson and his currently covered dependents. MTS reserves the right, however, to amend or discontinue its employee benefit plans and programs generally applicable to employees of MTS. Any such changes shall not diminish Mr. Hopson=s rights under this Agreement except as described in subsections (iv) and (v) below. (iv.) In the event health coverage benefits under the plan sponsored by MTS is terminated or changes in a fashion which is materially significant to Mr. Hopson or his covered dependents, Mr. Hopson may provide notice to MTS=s Vice President of Compensation and Benefits and seek his own coverage. If the premium for the coverage obtained by Mr. Hopson does not exceed 200% of the cost MTS incurred to provide coverage to Mr. Hopson and his dependents prior to the change, Mr. Hopson shall be reimbursed the amount of the premium he actually pays for individual coverage, plus an additional amount to Agross up@Mr. Hopson based upon the assumption that Mr. Hopson would have a 35% marginal federal income tax rate. The amount of this additional payment in excess of premium shall not be affected by the actual tax rate that Mr. Hopson incurs. (v.) If Mr. Hopson is unable to locate replacement coverage within the cost range described above, Mr. Hopson may either terminate coverage under the MTS plan or remain covered under the modified plan, if any, but in no event shall MTS be obligated to make additional compensation for the loss of benefits. 8. Reconciliation of Vacation Accounts. MTS has calculated, and Mr. Hopson has verified, that the amount of accumulated but unused vacation pay to which he is eligible as of the date this Agreement is executed is $34,805. As part of the consideration for this Agreement, Mr. Hopson agrees that, notwithstanding any other policy of MTS, he shall not earn any further vacation for any time worked following the execution of this Agreement, and MTS agrees that it will distribute to Mr. Hopson the entire accumulated vacation bank by check within ten days following his request for distribution. 9. Effect of Adverse Disability Determination. The parties have drafted this Agreement in the mutual good faith belief that it will not have any adverse affect on Mr. Hopson=s eligibility for benefits under the long term disability program maintained by MTS and administered by Standard Insurance Company. In the event that Mr. Hopson applies for disability benefits, MTS will cooperate both with Standard Insurance and Mr. Hopson in providing necessary information. If a court upholds the denial or limitation of disability benefits to Mr. Hopson as a result of payments provided for under the terms of this Agreement, MTS shall make monthly payments to Mr. Hopson reflecting the difference between the maximum long term disability benefit amount under the terms of the policy and the amount actually paid to Mr. Hopson pursuant to the administrator=s decision. Mr. Hopson agrees to notify MTS=s Vice President of Compensation and Benefits immediately upon his receipt of notification of the denial of the claim for long term disability benefits, and agrees to cooperate with, and assist, MTS in protecting Mr. Hopson=s rights in the event of a claim denial. 10. Future IPO Opportunities. In the event that MTS is purchased or is the subject of an IPO following Mr. Hopson=s separation from employment or determination of long term disability, MTS will consider, but shall not be bound to offer Mr. Hopson the same pre-IPO opportunity or other monetary compensation as would be made available to him had he remained in active employment. 11. Arbitration of Disputes. Mr. Hopson and MTS agree that in the event a dispute arises between them regarding the interpretation of this agreement or an assertion that one party or the other has breached the agreement, they shall first attempt to resolve the dispute informally. If that discussion fails to resolve the dispute, either Mr. Hopson or MTS may request mediation of the dispute and the parties shall bear their own costs, expenses and attorneys fees of any such mediation and equally share the cost of the mediator. Any and all disputes arising from or relating to this agreement or events leading to it that are not resolved by the parties informally or through mediation shall be resolved through binding arbitration pursuant to the National Rules for the Resolution of Employment Disputes (Including Mediation and Arbitration Rules) of the American Arbitration Association in effect at the time the dispute arises. In any such arbitration, each party shall bear their own attorneys fees and costs in the absence of a finding that the party against whom fees are to be awarded violated a statute under which an award of fees is a remedy. The arbitrator shall not have the power to add or delete terms from the agreement and shall be limited to interpreting the terms of the Agreement as written.   12. Confidentiality. Mr. Hopson and MTS acknowledge that in the course of Mr. Hopson=s employment he may have had access to confidential MTS information, that he is required to keep confidential both during and after his employment. MTS and Mr. Hopson further agree that the existence and terms of this agreement are also to be treated by each of them as confidential informational and shall not be disclosed by either to anyone other than to their attorneys and/or accountants except as required by law for purposes of income tax returns or other government compelled disclosure or pursuant to lawful subpoena. The Mr. Hopson and MTS further agree that neither shall respond to or initiate any inquiries to or from the media or individuals known to be current or former employees of MTS (or applicants for employment at MTS) regarding any the circumstances surrounding this dispute or its resolution. If asked, Mr. Hopson and MTS shall respond only by acknowledging that there were some discussions between the parties on various issues and that these were resolved. 13. Governing Law and Construction. This Agreement shall be governed under the laws of the state of California and has been negotiated at arms length with each party having approximately equal bargaining power. As a consequence, no presumption of interpretation against the drafter of the agreement is appropriate and no meaning should be given to the titles used that is inconsistent with or which supercedes the text. Dated: ________________________ ____________________________ Chris Hopson Dated: ________________________ MTS, Inc.   By: ___________________________

  EXHIBIT 10.1   CONSULTING SERVICES AGREEMENT           This Consulting Services Agreement (“Agreement”) is effective as of the 22nd day of June, 2000 (the “Effective Date”), by and between Peritus Software Services, Inc. (“Peritus”), a Massachusetts corporation, with its principal place of business at 112 Turnpike Road, Suite 111, Westborough, MA 01581 and Dominic K. Chan (“Client”), with a principal place of business at 5 Gilboa Lane, Nashua, NH 03060.           Peritus and Client agree that the following terms and conditions will apply to the services provided by Peritus for Client as specified in Statement of Work No. 1, attached hereto and incorporated herein by reference, and any future Statement of Work which may be agreed to in writing between the parties (the “Services”).           1.    Term and Termination.    The Agreement shall commence as of the Effective Date and shall remain in effect unless terminated in accordance with the provisions of this paragraph. Either party may terminate this Agreement or the Services performed hereunder for any reason upon notice to the other party. Peritus’ performance of Services hereunder shall continue until the effective date of termination and Client shall be obligated to pay Peritus for all Services performed through such termination date. Upon termination of this Agreement or any Services performed hereunder, each party shall promptly return to the other all data, material, and other properties of the other party.           2.    Site of Services.    The Services provided under this Agreement shall be performed at the offices of Peritus in Westborough, MA unless otherwise agreed upon by the parties in the applicable Statement of Work.           3.    Fees and Payment Terms.    In consideration of the Services rendered by Peritus hereunder, Client will pay to Peritus a fee(s) as set forth in the applicable Statement of Work. Such fee(s) will be invoiced upon completion of the Services (or on a monthly basis if Services are being performed for longer than a month) and shall be due upon receipt of such invoice(s).           4.    Expenses.    Any out-of-pocket expenses incurred by Peritus shall be paid by Client promptly after receipt of an invoice therefor. Out-of-pocket expenses shall mean any reasonable and documented expenses incurred in connection with the performance of the Services under this Agreement such as travel, meals and lodging expenses, in the event the Services are to be performed at a location other than the offices of Peritus. All travel by Peritus staff shall be in accordance with Peritus’ standard policies governing travel and business expenses.           5.    Confidentiality.    Peritus agrees to treat any information received from Client during the performance of Services hereunder which has been identified in writing as confidential or proprietary in the same manner as it would treat its own confidential or proprietary information of a similar nature and shall not disclose such information except to those employees or agents with a need to know. The foregoing shall not apply to information which (i) is publicly known through no breach of the confidentiality provisions of this Agreement by Peritus, (ii) was previously known by or in the possession of Peritus without use of confidential or proprietary information obtained though the performance of Services under this Agreement, (iii) is independently developed by Peritus without use of confidential or proprietary information obtained through the performance of Services under this Agreement, (iv) is approved for release by written authorization by Client, or (v) is released by Peritus pursuant to a good faith adherence to a court order. The confidentiality obligations imposed herein shall extend for a period of three (3) years following disclosure of the confidential and proprietary information to Peritus.           6.    Ownership Rights.    Client shall retain all right, title and interest in and to (i) any deliverable or work product that is developed specifically and exclusively for Client pursuant to any fully-executed Statement of Work to this Agreement and (ii) any materials furnished by Client to Peritus under this Agreement.           Except as set forth in the previous paragraph, Peritus retains all right, title and interest in and to any software, methods, techniques, systems, data and materials used or developed by it in the performance of the Services. Peritus shall retain all rights to and be entitled to use, disclose, and otherwise employ any and all ideas, concepts, know-how, knowledge bases, methods, techniques, processes, skills, and adaptations, including generalized features of sequence, structure, and organization, in conducting its business, providing the Services or pertaining to its software or methodologies. Nothing in this Agreement shall be deemed to implicitly or explicitly grant any license or other right to Client to use, possess, copy or own any of Peritus’ software, products, processes, techniques, methodologies, knowledge bases or intellectual property. This Agreement shall not limit Peritus’ ability to market, develop and provide functionally comparable deliverables, work products or services to others based on the same general concepts, techniques and routines as are used hereunder. This Agreement shall not preclude Peritus from developing or providing deliverables, work products or services which are competitive to deliverables, work products or services which might be provided to Client, irrespective of their similarity.           7.    Limitation of Liability.    Peritus’ liability for any and all claims of damages arising out of this Agreement shall be limited to direct damages and shall not exceed the amount paid to Peritus for the performance of Services hereunder.           IN NO EVENT SHALL PERITUS BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING ANY DAMAGES RESULTING FROM THE LOSS OF USE, LOSS OF DATA, LOSS OF PROFITS, OR LOSS OF BUSINESS, EVEN IF PERITUS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.           8.    Warranty of Performance.    Peritus warrants that the Services performed under this Agreement will be performed in a good and workmanlike manner, subject to the supervision and instructions provided by Client, and that the Services will be performed substantially as specified under this Agreement.           THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 8 IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.           9.    Non-Solicitation.    The parties agree that during the performance of Services by Peritus hereunder and for a period of one year thereafter, neither party shall directly or indirectly solicit, hire or otherwise retain as an employee or independent contractor, a staff member of the other party or a former staff member who was assigned to such Services.           10.    General.    The provisions of paragraphs 1, 5, 6, 7, 8, 9 and 10 shall survive any termination or expiration of this Agreement. This Agreement and any fully-executed Statement of Work attached hereto set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersede any and all oral and prior written agreements, understandings and quotations relating thereto. No alteration, modification, or cancellation of any of the provisions of this Agreement shall be binding unless made in writing and signed by officers of the parties. Printed terms and conditions on Client’s purchase order(s) shall not apply to the Services performed hereunder. This Agreement will be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts, U.S.A.           The Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns and legal representatives.   Client:  Dominic K. Chan   By: -------------------------------------------------------------------------------- (Authorized Signature)   Name: --------------------------------------------------------------------------------   Title: --------------------------------------------------------------------------------   Date: -------------------------------------------------------------------------------- Peritus Software Services, Inc.   By: -------------------------------------------------------------------------------- (Authorized Signature)   Name: --------------------------------------------------------------------------------   Title: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------

NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVES’ DEFERRED COMPENSATION PLAN (AS AMENDED AND RESTATED AS OF OCTOBER 4, 2000) (Effective As of August 24, 1981 and Amended Effective As of September 21, 1989, September 1, 1994, August 31, 1996, and October 4, 2000) 76 NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVES’ DEFERRED COMPENSATION PLAN TABLE OF CONTENTS Purpose...........................................................................................................2 Article I Definitions.................................................................................................3 Article II Amounts Deferred............................................................................................7 Article III Company Contribution........................................................................................9 Article IV Interest Allowance.........................................................................................10 Article V Vesting....................................................................................................11 Article VI Distribution...............................................................................................13 Article VII Miscellaneous..............................................................................................15 Article VIII Committee..................................................................................................19 Article IX Change in Control Provisions 9.01 Cause................................................................................................21 9.02 Change in Control....................................................................................22 9.03 Termination of Employment............................................................................23 9.04 Amendment or Termination.............................................................................23 Article X Transfer of Accounts 10.01 Transfer of Accounts in Deferred Compensation Plan for Junior Officers..............................24 Appendix A Adopting Employers.........................................................................................25 Application for Deferral of Compensation.........................................................................26 77 PURPOSE         National Service Industries, Inc. has established the Executives’ Deferred Compensation Plan to assist certain key employees in accumulating capital or supplementing any retirement income they may otherwise receive by permitting them to defer a portion of their compensation. To encourage these individuals to participate in the Plan and to continue their employment with the Company, the Company will match a portion of these deferred amounts.         This Plan, hereafter called the “Executives’ Deferred Compensation Plan,” is described herein. This document reflects the Plan as amended and restated, effective as of October 4, 2000. 78 EXECUTIVES’ DEFERRED COMPENSATION PLAN ARTICLE I Definitions         1.01....."Average Prime Rate" means the numerical mean of the prime rate as reflected in the Wall Street Journal (the base rate on corporate loans posted by at least 75 percent of the nation's 30 largest banks, or if more than one rate is published, the average of the rates published) for the first business day of each calendar quarter commencing between Valuation Dates.         1.02....."Class Year" means the Fiscal Year for which a deferral is elected.         1.03....."Class Year Account" means the sub-accounts set up for the Primary Account and Company Contribution Account for each Class Year.         1.04....."Company" means National Service Industries, Inc., a Delaware corporation (or its successor or successors). Affiliated or related employers are permitted to adopt the Plan and shall be known as "Adopting Employers." To the extent required by certain provisions (e.g., Compensation and Continuous Service), references to the Company shall include the Adopting Employer of the Participant. Adopting Employers are listed on Appendix A.         1.05....."Committee" means the Committee appointed to administer the Plan as and to the extent provided in Article VIII.         1.06....."Company Contribution Account" means the sum of all amounts credited to a Participant pursuant to Section 3.01 together with interest allowances thereon credited pursuant to Section 4.01 herein. 79         1.07....."Compensation" means the aggregate salary from the Company received by a Participant during a Fiscal Year together with any performance or discretionary bonus awarded by the Company for that same Fiscal Year. Compensation does not include expense reimbursement, car allowance, imputed value of group life insurance, aspiration award payments, income from stock options, restricted stock, and other stock awards, company contributions to any benefit plan, or any gift or awards not treated as pay by the Company.         1.08....."Continuous Service" means the period of uninterrupted employment of an Eligible Executive since the individual's most recent date of employment or appointment to the class of Eligible Executives, whichever is applicable.         1.09....."Deferred Compensation" means the portion of a Participant's compensation for any Fiscal Year, or part thereof, that has been deferred pursuant to the Plan.         1.10....."Deferred Compensation Plan for Junior Officers" or "Junior Officers' Plan" means the Deferred Compensation Plan for Junior Officers which was established effective August 24, 1981.         1.11....."Executive or Eligible Executive" means a Senior Officer, a Key Manager, or a President, each as defined herein. Any dispute regarding any individual's eligibility for the Plan shall be resolved by the Committee in its sole discretion.         1.12....."Fiscal Year" means the fiscal year of the Company commencing on September 1 and ending on August 31 of the following calendar year, or such other fiscal year as may be established in the future. 80         1.13....."Key Manager" means an assistant vice president or other key management employee (as determined by the Committee or its designee) of the Company or an Adopting Employer.         1.14....."Participant" means a person a portion of whose compensation for any Fiscal Year has been deferred pursuant to the Plan and whose interests in the Plan have not been wholly forfeited or distributed.         1.15....."Plan or Executives' Plan" means the Executives' Deferred Compensation Plan of National Service Industries, Inc., as described in this instrument, and as it may be amended.         1.16....."President" means the president of a business segment of the Company or an Adopting Employer.         1.17....."Primary Account" means the sum of all amounts deferred by a Participant pursuant to Section 2.01 plus interest allowances thereon credited pursuant to Section 4.01 herein.         1.18....."Senior Officer" means the president or an executive vice president, senior vice president, or vice president of the Company or an Adopting Employer.         1.19....."Termination of Service" or similar expression means the termination of the Participant's employment as an Eligible Executive of the Company. A Participant who is granted a temporary leave of absence, whether with or without pay, shall not be deemed to have terminated his service. In the event of a transfer of an Eligible Executive to a position in which he would no longer be eligible to continue in this Plan, or in the event of the disability of a Participant (as determined by the Committee), the Committee, in its sole discretion, shall determine whether a Termination of Service has occurred. 81         1.20....."Valuation Dates" mean March 31 and September 30 of each year. 82 ARTICLE II Amounts Deferred         2.01.....Each Eligible Executive may elect to have a portion of the annual performance or discretionary bonus ("bonus"), if any, to be received by him for the Fiscal Year commencing September 1, 1981, and for any Fiscal Year thereafter, irrevocably deferred in accordance with the terms and conditions of the Plan. The amount of such bonus that may be so deferred shall not exceed the lower of         (A)......the Executive "s Compensation for the Class Year which is in excess of the average Compensation paid or credited to the Executive (including any amounts deferred under this Plan, but excluding Company Contributions under this Plan) for services rendered as an Eligible Executive over the three (3) full Fiscal Years immediately preceding the Class Year. If the Executive has completed two (2) but less than three (3) full Fiscal Years of Continuous Service in an eligible position the average shall be computed based upon the average Compensation paid or credited to the Executive for the two (2) full Fiscal Years immediately preceding the Class Year. Any Executive who has not completed two (2) full Fiscal Years in an eligible position shall be entitled to defer for the Class Year not more than (1) twenty five hundred dollars ($2,500) for a Senior Officer and (2) twelve hundred fifty dollars ($1,250) for a Key Manager; and         (B)......the Executive's bonus for the Class Year.         An Executive desiring to exercise such election shall, prior to the beginning of each such Fiscal Year, or prior to the beginning of the Executive's initial employment if such employment is to commence other than at the beginning of a Fiscal Year (or within such other period as may be established by the Committee), notify the Company, in writing, of the portion of his bonus for such Fiscal Year that he elects to have so deferred. If the Executive's election would result in a deferral greater than the maximum provided herein, any deferred amount shall be reduced to the maximum limit provided herein. 83         2.02.....The Executive's Primary Account shall be credited, as of October 1 next following the end of each Class Year for which the election was made, with the dollar amount of the compensation deferred for such Class Year pursuant to Section 2.01.         2.03.....A Participant's accounts shall be distributable in the manner and subject to the conditions set forth in Article V, Article VI and Article IX. 84 ARTICLE III Company Contribution         3.01.....Each October 1, the Company shall contribute to a Company Contribution Account on behalf of each Eligible Executive an amount equal to the Executive's Deferred Compensation for the immediately preceding Class Year, up to a maximum of five thousand dollars ($5,000) for a Senior Officer or President and twenty five hundred dollars ($2,500) for a Key Manager.         The inability of a Participant to fully utilize the maximum Company Contribution for any Class Year, whether due to lack of qualified earnings, eligible service, failure to elect or any other reason, shall not result in a carry-over of unused credits to any subsequent year. 85 ARTICLE IV Interest Allowance         4.01.....Each Primary Account and Company Contribution Account of each Participant shall be credited on each September 30 with an interest allowance which shall be computed and compounded on semi-annual Valuation Dates based upon the Average Prime Rate as follows: When the Average Prime Rate is: The Interest Credit Shall Be: ------------------------------- ----------------------------- -more than 12.00% -Average Prime Rate less 3% -more than 8.00% but not more than 12.00% -Average Prime Rate less 2% -8.00% or less -Average Prime Rate less 1% 86 This interest allowance shall be applied to the balances standing, as of said date, in each Participant’s accounts for all Class Years. ARTICLE V Vesting         5.01.....A Participant shall at all times have a non-forfeitable (vested) right to the amounts in his Primary Account subject to the Distribution provisions of Article VI.         5.02.....(A) Subject to Article IX, the Company Contribution Account of a Participant for each Class Year shall become vested in him upon the completion of five full Fiscal Years of Continuous Service as an Eligible Employee after the end of such Class Year.         (B) Subject to Article IX, the Company Contribution Account of a Participant for all Class Years shall become vested in him upon the occurrence of any of the following events:         (1) Total and Permanent Disability of the Participant (as determined by the Committee); or         (2) Retirement after the Participant has attained age 55; or         (3) Death of the Participant; or         (4) Termination of this Plan.         5.03 Notwithstanding anything to the contrary herein, prior to a Change in Control should the Participant be found by the Committee to be guilty of theft, embezzlement, fraud or misappropriation of the Company's property or of any action which, if the individual were an Officer of the Corporation, would constitute a breach of fiduciary duty, the Company Contribution Account for all Class Years which had not yet vested in the Participant shall be immediately forfeited. 87 ARTICLE VI Distribution         6.01 Subject to Article IX, distribution of the Vested Portion of a Participant's Account shall be made in a lump sum as soon as practicable following the Participant's Total and Permanent Disability, Death or Termination of Service for any other reason prior to attainment of age 55. If a Participant terminates employment on or after age 55, the provisions of any benefit elections made by the Participant pursuant to Section 6.03 shall be recognized. In the event of the Termination of the Plan or the Total and Permanent Disability or Death of a Participant, interest allowance pursuant to Article IV shall be computed to the date of payment hereunder. In the event of Termination of Service for any other reason, interest allowance shall be computed to the last Valuation Date falling on or before the date of such Termination of Service.         6.02 Except as provided in Section 6.01 above and Article IX, distribution of each Class Year Account of a Participant shall be made in a single lump sum payment on the October 1 next following five (5) full Fiscal Years after the Class Year. For example, the distribution of Class Year 1982 Account shall be made on October 1, 1987 and for Class Year 1983 Account on October 1, 1988, etc. Such Participant, may, however, make a timely election to further defer receipt of this sum as provided in Section 6.03.         6.03 Any such Participant may file a subsequent election to further irrevocably defer any amount becoming distributable under this Plan provided that such election is filed before the end of the fourth Fiscal Year immediately following the Class Year. For example, for Class Year 1982 any such election must be filed prior to September 1, 1986. This subsequent deferral shall provide, at the option of the Participant, for payment of the Participant's full Class Year Account balance in a single sum or in installments payable on October 1 of any year or years but with the last installment due not later than ten years after the Participant's retirement and not before the regular distribution date otherwise provided herein. A Participant retiring on or after age 55 may elect at least one (1) year prior to the date of his retirement to make the deferral election in this section with respect to all Class Year Accounts which have not yet become distributable because five (5) full Fiscal Years have not elapsed. 88         6.04 Hardship. A Participant who is suffering an unforeseen and severe financial hardship as a result of (i) an illness or accident of the Participant or his immediate family, (ii) loss of Participant's property due to casualty, or (iii) for such other reasons as the Committee may establish, may file a written request with the Committee for distribution of all or a portion of the amount credited to his Account. The Committee shall have the sole discretion to determine whether to grant a Participant's hardship request and the amount to distribute to the Participant. The Committee shall have authority in connection with such hardship request to accelerate the payment of any Class Year Accounts which have been deferred pursuant to Section 6.03. 89 ARTICLE VII Miscellaneous         7.01 No Participant or any other person shall have any interest in any specific asset or assets of the Company by reason of any sums credited to him hereunder or any right to receive any distribution under the Plan except as and to the extent expressly provided in the Plan. Nothing in the Plan shall be deemed to give any officer or any employee of the Company any right to participate in the Plan, except in accordance with the provisions of the Plan.         7.02 Neither the adoption nor the amendment of the Plan, nor any action of the Board of Directors of the Company or the Committee, nor any election to defer compensation hereunder, shall be held or construed to confer on any person any legal right to be continued as an employee of the Company.         7.03 No Participant or any other person entitled to payment hereunder shall have the right to assign, pledge or otherwise dispose of any interest in his Account, nor shall the Participant's interest therein be subject to garnishment, attachment, transfer by operation of law, or any legal process, except to pay a debt of such Participant to the Company or an Adopting Employer.         7.04 If a Participant or beneficiary (hereafter, "Claimant") does not receive timely payment of any benefits which he believes are due and payable under the Plan, he may make a claim for benefits to the Plan Administrator. The claim for benefits must be in writing and addressed to the Plan Administrator or to the Company. If the claim for benefits is denied, the Plan Administrator shall notify the Claimant in writing within 90 days after the Plan Administrator initially received the benefit claim. However, if special circumstances require an extension of time for processing the claim, the Plan Administrator shall furnish notice of the extension to the Claimant prior to the termination of the initial 90-day period and such extension shall not exceed one additional, consecutive 90-day period. Any notice of a denial of benefits shall advise the Claimant of the basis for the denial, any additional material or information necessary for the Claimant to perfect his claim, and the steps which the Claimant must take to have his claim for benefits reviewed. 90         7.05 Each Claimant whose claim for benefits has been denied may file a written request for a review of his claim by the Plan Administrator. The request for review must be filed by the Claimant within 60 days after he received the written notice denying his claim. The decision of the Plan Administrator will be made within 60 days after receipt of a request for review and shall be communicated in writing to the Claimant. Such written notice shall set forth the basis for the Plan Administrator's decision. If there are special circumstances which require an extension of time for completing the review, the Plan Administrator's decision shall be rendered not later than 120 days after receipt of a request for review.         7.06 If the whole or any part of any Participant's Account shall become liable for the payment of any estate, inheritance, income, or other tax which the Company shall be required to pay or withhold, the Company shall have the full power and authority to withhold and pay such tax out of any monies or other property in its hand for the account of the Participant whose interests hereunder are so liable. The Company shall provide notice of any such withholding. Prior to making any payment, the Company may require such releases or other documents from any lawful taxing authority as it shall deem necessary. 91         7.07 Each Participant shall have the right at anytime to designate, and rescind or change any designation of, a primary and contingent beneficiary or beneficiaries to receive benefits hereunder in the event of his death. If there is no surviving beneficiary at the time of the Participant's death, future payments due shall be made to the estate of the Participant. A designation or change of beneficiary shall be made in writing on a form prescribed by the Committee. After such notice is filed with the Committee, the designation or change shall relate back and take effect as of the date the Participant signed such form, but without prejudice to the Committee or the Company on account of any payment made before receipt of such notice.         7.08 The benefits provided by this Plan shall be unfunded. All amounts payable under this Plan to any Participant shall be paid from the general assets of the employer which principally employs the Participant (the "Obligated Employer"), and nothing contained in this Plan shall require the Obligated Employer to set aside or hold in trust any amounts or assets for the purpose of paying benefits to Participants. This Plan shall create only a contractual obligation on the part of the Obligated Employer and Participants shall have the status of general unsecured creditors of the Obligated Employer under the Plan with respect to amounts of Compensation they defer hereunder or any other obligation of the Obligated Employer to pay benefits pursuant hereto. Any funds of the Obligated Employer available to pay benefits pursuant to the Plan shall be subject to the claims of general creditors of the Obligated Employer, and may be used for any purpose by the Obligated Employer.         Notwithstanding the preceding paragraph, the Obligated Employer may at any time transfer assets to a trust for purposes of paying all or any part of its obligations under this Plan. However, to the extent provided in the trust only, such transferred amounts shall remain subject to the claims of general creditors of the Obligated Employer. To the extent that assets are held in a trust when a Participant's benefits under the Plan become payable, the Committee shall direct the trustee to pay such benefits to the Participant from the assets of the trust. 92         7.09 In consideration of each Participant's performance of valuable services that inure to the financial benefit of the Company, the Company does hereby agree to perform all of the obligations and responsibilities and pay any benefits due and owing to a Participant under the Plan if the Obligated Employer (as defined in Section 7.05) designated to perform such obligations and responsibilities or pay such benefits fails or is unable to do so. 93 ARTICLE VIII Committee         8.01 The Plan shall be administered by a Committee composed of the Executive Resource and Compensation Committee of the Board of Directors of the Company or such other committee as may be designated by the Board of Directors. The Committee shall be deemed to have and to be exercising all of the powers of the Board of Directors of the Company in the performance of any of the powers and duties delegated to it under the Plan. No member of the Committee may participate in a decision regarding his or her own benefits under the Plan except in general matters dealing with the Plan as a whole. The Committee shall have the authority to delegate its duties and responsibilities hereunder.         8.02 The Committee may, in its absolute discretion, without notice at any time and from time to time, modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely; provided that no such modification, amendment, suspension or termination may, without his consent, apply to or affect the payment or distribution to any Participant of any amounts credited to him hereunder prior to the effective date of such modification, amendment, suspension or termination. Notwithstanding anything contained in this Plan to the contrary, for a period of two (2) years following a Change in Control this Plan shall not be terminated or amended to reduce or eliminate any Eligible Executive's or Participant's benefits or participation (or right to participate) provided under this Plan, including, without limitation, the benefits provided in Articles II, III, V and IX. 94         8.03 The Committee shall from time to time establish eligibility requirements for participation in the Plan and rules for the administration of the Plan, including such delegation of any administrative or ministerial duties hereunder as it may deem desirable, that are not inconsistent with the provisions of the Plan.         8.04 The Committee shall have the exclusive discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and its decisions on such matters shall be final and conclusive on all parties. Without limiting the generality of the foregoing, the determination of the Committee as to whether a Participant has retired, terminated his service or become totally and permanently disabled and the date thereof shall be final, binding and conclusive upon all persons.         8.05 The Company or the Committee may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel.         8.06 Wherever the context so requires, words in the masculine include the feminine and in the feminine include the masculine.         8.07 This Plan shall be construed, administered and governed in all respects under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and, to the extent not preempted by ERISA, by the laws of the State of Georgia. 95 Change in Control Provisions         9.01 Cause. For purposes of this Plan, a termination for "Cause" is a termination evidenced by a resolution adopted in good faith by two-thirds of the Board that the Participant (i) intentionally and continually failed to substantially perform his duties with the Company (other than a failure resulting from the Participant's incapacity due to physical or mental illness) which failure continued for a period of at least thirty (30) days after written notice of demand for substantial performance has been delivered to the Participant specifying the manner in which the Participant has failed to substantially perform, or (ii) intentionally engaged in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; provided, however that no termination of the Participant's employment shall be for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Participant a copy of a written notice setting forth that the Participant was guilty of the conduct set forth in clause (ii) and "specifying the particulars thereof in detail, and (y) the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant's part, shall be considered "intentional" unless he has acted or failed to act, with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Agreement to the contrary, in the case of any Participant who is a party to a Severance Protection Agreement, no failure to perform by the Participant after a Notice of Termination (as defined in the Participant's Severance Protection Agreement) is given by the Participant shall constitute Cause for purposes of this Plan. 96         9.02 Change in Control. For purposes of this Plan, a Change in Control shall mean any of the following events:         (A) The acquisition (other than from the Company) by any "Person" (as the term person is used for purposes of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the combined voting power of the Company's then outstanding voting securities; or         (B) The individuals who, as of September 21, 1989, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; or         (C) Approval by stockholders of the Company of (1) a merger or consolidation involving the Company if the stockholders of the Company, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than seventy percent (70%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger or consolidation or (2) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company. 97         Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to Section (a), solely because twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition.         9.03 Termination of Employment. Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated by the Company (other than for "Cause") or by the Participant for any reason within two (2) years following a Change in Control, the Company shall, within five (5) days, pay to the Participant a lump sum cash payment of his Primary Account and Company Contribution Account with the interest allowance provided for in Article IV credited thereto to the date of payment.         9.04 Amendment or Termination. Any amendment or termination of this Plan which a Participant reasonably demonstrates (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, and which was not consented to in writing by the Participant shall be null and void, and shall have no effect whatsoever with respect to the Participant. 98 ARTICLE X Transfer of Accounts         10.01 Transfer of Accounts in Deferred Compensation Plan for Junior Officers. A participant in the Junior Officers' Plan shall have the amounts credited to his "Class Year Accounts" (as defined in the Junior Officers' Plan) transferred to the Executives' Plan effective as of October 1, 2000, or as soon thereafter as is practical. The amounts credited to the sub-accounts in the Participant's Class Year Accounts in the Junior Officers' Plan shall be credited to the like sub-accounts in his Class Year Accounts under the Executives' Plan and shall thereafter be held and distributed in accordance with the rules of the Plan applicable to the Class Year Accounts. 99 Appendix A Adopting Employers         National Service Industries, Inc. of Georgia         NSI Enterprises, Inc. 100 NATIONAL SERVICE INDUSTRIES, INC. APPLICATION FOR DEFERRAL OF COMPENSATION         I hereby elect to defer the following amount of any performance or discretionary bonus which is earned by me for the Company’s Fiscal Year commencing on September 1 next following the date signed below. If the amount specified below is greater than the maximum amount deferrable under the Plan, the amount deferred will be reduced as required by the Plan. (Please check) [ ] $_____________ [ ] ______% of bonus [ ] All over $_________ [ ] Other ___________________________________________________________ ________________________________________________________________ I have received a copy of the Plan and understand all of the provisions in it. BENEFICIARY DESIGNATION In the event of my death before my entire interest in the Plan has been distributed, any unpaid balances in my Account should be paid to: Primary____________________________ ____________________________________ Beneficiary(ies) Name Relationship In the event my Primary Beneficiary Predeceases me, my Account balance should be paid to: Contingent_________________________ ____________________________________ Beneficiary(ies) Name Relationship _________________________ ____________________________________ Name Relationship Date: _____________________________ Signature:____________________________ Print Name 101

Exhibit 10.2 [POWERCERV LOGO]                                                                                                                July 27, 2000 Mr. Michael Simmons 2849 Seabreeze Drive South Gulfport, FL 33707 Dear Mike:       Per our most recent discussions, this letter reflects the final agreement PowerCerv and you reached in connection with the separation of your employment from PowerCerv Technologies Corporation. For purposes of this letter (hereinafter, the “Letter Agreement”), the terms “you” or “your” collectively refers to yourself and your heirs, executors, guardians, administrators, successors, and assigns, and each of them, jointly and severally. Additionally, the term “PowerCerv” collectively refers to PowerCerv Technologies Corporation, its officers, directors, shareholders, employees, and agents (in their individual and representative capacities), and its parent, affiliated, predecessor, successor, subsidiary, and other related companies, and each of them, jointly and severally. Any references to “the parties” include you and PowerCerv. Also, any reference to your “Employment Agreement” refers to the Executive Employment Agreement by and between PowerCerv and you dated as of February 19, 1998 and the Amendment dated as of December 29, 1998.       The terms and conditions of this Letter Agreement are as follows: 1.   Pursuant to recent discussions, on June 1, 2000, PowerCerv provided you notice of its termination of the Employment Agreement per section 9(a)(iii), thereof. You and PowerCerv agree that the “Termination Date”, as referenced in Section 10(a) of the Employment Agreement, shall be August 31, 2000. Notwithstanding the foregoing, and per our conversation, you are not to provide PowerCerv services as an employee or officer as set forth in the Employment Agreement following the close of business on August 31, 2000. You agree, however, over the next twelve (12) months, to provide reasonable phone consulting to PowerCerv, during normal business hours, relative to matters you worked on or had knowledge of during your time of employ. 2.   You will submit a letter of resignation to me on or about the date hereof. PowerCerv and you agree that your separation of employment with PowerCerv was effected per Section 9(a)(iii) of the Employment Agreement. 3.   You will further submit a letter of resignation from the Board of Directors of PowerCerv Corporation and any of its direct or indirect subsidiaries and any committees thereof, effective on a date determined by me. Further, your resignation letter shall confirm that there are no outstanding issues or comments against the company, and that your resignation is not due to any disagreement with any such entity relating to the operations, policies or procedures of PowerCerv Corporation or its direct or indirect subsidiaries. 1 Corporate Headquarters • 400 N. Ashley Drive • Suite 2700 • Tampa, Florida 33602 Phone: (813) 226-2600 • Telefax: (813) 222-0886 • http://www.powercerv.com -------------------------------------------------------------------------------- 4.   PowerCerv will pay you the sum of $18,750.00 for twelve (12) months. The first payment will be made on September 15, 2000 and the last payment will be made on August 15, 2001. These payments will be made on the fifteenth of each month. PowerCerv shall continue to provide you with your existing health, welfare, life and disability insurance or benefits similar to those offered to other members of senior management of PowerCerv, until August 31, 2001 or until you obtain other employment providing comparable benefits, whichever occurs first. 5.   In the event of a change of control of PowerCerv during the period PowerCerv is obligated to pay the monthly cash payments as set forth in section 4 above, such remaining obligation shall become due and payable to you within 30 days from the closing of such change of control. A change of control shall mean a sale, merger, or acquisition of all or substantially all of the assets of PowerCerv to an unrelated third party. 6.   PowerCerv and you agree that as of August 31, 2000, your Stock Option Agreement dated as of February 19, 1998 (the “Option Agreement”) shall be vested in the amount of 750,000 shares at the option price contained therein with no further vesting occurring. Section 8 of the Option Agreement is hereby modified to reflect that PowerCerv and you agree that as of January 31, 2001, such Option Agreement issued to you by PowerCerv shall immediately be cancelled and terminated. Until such date, PowerCerv shall allow you to exercise the options under the Option Agreement on a “cashless transaction” basis in accordance with PowerCerv’s then applicable procedures and in accordance with the standard PowerCerv Stock Option ISO Agreement. All other stock options granted to you, whether ISO or Non-Statutory, other than the Option Agreement shall be terminated as of the date hereof. 7.   You agree that these monies and the Option Agreement (described in Paragraphs 4, 5 and 6 of this Letter Agreement), plus any funds you may have contributed to PowerCerv’s 401(k) Profit Sharing Plan including amounts paid by PowerCerv which have vested per the vesting schedule in the Plan, represent all monies to which you may now or may hereafter be entitled to under the Employment Agreement or otherwise from PowerCerv including but not limited to back-pay, severance pay, wages, commissions, bonuses, vacation pay, benefits, attorneys’ fees and damages of any nature whatsoever. 8.   Effective August 31, 2001, you will become eligible for standard COBRA benefits (in accordance with the applicable federal requirements and guidelines) at your own cost. 9.   As may be reasonably requested for a twelve (12) month period after the date of this Letter Agreement, you agree to complete the orderly transition of all of your accounts, prospective accounts and PowerCerv business matters to Marc Fratello or his designee, and agree to assist PowerCerv at no cost or fee in connection with any outstanding litigation to which you may be involved or have knowledge. Provided PowerCerv shall pay your reasonable pre-approved expenses associated with travel and lodging for such matters. You will also return to PowerCerv all PowerCerv property, 2 -------------------------------------------------------------------------------- including office equipment, supplies, customer and work files and related materials. Notwithstanding, PowerCerv shall provide you with use of your existing computer until August 31, 2000. Also, you will return all keys, cards and other similar type materials to PowerCerv. Additionally, you hereby agree to comply with the terms and conditions of Sections 12 and 13 of your Employment Agreement, which provisions are incorporated herein by this reference. Further, you acknowledge that PowerCerv has the right to continue to enforce Sections 12 and 13 of the Employment Agreement. Notwithstanding the foregoing, the parties hereby agree and acknowledge that the definition of a competing company in Section 13 (a)(III) is limited to those companies which are engaged in the development, sales or marketing of ERP software or CRM software. 10.   You agree not to file any charges, claims, suits, complaints, or grievances against PowerCerv with any federal, state, or local governmental agency, or in any court of law, with respect to any aspect of your employment by, or separation of employment from, PowerCerv, or wide respect to any other matter whatsoever, whether known or unknown to you at the time of execution of this Letter Agreement, with the exception of any claim that PowerCerv breached its commitments to you under Paragraphs 4, 5 and 6 of this Letter Agreement. 11.   You agree to release and forever discharge PowerCerv of and from all actions and causes of action, suits, debts, claims, and demands whatsoever, in law or in equity, which you ever had, or may now have, with respect to your employment by, or separation of employment from, PowerCerv, whether known or unknown as of the date of this Letter Agreement, with the exception that PowerCerv breached its commitments to you under Paragraphs 4, 5 and 6 of this Letter Agreement. 12.   PowerCerv agrees to release and forever discharge you of and from all actions and causes of action, suits, debts, claims, and demands whatsoever, in law or in equity, which PowerCerv ever had, or may now have, with respect to your employment with, or separation of employment with, PowerCerv, whether known or unknown as of the date of this Letter Agreement, with the exception that you breached your commitments to PowerCerv under this Letter Agreement. Notwithstanding the foregoing, the release and discharge set forth in this Paragraph 12 does not apply, and you hereby acknowledge that it does not apply, to any obligation, responsibility, covenant or the like you have as set forth in this Letter Agreement and your Employment Agreement. 13.   Each party’s covenants and releases, as set forth in this Letter Agreement, include a waiver of any and all rights or remedies which you ever had, or may now have, against PowerCerv under any present or future federal, state, or local statute or law, including, but not limited to, Florida’s Laws Against Discrimination, Title VII of the 1964 Civil Rights Act, 42 U.S.C. §2000e, et seq.; the Age Discrimination in Employment Act of 1967, 29 U.S.C. §621, et seq., as amended by the Older Worker Benefit Protection Act of 1990; the 1866 Civil Rights Act, 42 U.S.C. § 1981; the Civil Rights Act of 1991, PL. 102-166; Americans with Disabilities Act, 42 U.S.C. §12101, et seq.; the Fair Labor Standards Act of 1938, 29 U.S.C. §201, et seq.; the Equal Pay Act, 29 U.S.C. §206(d); the Family and Medical Leave Act of 1993, 29 U.S.C. §2601, et seq.; the Occupational Safety and Health Act of 1970, 29 U.S.C. §553, et seq.; the Employee Retirement Income 3 -------------------------------------------------------------------------------- Security Act of 1974, 29 U.S.C. §1001, et seq.; the Consolidated Omnibus Budget Reconciliation Act of 1986, 29 U.S.C. §1161, et seq.; Florida’s Workers’ Compensation Law; and various state and local constitutional and statutory provisions and human rights laws as well as the laws of contract and tort. 14.   The parties agree that their covenants and promises made in this Letter Agreement are in consideration of the payment and other promises made hereunder by the other party. 15.   This Letter Agreement including all terms described herein shall remain confidential and, except as otherwise required by law or pursuant to discussions with attorneys or accountants, neither party has or shall disclose the terms of this Letter Agreement to any person or entity without the prior written consent of the other party. 16.   In the event that you, or any person, entity, or organization, breaches any of your promises made in this Letter Agreement, and PowerCerv defends or pursues any charge, suit, complaint, claim, or grievance as a result thereof, you shall be liable to PowerCerv for all damages, attorneys’ fees, expenses, and costs (including discovery costs) incurred by it in defending or pursuing the same. 17.   In the event that PowerCerv, or any person, entity, or organization, breaches any of its promises made in this Agreement, and you defend or pursue any charge, suit, complaint, claim, or grievance as a result thereof, PowerCerv shall be liable to you for all damages, attorneys’ fees, expenses, and costs (including discovery costs) incurred by you in defending or pursuing the same. 18.   You hereby acknowledge that you have been advised of your right to consult with legal counsel. You further acknowledge that you have entered into this Letter Agreement voluntarily and of your own free will. 19.   The validity of this Letter Agreement and the rights and obligations of the parties will be construed and determined in accordance with the laws of the State of Florida; provided, however, that if any provision of this Letter Agreement is determined by a court of competent jurisdiction to be in violation of any applicable law or otherwise invalid or unenforceable, such provision shall to such extent as it shall be determined to be illegal, invalid or unenforceable under such law be deemed null and void, but this Letter Agreement shall otherwise remain in full force and effect. This Letter Agreement may only be modified or amended by a written document duly executed by both parties. 20.   This Letter Agreement, together with its attachments referenced herein, represent the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersede any and all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between you and PowerCerv with respect thereto. 4 --------------------------------------------------------------------------------       I believe this document, containing sections 1 through 20 as set forth above, incorporates all of the terms and conditions discussed and agreed upon. If you have any questions, I recommend you speak with your own legal counsel. In order to proceed, and assuming your agreement with these terms and conditions, please execute below indicating your express written acceptance.       Very truly yours,   POWERCERV TECHNOLOGIES CORPORATION   /s/ Marc Fratello Marc Fratello Chairman of the Board AGREED AND ACCEPTED: /s/ Michael J. Simmons                                                           Michael J. Simmons, in his individual capacity Date: August 1, 2000                                                               5

Exhibit 10.72 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement"), with an Effective Date of December 1, 1999, is made and entered into between Mercedes Johnson (the "Executive") and Lam Research Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Company and Executive desire to enter into this Agreement to confirm the terms and conditions with respect to the Executive's continuing employment with the Company. B. Certain capitalized terms used in the Agreement are defined in Section 5 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Executive by the Company, the parties agree as follows: 1. Duties and Scope of Employment. (a) Position. During the Employment Period (as defined in Section 2 (a) below), Executive shall serve as Vice President and the Chief Financial Officer of the Company. The duties and responsibilities of Executive shall include the duties and responsibilities for Executive's corporate offices and positions as set forth in the Company's Bylaws from time to time in effect and as are customary for such corporate offices and positions, and such other duties and responsibilities as the Chief Executive Officer and the Board of Directors of the Company (the "Board") may, from time to time, reasonably assign to Executive, in all cases to be consistent with Executive's corporate offices and positions. (b) Obligations. Executive shall comply with all of Lam's policies and procedures governing employment. During the Employment Period, Executive shall devote her full business efforts and time to the Company. The foregoing, however, shall not preclude the Executive from engaging in such activities and services as do not interfere or conflict with her responsibilities to the Company. 2. Employment Period. (a) Term. This Agreement shall begin upon the Effective Date and shall continue until December 31, 2002, unless earlier terminated as set forth herein (the "Employment Period"). Except as otherwise provided herein, the Employment Period shall end on the Termination Date. (b) Termination. (i) By the Company. The Company may terminate Executive's employment for Cause (as defined in Section 5(a) below), by giving the Executive thirty (30) days' advance written notice, subject, however, to the cure provisions of such Section. The Company may terminate the Executive's employment with the Company other than for Cause by giving the Executive ninety (90) days' advance notice in writing. Any waiver of notice shall be valid only if it is made in writing and expressly refers to the applicable notice requirement of this Section 2(b). (ii) By the Executive. Executive may terminate her employment with the Company in response to her Involuntary Termination (as defined in Section 5(c) below) by giving the Company thirty (30) days' advance written notice, subject, however, to the cure provisions of such Section. Executive may terminate her employment with the Company at any time for any other reason ("Voluntary Resignation") by giving the Company ninety (90) days' advance written notice. Any waiver of notice shall be valid only if it is made in writing and expressly refers to the applicable notice requirement of this Section 2(b). (c) Death. Executive's employment shall terminate immediately in the event of her death. The Company shall pay to the Executive's estate any earned but unpaid salary and vacation pay accrued to the date of her death. (d) Disability. The Company may terminate Executive's employment for Disability (as defined in Section 5(b) below) by giving Executive ninety (90) days' advance notice in writing. In the event Executive resumes the performance of substantially all of her duties hereunder before the termination of her employment under this Section 2(d) becomes effective, the notice of termination shall automatically be deemed to have been revoked. (e) Priority of Rights and Obligations upon Termination Events. If any event leading to or permitting Termination of this Agreement, or providing notice thereof, occurs at approximately the same time as any other Early Termination event or during any Termination notice period, and those events invoke different notice periods or different severance or other benefit arrangements, the deadlines, obligations, rights and benefits applicable to the Termination event having the highest priority shall control. The priority of Termination events (from highest to lowest priority) is as follows: (1) Termination for Cause; (2) Voluntary Resignation; (3) Involuntary Termination; (4) Disability; and (5) death. For example, if Executive gives notice of her Voluntary Resignation and, before the 90 day notice period has expired, she is subject to an Involuntary Termination, only the rights and benefits available to her for Voluntary Resignation apply since the provisions governing Voluntary Resignation have a higher priority than those applicable to Involuntary Termination. Similarly, if Executive has been subject to an Involuntary Termination and dies during the notice period, she shall have the rights and benefits available to her estate as one subject to an Involuntary Termination. Expiration of this Agreement prevails over all termination events.   3. Compensation and Benefits. (a) Base Compensation. During the term of this Agreement, the Company shall pay the Executive as compensation for services a base salary. The Board, at least annually, will review such base salary for possible increase, reasonably taking into account Executive's performance and prevailing compensation for executives at similar levels in similar-sized companies in the industry. Such salary shall be paid periodically in accordance with normal Company payroll. The annual compensation specified in this Section 3(a) is referred to in this Agreement as "Base Compensation." (b) Stock Options As of the Effective Date, the Executive has been granted the following non-qualified stock options to purchase shares of the Company's common stock, par value $.001 per share (the "Common Stock"): 1. Grant dated April 30, 1997, to purchase 75,000 shares of Common Stock;, at an exercise price of $29.0625. 2. Grant dated April 16, 1998, to purchase 30,000 shares of Common Stock, at an exercise price of $29.875. 3. Grant dated November 5, 1998, to purchase 80,000 shares of Common Stock, at an exercise price of $14.4688. Collectively, these grants shall be referred to herein as the "Incentive Options." (c) Deferred Compensation. Executive shall be entitled to participate in the Company's Executive Deferred Compensation Plan pursuant to the terms thereof. (d) Benefits. During the Employment Period, Executive shall be eligible to participate in the benefit plans and compensation programs maintained by the Company of general applicability to other key executives of the Company, including (without limitation) retirement plans, automobile allowances, savings or profit-sharing plans, deferred compensation plans, supplemental retirement or excess-benefit plans, stock option, life, disability, health, accident and other insurance programs, paid vacations (but accruing at not less than three weeks per year), sabbatical programs, and similar plans or programs, but excluding any performance bonus plans, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determination of the Board or any committee administering such plan or program. (e) Reimbursement of Business Expenses. The Company shall reimburse Executive for all reasonable and necessary business expenses incurred by Executive in the performance of her duties hereunder upon proper submission of expense reports in accordance with Company policies regarding such reimbursement. (f) Section 162(m). Executive and the Company agree to use reasonable good faith efforts, to the extent reasonably practicable and not materially adverse to Executive, to structure payment of all amounts of Executive's compensation from the Company so as to avoid non-deductibility of any such amounts under Section 162(m) of the Internal Revenue Code (the "Code") or any successor provision. (g) Loan Repayment through Bonuses. In or about April 1997, the Company made Executive a loan in the amount of $150,000. The loan bears no interest and is payable in equal annual installments over a 4-year period. On each of the first four anniversaries of Executive's initial employment, the Company agrees to pay Executive a bonus in the amount of $37,500, which bonus amount Executive understands and agrees may be used by the Company to offset the loan principal. In the event Executive terminates her employment with the Company, she will be required to pay the outstanding balance of the loan principal in accordance with its terms. Further, the Company is not obligated to pay Executive any bonus, and Executive understands and agrees that all unpaid loan principal shall become immediately due and owing, upon (i) the Company providing notice of termination of Executive's employment for cause, or (ii) Executive providing notice of her Voluntary Resignation. The Company understands and agrees that all unpaid loan principal due and owing as of the date of any Involuntary Termination of the Executive, which is not cured by Company, shall be forgiven. Executive understands and agrees that she is solely responsible and liable for all employment and other taxes arising out of any such bonus payments or loan forgiveness. 4. Severance Benefits. (a) Severance Benefits. Executive is not entitled to severance benefits of any kind due to the expiration of this Agreement or benefits or compensation of any kind upon termination of her employment for any reason, except as expressly provided herein. If Executive's employment with the Company terminates prior to the expiration of this Agreement, then the Executive shall be entitled to receive severance benefits as follows: Involuntary Termination . If Executive's employment terminates as a result of her Involuntary Termination, then Executive will be placed on a one year Leave of Absence from the Company beginning on the Termination Date the ("LOA"). During the LOA, Executive will continue to make herself available for such special projects as are delegated to her by the Company's Chief Executive Officer. During such LOA period, Executive will continue to receive (A) her annual Base Compensation and targeted bonus (if any) less withholdings and deductions, (B) all executive benefits (except those available only to those employees actually working on Lam's premises), (C) the annual bonus identified in 3(g) above. Further, all Stock Options granted as of the Termination Date shall continue to vest and be exercisable during the LOA (subject to termination of any such option provided in the terms of grant). At the conclusion of the LOA, Executive shall be entitled to no further compensation, severance pay or vesting of Stock Options. i. Voluntary Resignation; Disability; Death; Termination for Cause. If, at any time during the term of this Agreement, (A) Executive's employment terminates by reason of Executive's (i) vVoluntary rResignation (and is not the result of an Involuntary Termination), (ii) Disability or (iii) death, or (B) Executive's employment is terminated by the Company for Cause, then unless as otherwise expressly provided in Section 4(b) Executive shall not be entitled to receive severance or other benefits beyond the Termination Date except for those (if any) as may then be established (and applicable) under the Company's then- existing severance and benefits plans and policies at the time of such termination. (b) Benefits; Miscellaneous. In the event of any termination of Executive's employment at any time during the term of this Agreement, (i) the Company shall pay Executive any unpaid Base Compensation due for periods prior to the Termination Date; (ii) the Company shall pay the Executive all of the Executive's accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive (or her Estate), the Company shall reimburse the Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company. These payments shall be made promptly and within the period of time mandated by law. (c) Acceleration of Vesting of Incentive Options upon a Change in Control. If a Change in Control (as defined in this Agreement), occurs which is followed by any of the events described in paragraphs (i) through (vi) of the Involuntary Termination clause, below, including, specifically, the Company imposing upon Executive a corporate office or position of materially reduced authority or responsibility than Executive held immediately preceding such Change of Control, then any unvested portion of the Incentive Options shall automatically be accelerated in full so as to become completely vested and immediately exercisable by Executive. However, no such acceleration will occur if the Change in Control or offer or imposition of reduced authority or responsibility occurs after Executive has (i) given notice of Voluntary Resignation (ii) been given notice of Termination for Cause by the Company (unless that notice is subsequently withdrawn in writing by the Company and Executive's employment does not terminate as a result of such notice), or (iii) this Agreement has terminated. The Chief Executive Officer of the Company shall, in his or her reasonable discretion, following consultations with Executive and, if necessary, the Board, determine whether any corporate office or position offered or imposed on Executive position is of materially reduced authority or responsibility for the purposes of this paragraph. (d) Post-Termination Exercisability of Options. If, during the term of this Agreement, Executive's employment with the Company is terminated for any reason, other than for cause, Executive may exercise any Stock Options vested as of the Termination Date for a period of one (1) year s following either (i) the Termination Date or (ii) conclusion of Executive's LOA following an Involuntary Termination, whichever is later, after which all such Stock Options shall terminate and no longer be exercisable. In all other instances, including termination for cause, Executive may exercise any and all stock options vested as of any termination of her employment within ninety (90) days of such termination, after which all such stock options shall terminate and no longer be exercisable. However, nothing in this Agreement shall extend the term of the any stock option granted at any time to Executive set forth in the terms and conditions of grant or the Company's stock plan under which the stock option was originally granted. 5. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" shall mean (i) a willful act of personal dishonesty knowingly taken by Executive in connection with her responsibilities as an employee and intended to result in her substantial personal enrichment, (ii) a willful and knowing act by Executive which constitutes gross professional misconduct, (iii) any refusal by Executive to comply with a reasonable written directive of the Board or established policy, procedure or terms of employment of the Company, (iv) a willful breach by Executive of a material provision of this Agreement, or (v) a material and willful violation of a federal or state law or regulation applicable to the business of the Company or Executive's continuing employment. No act, or failure to act, by Executive shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest. Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all of the members of the Board (excluding Executive, if applicable), at a meeting called and held for that purpose (after reasonable notice to Executive and her counsel and after allowing Executive and her counsel to be heard before the Board), a resolution is adopted finding that in the good faith opinion of such Board members Executive was guilty of conduct set forth in (i), (ii), (iii), (iv) or (v), specifying the particulars thereof; provided, however, that in the case of conduct set forth in (iii), (iv) or (iv), Executive shall have the opportunity to cure same within 30 days following Executive's receipt of written notice thereof. (b) Disability. "Disability" shall mean that Executive has been or will be unable to substantially perform her duties under this Agreement for a period of six or more consecutive months due to illness, accident or other physical or mental incapacity. (c) Involuntary Termination. "Involuntary Termination" shall mean: (i) the continued assignment to Executive of any duties or the continued significant change in Executive's duties, either of which is substantially inconsistent with Executive's duties immediately prior to such assignment or change for a period of thirty (30) days after notice thereof from Executive to the Board setting forth in reasonable detail the respects in which Executive believes such assignments or duties are significantly inconsistent with the Executive's prior duties; (ii) a material reduction in Executive's Base Compensation, other than any such reduction which is part of, and generally consistent with, a general reduction of corporate officers' salaries; (iii) a material reduction by the Company in the kind or level of employee benefits (other than salary) to which Executive is entitled immediately prior to such reduction with the result that Executive's overall benefits package (other than salary) is substantially reduced (other than any such reduction applicable to officers of the Company generally); (iv) the relocation of the Company's principal executive office to a location more than fifty (50) miles from its present location; (v) any purported termination of Executive's employment by the Company other than for Cause, Disability or Death; (vi) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 6 below; or (vii) any material breach by the Company of any material provision of this Agreement; provided, however, that none of the foregoing shall constitute Involuntary Termination to the extent Executive has agreed thereto; and provided, further, however, that the foregoing shall constitute Involuntary Termination only if and to the extent that (i) Executive provides written notice to the Company setting forth in reasonable detail such facts which Executive believes constitute Involuntary Termination and (ii) any circumstances constituting Involuntary Termination remain uncured for a period of thirty (30) days following the Company's receipt of such written notice. (d) Termination Date. "Termination Date" shall mean (i) the last day of the applicable notice period set forth in Section 2(b) or 2(d) above (except for any Involuntary Termination Notice, given by the Executive, which is cured by the Company, or a Termination for Disability Notice which is revoked by the Executive resuming the performance of her duties), (ii) the date as of which such notice is waived in accordance with the terms of Section 2(b), (iii) the date of Executive's employment termination pursuant to this Agreement if notice of the same is not required under Section 2, or (iv) the date upon which this Agreement expires. If more than one Termination Date may apply, then the priority provisions of section 2(e) of this Agreement shall determine which Termination Date controls. (e) Change in Control. "Change in Control" shall mean the occurrence of any of the following events: i. any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any person or group as such term is used in Rule 13d-1(b) under the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule13-d-3 under said Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company's then outstanding voting securities; or ii. the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets (other than to a subsidiary or subsidiaries). 6. Successors. (a) Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the Company's obligations under this Agreement and agrees expressly to perform such obligations in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law. (b) Executive's Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 7. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices shall be addressed to her at the home address which she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for Cause or by Executive as a result of a vVoluntary rResignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date in accordance with Section 2(b) or 2(d) Subject to the second provision to Section 5(d), the failure by the Executive to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing her rights hereunder. 8. Non-Compete; Non-Solicit. (a) The parties hereto recognize that Executive's services are special and unique and that her level of compensation and the provisions herein for compensation upon Involuntary Termination are partly in consideration of and conditioned upon Executive's not competing with the Company, and that the covenant on her part not to compete and not to solicit as set forth in this Section 8 is essential to protect the business and goodwill of the Company. (b) Executive agrees that prior to the Termination Date and during any LOA following Involuntary Termination, the Executive will not either directly or indirectly, whether as a director, officer, consultant, employee or advisor or in any other capacity (i) render any planning, marketing or other services respecting the creation, design, manufacture or sale of semiconductor manufacturing equipment and/or software to any business, agency, partnership or entity ("Restricted Business") other than the Company, or (ii) make or hold any investment in any Restricted Business in the United States other than the Company, whether such investment be by way of loan, purchase of stock or otherwise, provided that there shall be excluded from the foregoing the ownership of not more than 2% of the listed or traded stock of any publicly held corporation. For purposes of this Section 8, the term "Company" shall mean and include the Company, any subsidiary or affiliate of the Company, any successor to the business of the Company (by merger, consolidation, sale of assets or stock or otherwise) and any other corporation or entity of which the Executive may serve as a director, officer or employee at the request of the Company or any successor of the Company. (c) Prior to the Termination Date and during any LOA following Involuntary Termination, and for the period extending six (6) months thereafter(other than upon expiration of the two-year Employment Period without early termination thereof), Executive will not, directly or indirectly, induce or attempt to influence any employee of the Company to leave its employ, and Executive will not, directly or indirectly, involve herself in decisions to hire any employee who has left the Company's employ within the three-month period preceding the Executive's cessation of employment or the three-month period following her cessation of employment. (d) Executive agrees that the Company would suffer an irreparable injury if she were to breach the covenants contained in subparagraphs (b) or (c) and that the Company would by reason of such breach or threatened breach be entitled to injunctive relief in a court of appropriate jurisdiction, and Executive hereby stipulates to the entering of such injunctive relief prohibiting her from engaging in such breach. (e) If any of the restrictions contained in this Section 8 shall be deemed to be unenforceable by reason of the extent, duration or geographical scope or other provisions thereof, then the parties hereto contemplate that the court shall reduce such extent, duration, geographical scope or other provisions hereof (but only to the extent necessary to render such restrictions enforceable) and then enforce this Section 8 in its reduced form for all purposes in the manner contemplated hereby. 9. Existing Confidentiality and Non-Compete Agreements. Executive represents and warrants (i) that prior to the date hereof she has provided the Company with true and complete copies of any and all written confidentiality and/or non-compete agreements to which Executive is a party as of the date hereof (together with a written description of any such oral agreements), and (ii) to the best of Executive's knowledge, full compliance with the terms of each such agreement will not materially interfere with Executive's duties hereunder (except to the extent that Executive reasonably may determine to absent herself from certain Company meetings and communication during the first year of the Employment Period). Executive further covenants that she will not willfully and knowingly fail to fully abide by the terms of any and all such agreements and will work in good faith with the Company to avoid any breach thereof. 10. Arbitration. At the option of either party, any and all disputes or controversies whether of law or fact and of any nature whatsoever arising from or respecting this Agreement shall be decided by arbitration by the American Arbitration Association in accordance with the rules and regulations of that Association with the exception of any claim for temporary, preliminary or permanent injunctive relief arising from or respecting this Agreement which may be brought by the Company in any court of competent jurisdiction irrespective of Executive's desire to arbitrate such a claim. The arbitrator shall be selected as follows. In the event the Company and Executive agree on one arbitrator, the arbitration shall be conducted by such arbitrator. In the event the Company and Executive do not so agree, the Company and Executive shall each select one independent, qualified arbitrator and the two arbitrators so selected shall select the third arbitrator. The Company reserves the right to object to any individual arbitrator who shall be employed by or affiliated with a competing organization. Arbitration shall take place in San Jose, California, or any other location mutually agreeable to the parties. At the request of either party, arbitration proceedings will be conducted in the utmost secrecy; in such case all documents, testimony and records shall be received, heard and maintained by the arbitrators in secrecy under seal, available for the inspection only by the Company and Executive and their respective attorneys and their respective experts who shall agree in advance and in writing to receive all such information confidentially and to maintain such information in secrecy unless and until such information shall become generally known. The arbitrator, who, if more than one, shall act by majority vote, shall have the power and authority to decree any and all relief of an equitable nature including, but not limited to, such relief as a temporary restraining order, a temporary and/or permanent injunction, and shall also have the power and authority to award damages, with or without an accounting and costs, provided, that punitive damages shall not be awarded, and provided, further, that Executive shall be entitled to reimbursement for her reasonable attorney's fees to the extent she prevails as to the material issues in such dispute. The decree or judgment of an award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Reasonable notice of the time and place of arbitration shall be given to all persons, other than the parties, as shall be required by law, in which case such persons or those authorized representatives shall have the right to attend and/or participate in all the arbitration hearings in such a manner as the law shall require. 11. Miscellaneous Provisions. (a) No Duty to Mitigate. Provided that Executive fully performs her obligations under this Agreement, Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (b) Waiver. No provisions of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. This Agreement and the documents expressly referred to herein represent the entire agreement of the parties with respect to the matters set forth herein. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly referred to herein have been made or entered into by either party with respect to the subject matter hereof. Nothing herein affects the continued enforceability of that certain pre-existing indemnification letter between the parties.Nothing herein affects the continued enforceability of the Employment, Confidential Information and Invention Assignment Agreement previously executed by the Executive. (d) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed and enforced by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect If any provision of this Agreement is determined to be invalid or unenforceable, the Agreement shall remain in full force and effect as to the remaining provisions, and the parties shall replace the invalid or unenforceable provision with one which reflects the parties' original intent in agreeing to the invalid/unenforceable one.. (f) No Assignment of Benefits. Except as otherwise provided herein, the rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (f) shall be void. (g) Employment Taxes. All payments made pursuant to this Agreement by Company shall be subject to withholding of applicable income and employment taxes. (h) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company, provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Agreement shall mean the corporation that actually employs the Executive.   (space intentionally left blank)                                                       (i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. (j) Survival of Obligations. The obligations of paragraphs 4, 7, 8, 9, 10 and 11 shall survive termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement. LAM RESEARCH CORPORATION     By: /s/ James W. Bagley James W. Bagley Its: Chairman and Chief Executive Officer   Dated: December 1, 1999     Dated: December 17, 1999   By: /s/ Richard H. Lovgren Richard Lovgren Its: Vice President, General Counsel and Secretary   Dated: December 17, 1999     /s/ Mercedes Johnson Mercedes Johnson

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 AUGUST TECHNOLOGY CORPORATION 1997 STOCK OPTION PLAN (Restated to Include Amendments and Stock Adjustments Through April 26, 2000) ARTICLE 1. ESTABLISHMENT AND PURPOSE     1.1 ESTABLISHMENT. August Technology Corporation (the "Company") hereby establishes a plan providing for the grant of stock options to certain eligible employees, directors and consultants of the Company and its subsidiaries. This plan shall be known as the 1997 Stock Option Plan (the "Plan").     1.2 PURPOSE. The purpose of the Plan is to advance the interests of the Company and its shareholders by enabling the Company to attract and retain persons of ability as employees, directors and consultants, by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its long-term economic objectives. ARTICLE 2. DEFINITIONS     The following terms shall have the meanings set forth below, unless the context clearly otherwise requires:     2.1 "BOARD" means the Board of Directors of the Company.     2.2 "CHANGE IN CONTROL" means an event described in Article 11 below.     2.3 "CODE" means the Internal Revenue Code of 1986, as amended.     2.4 "COMMITTEE" means the entity administering the Plan, as provided in Article 3 below.     2.5 "COMMON STOCK" means the common stock of the Company, par value $.01 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3 below.     2.6 "DISABILITY" means the occurrence of an event which constitutes permanent and total disability within the meaning of Section 22(e)(3) of the Code.     2.7 "ELIGIBLE PERSONS" means individuals who are (a) salaried employees (including, without limitation, officers and directors who are also employees) of the Company, (b) Non-Employee Directors, or (c) consultants to the Company.     2.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.     2.9 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any date:     (a) if the Common Stock is listed or admitted to unlisted trading privileges on any national securities exchange or is not so listed or admitted but transactions in the Common Stock are reported on the NASDAQ National Market System, the mean between the reported high and low sale prices of the Common Stock on such exchange or by the NASDAQ National Market System as of such date (or, if no shares were traded on such day, as of the next preceding day on which there was such a trade); or     (b) if the Common Stock is not listed or admitted to unlisted trading privileges or reported on the NASDAQ National Market System, and bid and asked prices therefor in the over-the-counter market are reported by the NASDAQ System or the National Quotation Bureau, Inc. (or any comparable reporting service), the mean of the closing bid and asked prices 1 -------------------------------------------------------------------------------- as of such date, as reported by the NASDAQ System, or, if not reported thereon, as reported by the National Quotation Bureau, Inc. (or a comparable reporting service); or     (c) if the Common Stock is not listed or admitted to unlisted trading privileges, or reported on the NASDAQ National Market System, and bid and asked prices are not reported, the price that the Committee determines in good faith in the exercise of its reasonable discretion. The Committee's determination as to the current value of the Common Stock shall be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the shareholders of the Company, the Optionees and their respective successors-in-interest. No member of the Board or the Committee shall be liable for any determination regarding current value of the Common Stock that is made in good faith.     2.10 "INCENTIVE STOCK OPTION" means a right to purchase Common Stock granted to an Optionee pursuant to Section 6.5 of the Plan that qualifies as an incentive stock option within the meaning of Section 422 of the Code.     2.11 "NON-EMPLOYEE DIRECTOR" means any member of the Board who is not an employee of the Company or any Subsidiary.     2.12 "NON-STATUTORY STOCK OPTION means a right to purchase Common Stock granted to an Optionee pursuant to Section 6.6 of the Plan that does not qualify as an Incentive Stock Option.     2.13 "OPTION" means an Incentive Stock Option or a Non-Statutory Stock Option.     2.14 "OPTIONEE" means an Eligible Person who receives one or more Incentive Stock Options or Non-Statutory Stock Options under the Plan.     2.15 "PERSON" means any individual, corporation, partnership, group, association or other "person" (as such term is used in Section 14(d) of the Exchange Act), other than the Company, a wholly owned subsidiary of the Company or any employee benefit plan sponsored by the Company.     2.16 "RETIREMENT" means the retirement of an Optionee pursuant to and in accordance with the regular retirement plan or practice of the Company or the Subsidiary employing the Optionee.     2.17 "SECURITIES ACT" means the Securities Act of 1933, as amended.     2.18 "SUBSIDIARY" means any corporation that is a subsidiary corporation of the Company (within the meaning of Section 424(f) of the Code).     2.19 "TAX DATE" means a date defined in Section 6.5(c) of the Plan. ARTICLE 3. PLAN ADMINISTRATION     The Plan shall be administered by the Board or by a Committee of the Board consisting of two or more directors. In the event the Company's securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, each of the members of the Committee shall be a "Non-Employee Director" within the meaning of Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934 as amended. Members of a Committee, if established, shall be appointed from time to time by the Board, shall serve at the pleasure of the Board and may resign at any time upon written notice to the Board. A majority of the members of the Committee shall constitute a quorum. The Committee shall act by majority approval of its members, shall keep minutes of its meetings and shall provide copies of such minutes to the Board. Action of the Committee may be taken without a meeting if unanimous written consent thereto is given. Copies of minutes of the Committee's meetings and of its actions by written consent shall be provided to the Board and kept with the corporate records of the Company. As used in this Plan, the term "Committee" will refer either to the Board or to such a Committee, if established. From and after the date on which the Company first registers a class of its equity securities under Section 12 of the Exchange Act, no member of the Committee shall be eligible, or shall have been eligible at any 2 -------------------------------------------------------------------------------- time within the lesser of one year or the period since the Company first registered a class of its equity securities under Section 12 of the Exchange Act, to receive an Incentive Stock Option or a Non-Statutory Stock Option under the Plan.     In accordance with the provisions of the Plan, the Committee shall select the Optionees from Eligible Persons; shall determine the number of shares of Common Stock to be subject to Options granted pursuant to the Plan, the time at which such Options are granted, the Option exercise price, Option period and the manner in which each such Option vests or becomes exercisable; and shall fix such other provisions of such Options as the Committee may deem necessary or desirable and as consistent with the terms of the Plan. The Committee shall determine the form or forms of the agreements with Optionees which shall evidence the particular terms, conditions, rights and duties of the Company and the Optionees under Options granted pursuant to the Plan. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt and revise such rules and regulations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. With the consent of the Optionee affected thereby, the Committee may amend or modify the terms of any outstanding Incentive Stock Option or Non-Statutory Stock Option in any manner, provided that the amended or modified terms are permitted by the Plan as then in effect. Without limiting the generality of the foregoing sentence, the Committee may, with the consent of the Optionee affected thereby, modify the exercise price, number of shares or other terms and conditions of an Incentive Award, extend the term of an Incentive Award, accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award, extend, renew or accept the surrender of any outstanding Incentive Stock Option or Non-Statutory Stock Option, to the extent not previously exercised, and the Committee may authorize the grant of new Options in substitution therefor to the extent not previously exercised.     Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan shall be conclusive and binding for all purposes and on all persons, including, without limitation, the Company and its Subsidiaries, the shareholders of the Company, the Committee and each of the members thereof, the directors, officers and employees of the Company and its Subsidiaries, and the Optionees and their respective successors in interest. ARTICLE 4. SHARES SUBJECT TO THE PLAN     4.1 NUMBER. The maximum number of shares of Common Stock that shall be reserved for issuance under the Plan shall be 2,250,000, subject to adjustment upon changes in capitalization of the Company as provided in Section 4.3 below. The maximum number of shares authorized may be increased from time to time by approval of the Board and, if required pursuant to Rule 16b-3, Section 422A of the Code, or the rules of any securities exchange or the NASD, or the shareholders of the Company. Shares of Common Stock that may be issued upon exercise of Options shall be applied to reduce the maximum number of shares of Common Stock remaining available for use under the Plan.     4.2 UNUSED STOCK. Any shares of Common Stock that are subject to an Option (or any portion thereof) that lapses, expires or for any reason is terminated unexercised shall automatically again become available for use under the Plan.     4.3 CHANGE IN SHARES, ADJUSTMENTS, ETC. If the number of outstanding shares of Common Stock is increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, combination of shares, rights offering or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) shall make appropriate adjustment as to the number and kind of securities subject to and reserved under the Plan and, in order to prevent 3 -------------------------------------------------------------------------------- dilution or enlargement of the rights of Optionees, the number and kind of securities subject to outstanding Options. Any such adjustment in any outstanding Option shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option but with an appropriate adjustment in the price for each share or other unit of any security covered by the Option. However, no change shall be made in the terms of any outstanding Incentive Stock Option as a result of any such change in the corporate structure or shares of the Company, without the consent of the Optionee affected thereby, that would disqualify that Incentive Stock Option from treatment under Section 422 of the Code or would be considered a modification, extension or renewal of an option under Section 424(h) of the Code. ARTICLE 5. ELIGIBILITY     Incentive Stock Options or Non-Statutory Stock Options shall be granted only to those Eligible Persons who, in the judgment of the Committee, are performing, or during the term of an Option, will perform, vital services in the management, operation and development of the Company or a Subsidiary, and significantly contribute or are expected to significantly contribute to the achievement of long-term corporate economic objectives. Optionees may be granted from time to time one or more Incentive Stock Options and/or Non-Statutory Stock Options under the Plan, provided that only employees of the Company or a Subsidiary may be granted Incentive Stock Options under the Plan, in any case as may be determined by the Committee in its sole discretion. The number, type, terms and conditions of Options granted to various Eligible Persons need not be uniform, consistent or in accordance with any plan, whether or not such Eligible Persons are similarly situated. The Committee may grant both an Incentive Stock Option and a Non-Statutory Stock Option to the same Optionee at the same time or at different times. Incentive Stock Options and Non-Statutory Stock Options, whether granted at the same or different times, shall be deemed to have been awarded in separate grants, shall be clearly identified, and in no event will the exercise of one Option affect the right to exercise any other Option or affect the number of shares of Common Stock for which any other Option may be exercised. Upon determination by the Committee that an Option is to be granted to an Optionee, written notice shall be given such person specifying such terms, conditions, rights and duties related thereto. Each Optionee shall enter into an agreement with the Company, in such form as the Committee shall determine and which is consistent with the provisions of the Plan, specifying the terms, conditions, rights and duties of Incentive Stock Options and Non-Statutory Stock Options granted under the Plan. Options shall be deemed to be granted as of the date specified in the grant resolution of the Committee, which date shall be the date of the related agreement with the Optionee. ARTICLE 6. DURATION AND EXERCISE     6.1 MANNER OF OPTION EXERCISE. An Option may be exercised by an Optionee in whole or in part from time to time, subject to the conditions contained herein and in the agreement evidencing such Option, by delivery, in person or through certified or registered mail, of written notice of exercise to the Company at its principal executive office (Attention: Secretary), and by paying in full the total Option exercise price for the shares of Common Stock purchased in accordance with Section 6.3. Such notice shall be in a form satisfactory to the Committee and shall specify the particular Option (or portion thereof) that is being exercised and the number of shares with respect to which the Option is being exercised. Subject to Section 9.1, the exercise of the Option shall be deemed effective upon receipt of such notice and payment. As soon as practicable after the effective exercise of the Option, the Company shall record on the stock transfer books of the Company the ownership of the shares purchased in the name of the Optionee, and the Company shall deliver to the Optionee one or more duly issued stock certificates evidencing such ownership.     6.2 METHOD OF PAYMENT OF OPTION EXERCISE PRICE. At the time of the exercise of an Incentive Stock Option or a Non-Statutory Stock Option, the Optionee may determine whether the total purchase price of the shares to be purchased shall be paid solely in cash or by transfer from the 4 -------------------------------------------------------------------------------- Optionee to the Company of previously acquired shares of Common Stock, or by a combination thereof. In the event the Optionee elects to pay the purchase price in whole or in part with previously acquired shares of Common Stock, the value of such shares shall be equal to their Fair Market Value on the date of exercise. The Committee may reject an Optionee's election to pay all or part of the purchase price with previously acquired shares of Common Stock and require such purchase price to be paid entirely in cash if, in the sole discretion of the Committee, payment in previously acquired shares would cause the Company to be required to recognize a charge to earnings in connection therewith. For purposes of this Section 6.2, "previously acquired shares" shall include only those shares of Common Stock which the Optionee has owned for at least six (6) months prior to the exercise of the stock option, or for such other period of time as may be required by generally accepted accounting principles. In its sole discretion, the Committee may determine either at the time of grant or exercise of an Incentive Stock Option or a Non-Statutory Stock Option, to permit a Optionee to pay all or any portion of the purchase price by delivery of a promissory note in form and substance acceptable to the Committee.     6.3 RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any shares of Common Stock covered by an Option until the Optionee shall have become the holder of record of such shares, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date the Optionee becomes the holder of record except as the Committee may determine pursuant to Section 4.3.     6.4 INCENTIVE STOCK OPTIONS.     (a) INCENTIVE STOCK OPTION EXERCISE PRICE. The per share price to be paid by the Optionee at the time an Incentive Stock Option is exercised will be determined by the Committee, but shall not be less than (i) 100% of the Fair Market Value of one share of Common Stock on the date the Option is granted, or (ii) 110% of the Fair Market Value of one share of Common Stock on the date the Option is granted if, at that time the Option is granted, the Optionee owns, directly or indirectly (as determined pursuant to Section 424(d) of the Code), more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any parent corporation of the Company (within the meaning of Section 424(e) of the Code).     (b) AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK OPTIONS. Notwithstanding any other provision of the Plan, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares of Common Stock with respect to which incentive stock options (within the meaning of Section 422 of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and any other incentive stock option plans of the Company, any Subsidiary or any parent corporation of the Company (within the meaning of Section 424(e) of the Code)) shall not exceed $100,000 (or such other amount as may be prescribed by the Code from time to time).     (c) DURATION OF INCENTIVE STOCK OPTIONS. The period during which an Incentive Stock Option may be exercised shall be fixed by the Committee at the time such Option is granted, but in no event shall such period exceed ten years from the date the Option is granted or, in the case of an Optionee that owns, directly or indirectly (as determined pursuant to Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any parent corporation of the Company (within the meaning of Section 424(e) of the Code), five years from the date the Incentive Stock Option is granted. An Incentive Stock Option shall become exercisable at such times and in such installments (which may be cumulative) as shall be determined by the Committee at the time the Option is granted. Upon the completion of its exercise period, an Incentive Stock Option, to the extent not then exercised, shall expire. Except as otherwise provided in Articles 7 or 11, all Incentive Stock Options granted to an Optionee hereunder shall terminate and may no longer be exercised if the Optionee ceases 5 -------------------------------------------------------------------------------- to be an employee of the Company and all Subsidiaries or if the Optionee is an employee of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee continues as an employee of the Company or another Subsidiary).     (d) DISPOSITION OF COMMON STOCK ACQUIRED PURSUANT TO THE EXERCISE OF INCENTIVE STOCK OPTIONS. Prior to making a disposition (as defined in Section 424(c) of the Code) of any shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option granted under the Plan before the expiration of two years after the date on which the Option was granted or before the expiration of one year after the date on which such shares of Common Stock were transferred to the Optionee pursuant to exercise of the Option, the Optionee shall send written notice to the Company of the proposed date of such disposition, the number of shares to be disposed of, the amount of proceeds to be received from such disposition and any other information relating to such disposition that the Company may reasonably request. The right of an Optionee to make any such disposition shall be conditioned on the receipt by the Company of all amounts necessary to satisfy any federal, state or local withholding tax requirements attributable to such disposition. The Committee shall have the right, in its sole discretion, to endorse the certificates representing such shares with a legend restricting transfer and to cause a stop transfer order to be entered with the Company's transfer agent until such time as the Company receives the amounts necessary to satisfy such withholding requirements or until the later of the expiration of two years from the date the Option was granted or one year from the date on which such shares were transferred to the Optionee pursuant to the exercise of the Option.     (e) WITHHOLDING TAXES. The Company is entitled to withhold and deduct from future wages of the Optionee, or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding tax requirements attributable to any action by the Optionee, including, without limitation, a disposition of shares of Common Stock described in Section 6.4(d) above, that causes the Incentive Stock Option to cease to qualify as an incentive stock option within the meaning of Section 422 of the Code.     6.5 NON-STATUTORY STOCK OPTIONS.     (a) OPTION EXERCISE PRICE. The per share price to be paid by the Optionee at the time a Non-Statutory Stock Option is exercised will be determined by the Committee, but shall not be less than 85% of the Fair Market Value of one share of Common Stock on the date the Option is granted.     (b) DURATION OF NON-STATUTORY STOCK OPTIONS. The period during which a Non-Statutory Stock Option may be exercised shall be fixed by the Committee at the time such Option is granted, but in no event shall such period exceed 10 years and one month from the date the Option is granted. A Non-Statutory Stock Option shall become exercisable at such times and in such installments (which may be cumulative) as shall be determined by the Committee at the time the Option is granted. Upon the completion of its exercise period, a Non-Statutory Stock Option, to the extent not then exercised, shall expire. Except as otherwise provided in Articles 7 or 11, all Non-Statutory Stock Options granted hereunder to an Optionee who is an employee of the Company or any Subsidiaries shall terminate and may no longer be exercised if the Optionee ceases to be an employee of the Company or a Subsidiary or if the Optionee is an employee of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee continues as an employee of the Company or another Subsidiary). A Non-Statutory Stock Option granted hereunder to an Optionee who is not an employee of the Company or a Subsidiary will terminate as determined by the Committee at the time of grant. 6 --------------------------------------------------------------------------------     (c) WITHHOLDING TAXES.      (i) The Company is entitled to (aa) withhold and deduct from future wages of the Optionee, or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding tax requirements attributable to the Optionee's exercise of a Non-Statutory Stock Option or otherwise incurred with respect to the Option, or (bb) require the Optionee promptly to remit the amount of such withholding to the Company before acting on the Optionee's notice of exercise of the Option.     (ii) The Committee may, in its discretion and subject to such rules as the Committee may adopt, permit an Optionee to satisfy, in whole or in part, any withholding tax obligation which may arise in connection with the exercise of a Non-Statutory Option either by electing to have the Company withhold from the shares of Common Stock to be issued upon exercise that number of shares of Common Stock, or by electing to deliver to the Company that number of already-owned shares of Common Stock, in either case having a Fair Market Value, on the date such tax is determined under the Code (the "Tax Date"), equal to the amount necessary to satisfy the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the option. In no event may the Company or any Affiliate withhold shares having a Fair Market Value in excess of such statutory minimum required tax withholding. An Optionee's election to have the Company withhold shares of Common Stock or to deliver already-owned shares of Common Stock is irrevocable, subject to the consent of the Committee, and subject to such rules as the Committee may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable. If shares of Common Stock are issued prior to the Tax Date to an Optionee making such an election, the Optionee shall agree in writing to surrender that number of shares on the Tax Date having an aggregate Fair Market Value equal to the minimum statutory withholding tax due. ARTICLE 7. EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS     7.1 TERMINATION OF EMPLOYMENT OR OTHER SERVICE DUE TO DEATH, DISABILITY OR RETIREMENT. Except as otherwise provided in the agreement evidencing the option, in the event an Optionee's employment or other service is terminated with the Company and all Subsidiaries by reason of his death, Disability or Retirement, all outstanding Incentive Stock Options and Non-Statutory Stock Options then held by the Optionee shall become immediately exercisable in full and remain exercisable for a period of three months in the case of Retirement and one year in the case of death or Disability, provided, however, that an exercise may not occur after the expiration date thereof in any event. The Company shall undertake to use its best efforts to notify the Optionee or his heirs or representatives, as the case may be, of the last date by which Options may be exercised pursuant to this Section 7.1, at least thirty (30) days in the case of Retirement and at least sixty (60) days in the case of death or Disability, prior to such date.     7.2 TERMINATION OF EMPLOYMENT OR OTHER SERVICE FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT.     (a) Except as otherwise provided in Article 11 or in the agreement evidencing the option, in the event an Optionee's employment or other service is terminated with the Company and all Subsidiaries for any reason other than his death, Disability or Retirement, all rights of the Optionee under the Plan shall immediately terminate without notice of any kind and no Incentive Stock Option or Non-Statutory Stock Option then held by the Optionee shall thereafter be exercisable. 7 --------------------------------------------------------------------------------     (b) Notwithstanding the provisions of Subsection (a) above, upon an Optionee's termination of employment or other service with the Company and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised before or following such termination), cause Incentive Stock Options and Non-Statutory Stock Options then held by such Optionee to become exercisable and to remain exercisable following such termination of employment or other service in the manner determined by the Committee; provided, however, that no Option shall be exercisable after the expiration date thereof in any event, and any Incentive Stock Option that remains unexercised more than three months following termination of employment shall thereafter be deemed to be a Non-Statutory Stock Option.     7.3 DATE OF TERMINATION. For purposes of the Plan, an Optionee's employment or other service shall be deemed to have terminated on the date that the Optionee ceases to perform services for the Company or the last day of the pay period covered by the Optionee's final paycheck, as the case may be. Notwithstanding the foregoing, the employee Optionee shall not be deemed to have ceased to be an employee for purposes of the Plan until the later of the 91st day of any bona fide leave of absence approved by the Company or a Subsidiary for the Optionee (including, without limitation any layoff) or the expiration of the period of any bona fide leave of absence approved by the Company or a Subsidiary for the Optionee (including without limitation any layoff) during which the Optionee's right to reemployment is guaranteed either by statute or contract. ARTICLE 8. RIGHTS OF EMPLOYEES; OPTIONEES     8.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment of any Eligible Person or Optionee at any time, nor confer upon any Eligible Person or Optionee any right to continue in the employ of the Company or any Subsidiary.     8.2 NONTRANSFERABILITY. No right or interest of any Optionee in an Option granted pursuant to the Plan shall be assignable or transferable during the lifetime of the Optionee, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of an Optionee's death, an Optionee's rights and interest in any Options shall be transferable by testamentary will or the laws of descent and distribution, and payment of any amounts due under the Plan shall be made to, and exercise of any Options (to the extent permitted pursuant to Section 7.1) may be made by, the Optionee's legal representatives, heirs or legatees. If in the opinion of the Committee an Optionee holding any Option is disabled from caring for his or her affairs because of mental condition, physical condition or age, any payments due the Optionee may be made to, and any rights of the Optionee under the Plan shall be exercised by, such Optionee's guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.     8.3 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is intended to amend, modify or rescind any previously approved compensation plans or programs entered into by the Company. The Plan will be construed to be an addition to any and all such other plans or programs. Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval will be construed as creating any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable. ARTICLE 9. SHARE ISSUANCE AND TRANSFER RESTRICTIONS     9.1 SHARE ISSUANCES. Notwithstanding any other provision of the Plan or any agreements entered into pursuant hereto, the Company shall not be required to issue or deliver any certificate for shares of Common Stock under this Plan (and an Option shall not be considered to be exercised, 8 -------------------------------------------------------------------------------- notwithstanding the tender by the Optionee of any consideration therefor), unless and until each of the following conditions has been fulfilled:     (a) (i) there shall be in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws if the Committee, in its sole discretion, shall have determined to file, cause to become effective and maintain the effectiveness of such registration statement; or (ii) if the Committee has determined not to so register the shares of Common Stock to be issued under the Plan, (A) exemptions from registration under the Securities Act and applicable state securities laws shall be available for such issuance (as determined by counsel to the Company) and (B) there shall have been received from the Optionee (or, in the event of death or disability, the Optionee's heir(s) or legal representative(s)) any representations or agreements requested by the Company in order to permit such issuance to be made pursuant to such exemptions; and     (b) there shall have been obtained any other consent, approval or permit from any state or federal governmental agency which the Committee shall, in its sole discretion upon the advice of counsel, deem necessary or advisable.     9.2 SHARE TRANSFER. Shares of Common Stock issued pursuant to the exercise of Options granted under the Plan may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed of (whether voluntarily or involuntarily) except pursuant to registration under the Securities Act and applicable state securities laws or pursuant to exemptions from such registrations. The Company may condition the sale, assignment, transfer, pledge, encumbrance or other disposition of such shares not issued pursuant to an effective and current registration statement under the Securities Act and all applicable state securities laws on the receipt from the party to whom the shares of Common Stock are to be so transferred of any representations or agreements requested by the Company in order to permit such transfer to be made pursuant to exemptions from registration under the Securities Act and applicable state securities laws.     9.3 LEGENDS. Unless a registration statement under the Securities Act is in effect with respect to the issuance or transfer of shares of Common Stock issued under the Plan, each certificate representing any such shares shall be endorsed with a legend in substantially the following form, unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:     THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. ARTICLE 10. PLAN AMENDMENT, MODIFICATION AND TERMINATION     The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Incentive Stock Options and Non-Statutory Stock Options under the Plan shall conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no such amendment, without approval of the shareholders of the Company, may (a) materially increase the benefits accruing to Optionees under the Plan, (b) increase the total number of shares of Common Stock as to which Options may be granted under the Plan, except as provided in Section 4.3 of the Plan, or (c) materially modify the requirements as to eligibility for participation in the Plan. No termination, suspension or amendment of the Plan shall alter or 9 -------------------------------------------------------------------------------- impair any outstanding Option without the consent of the Optionee affected thereby; provided, however, that this sentence shall not impair the right of the Committee to take whatever action it deems appropriate under Section 4.3. ARTICLE 11. CHANGE IN CONTROL     If, during the term of an Option, (i) the Company merges or consolidates with any other corporation and is not the surviving corporation after such merger or consolidation; (ii) the Company transfers all or substantially all of its business and assets to any other person; or (iii) more than 50% of the Company's outstanding voting shares are purchased by any other person, the Committee may, in its sole discretion, provide for the acceleration of the right to exercise the option prior to the anticipated effective date of any of the foregoing transactions or take any other action as it may deem appropriate to further the purposes of this Plan or protect the interests of the Optionee. ARTICLE 12. EFFECTIVE DATE OF THE PLAN     12.1 EFFECTIVE DATE. The Plan is effective as of July 31, 1997, the effective date it was adopted by the Board subject to the approval of the shareholders within 12 months. Options may be granted under the Plan prior to shareholder approval if made subject to shareholder approval.     12.2 DURATION OF THE PLAN. The Plan shall terminate at midnight on July 30, 2007 and may be terminated prior thereto by Board action, and no Options shall be granted after such termination. Options outstanding upon termination of the Plan may continue to be exercised in accordance with their terms. ARTICLE 13. MISCELLANEOUS     13.1 GOVERNING LAW. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Minnesota without regard to the conflict of laws provisions of any jurisdictions. All parties agree to submit to the jurisdiction of the state and federal courts of Minnesota with respect to matters relating to the Plan and agree not to raise or assert the defense that such forum is not convenient for such party.     13.2 GENDER AND NUMBER. Except when otherwise indicated by the context, reference to the masculine gender in the Plan shall include, when used, the feminine gender and any term used in the singular shall also include the plural.     13.3 CONSTRUCTION. Wherever possible, each provision of this Plan shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Plan shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Plan.     13.4 SUCCESSORS AND ASSIGNS. This Plan shall be binding upon and inure to the benefit of the successors and permitted assigns of the Company, including, without limitation, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company, and any and all such successors and assigns shall absolutely and unconditionally assume all of the Company's obligations under the Plan.     13.5 SURVIVAL OF PROVISIONS. The rights, remedies, agreements, obligations and covenants contained in or made pursuant to the Plan, any agreement evidencing an Incentive Award and any other notices or agreements in connection therewith, including, without limitation, any notice of exercise of an Option, shall survive the execution and delivery of such notices and agreements and the delivery and receipt of shares of Common Stock and shall remain in full force and effect. 10 -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.1 AUGUST TECHNOLOGY CORPORATION 1997 STOCK OPTION PLAN (Restated to Include Amendments and Stock Adjustments Through April 26, 2000) ARTICLE 1. ESTABLISHMENT AND PURPOSE ARTICLE 2. DEFINITIONS ARTICLE 3. PLAN ADMINISTRATION ARTICLE 4. SHARES SUBJECT TO THE PLAN ARTICLE 5. ELIGIBILITY ARTICLE 6. DURATION AND EXERCISE ARTICLE 7. EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS ARTICLE 8. RIGHTS OF EMPLOYEES; OPTIONEES ARTICLE 9. SHARE ISSUANCE AND TRANSFER RESTRICTIONS ARTICLE 10. PLAN AMENDMENT, MODIFICATION AND TERMINATION ARTICLE 11. CHANGE IN CONTROL ARTICLE 12. EFFECTIVE DATE OF THE PLAN ARTICLE 13. MISCELLANEOUS

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.03 Agreement     This is an agreement between Ceridian Corporation ("Ceridian") and Lawrence Perlman ("Perlman") dated as of May 1, 2000. 1.Ceridian hereby engages Perlman as a consultant during the period May 1, 2000 through December 31, 2000, and Perlman accepts such engagement. 2.Perlman's contact at Ceridian for the provision of the consulting services provided under this Agreement is Ronald L. Turner, Chairman, President and Chief Executive Officer of Ceridian ("Turner"). 3.The nature of the consulting provided by Perlman under this Agreement shall be as mutually agreed between Perlman and Turner, and is expected to relate to creation of shareholder value for Ceridian shareholders. 4.The services provided by Perlman under this Agreement will be provided as an independent contractor, and not as an agent or employee. Perlman shall be responsible for all applicable withholdings under federal, state, and local laws. 5.This Agreement shall not change or modify any other agreement between Ceridian and Perlman. 6.For his consulting services provided pursuant to this Agreement, Ceridian will pay Perlman the amount of $125,000 payable on June 1, 2000, and $125,000 payable on November 1, 2000. 7.Ceridian will pay or reimburse, from time to time, as appropriate receipts are presented to it, expenses incurred by Perlman associated with the consulting services provided under this Agreement, up to an aggregate amount of $25,000. 8.Since the services provided under this Agreement are being provided as an independent contractor, and not as an employee, Perlman understands and agrees that any payments received under this Agreement will in no way impact any benefits he is entitled to from Ceridian relating to his services to Ceridian as an employee. /s/ Lawrence Perlman --------------------------------------------------------------------------------   /s/ Ronald L. Turner -------------------------------------------------------------------------------- Lawrence Perlman   Ceridian Corporation May 20, 2000   by Ronald L. Turner, Chairman, President and Chief Executive Officer May 17, 2000 -------------------------------------------------------------------------------- QUICKLINKS Agreement

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Cybex Computer Products Corporation, an Alabama corporation ("Employer" or "Cybex"), Avocent Corporation, a Delaware corporation, and Victor Odryna (the "Employee"). RECITALS     WHEREAS, Avocent Corporation and its affiliates including Apex Inc. ("Apex") and Cybex (Avocent Corporation and its affiliates are collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee and Employer entered into that certain Employment and Noncompetition Agreement dated October 5, 1999 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as Senior Vice President of Corporate Strategic Marketing, and Employee agrees to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of Senior Vice President of Corporate Strategic Marketing. The Employee shall report to the President of Employer and Avocent Corporation, or such other person or persons as Employer may designate from time to time, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of Corporate Strategic Marketing of Avocent Corporation.     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other -------------------------------------------------------------------------------- than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same 2 -------------------------------------------------------------------------------- proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon 3 -------------------------------------------------------------------------------- giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee 4 -------------------------------------------------------------------------------- in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $180,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a)  THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, 5 -------------------------------------------------------------------------------- the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was October 5, 1999.     (b)  VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c)  LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d)  REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates 6 -------------------------------------------------------------------------------- and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof.     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including 7 -------------------------------------------------------------------------------- without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to General Counsel   If to the Employee:   Victor Odryna [          ] [          ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Massachusetts.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent 8 -------------------------------------------------------------------------------- Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax. 9 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     CYBEX COMPUER PRODUCTS CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Vice President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ VICTOR ODRYNA    -------------------------------------------------------------------------------- Victor Odryna 10 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

    MANAGEMENT AND OFFICERS CAPITAL APPRECIATION PLAN, AN INCENTIVE STOCK OPTION PLAN ADOPTED MAY 12, 1977 (As Amended August 9, 1990) 1. Purpose. The purposes of this Plan are to attract, retain and motivate key employees of Carpenter Technology Corporation and its wholly owned subsidiaries ("the Corporation"), to encourage stock ownership by such employees by providing them with a means to acquire a proprietary interest or to increase their proprietary interest in the Corporation's success and to provide a greater community of interest between such employees and the Corporation's stockholders. 2. Administration. The Board of Directors ("the Board") shall be responsible for the operation of the Plan. It shall be authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations and to appoint such agents as it deems appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan or the options or stock appreciation rights granted hereunder as it deems necessary or advisable. Any questions of interpretation as determined by the Board shall be final and binding upon all persons. The Board may delegate these powers to the Compensation and Stock Option Committee of the Board, consisting of at least three Directors not participating in the Plan. 3. Participants. Participants in the Plan will consist of such officers or key employees of the Corporation as the Board in its sole discretion may, from time to time, designate. The Board's designation of a participant at any time to receive benefits under the Plan shall not obligate it to designate such person to receive benefits at any other time. The Board shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of options and rights granted hereunder. 4. Types of Benefits. Benefits under the Plan may be granted in (a) non-qualified stock options ("options" or individually an "option") which are intended to be nonstatutory options not qualifying under Section 422 or any other section of the Internal Revenue Code, and (b) stock appreciation rights, each as described below. 5. Shares Reserved Under the Plan. (a) Subject to the provisions of Section 11, the maximum aggregate number of shares which may be made available for options hereunder is 400,000 shares of common stock of the Corporation and no more than 40,000 shares of said 400,000 shares shall be optioned to any one individual. The shares involved in the unexercised portion of any terminated or expired option or stock appreciation right under the Plan may again be subject to options under the Plan. Such shares may be either authorized and unissued shares, or issued shares reacquired by the Corporation. 6. Options. Options may be granted by the Board from time to time, subject to the following provisions: (a) Each option granted under this Plan shall become exercisable by the optionee only after the optionee has completed one year of employment immediately following the date the option is granted, as determined by the Board (the "date of grant"), and shall expire ten years from the date of grant. Exercise of any or all prior existing options shall not be required. (b) The option price per share of an option shall be determined by the Board but shall not be less than the fair market value of the Corporation's stock on the date of grant. For the purpose of this Plan, the term "fair market value" shall mean the closing price of Carpenter Technology Corporation common stock on the New York Stock Exchange on the date in question, or, in the absence of a closing price on such date, then the closing price on the last trading day preceding the date of grant, as reflected on the consolidated tape of New York Stock Exchange issues. (c) No option under this Plan may be transferable by the optionee except by will or the laws of descent and distribution. In the event of the death of the optionee more than one year after the date of grant and not more than three months after the termination of the optionee's employment by the Corporation, the option may be transferred to the optionee's personal representative, heirs or legatees ("transferee") and may be exercised by the transferee before the earlier of (i) the expiration of one year from the date of the death of the optionee or (ii) the expiration of 10 years from the date of grant. In the event of the retirement of an optionee, an option may be exercised prior to its expiration during the five year period beginning with the date of retirement; provided, however, that in the event of a retiree's death during such five year period, unexercised options may be exercised by the transferee before the earlier of either items (i) or (ii) of this Section 6(c). In all other cases of termination of employment of an optionee, the option, if otherwise exercisable by the optionee at the time of such termination, may be exercised within three months after such termination. Notwithstanding anything in the Plan to the contrary, in the event an optionee's employment with the Corporation is terminated for "cause", the Board (or if the Board has delegated its authority, the Compensation and Stock Option Committee) may, in its sole discretion, cancel each unexercised option awarded to such terminated optionee effective upon the termination. For purposes of this Section, a termination for "cause" shall mean termination of an optionee's employment with the Corporation which results from either (a) the optionee committing an Intolerable Offense (as defined in the Corporation's Personnel Practices and Policies as in effect on the date of termination) or (b) the operation of the Corporation's Corrective Performance System (as set forth in the Corporation's Personnel Procedures and Policies as in effect on the date of termination). (d) Each option shall be exercisable for the full amount or any part thereof, including a partial exercise from time to time. All shares purchased under options shall be paid for in full at the time of purchase. Exercised options may be paid for with cash or stock of the Corporation which has been held by the optionee for a period of at least six months, the value of which shall be the fair market value on the date of exercise of the options, as determined in Section 6(b) of the Plan. 7. Stock Appreciation Rights. (a) Stock appreciation rights may be granted from time to time by the Board upon such terms and conditions as it may prescribe. The Board shall grant one stock appreciation right for every option share granted hereunder prior to August 9, 1990. The Board may in its discretion grant no more than one stock appreciation right for every option share granted hereunder on or subsequent to August 9, 1990. A stock appreciation right shall be exercisable only with exercise and surrender of the related option or portion thereof and shall entitle the optionee to receive the excess of the fair market value of the shares of the common stock for which the right is exercised on the date of such exercise over the option price under the related option. Such excess is hereafter called "the spread". (b) A stock appreciation right shall be exercisable only to the extent and at the same time that the related option is exercised. (c) Upon the exercise of a stock appreciation right, the Corporation shall give to the optionee an amount equivalent to the spread (less any applicable withholding taxes) in cash, or in shares of the Corporation's common stock, or a combination of both, as the Board shall determine. Such determination may be made at the time of the granting of the stock appreciation right. The shares may consist either in whole or in part of authorized and unissued shares or issued shares reacquired by the Corporation. The payment of the stock appreciation right spread in shares of common stock will correspondingly reduce the number of shares reserved under Section 5. No fractional shares of common stock shall be issued and the Board shall determine whether cash shall be given in lieu of such fractional share or whether such fractional share shall be eliminated. (d) A stock appreciation right shall terminate and may no longer be exercised upon the termination or expiration of the related option. (e) Income attributable to the exercise of a stock appreciation right shall not be included in the calculation of pension or other benefits payable at any time by reason of the optionee's employment by the Corporation. (f) No stock appreciation right shall be transferable by the optionee except as provided in Section 6(c) of this Plan. 8. Valuation Date. The options granted hereunder shall be valued for Federal income tax purposes on the date said options are exercised and the optionee, by accepting the option, agrees not to elect to value said options for tax purposes at any other date, including, without limitation, the date of grant. 9. Adjustment Provisions. If the Corporation shall at any time change the number of issued shares of common stock without new consideration to the Corporation (such as by stock dividends, stock splits or stock combinations), the total number of shares reserved for issuance under this Plan and the number of shares covered by each outstanding benefit shall be adjusted so that the aggregate consideration payable to the Corporation and the value of each benefit shall not be changed. In the event of a merger or consolidation of the Corporation, the Board shall make such adjustments with respect to options or take such other action as it deems necessary or appropriate to equitably reflect such merger or consolidation including, without limitation, the substitution of new options, the termination of existing options or the acceleration of the right to exercise. Appropriate adjustments shall be made by the Board in the terms of stock appreciation rights to reflect the foregoing changes. 10. Change in Control. (a) Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Corporation (i) each Option shall become immediately exercisable and (ii) each stock appreciation right shall be fully exercisable for the sixty-day period immediately following the Change in Control of the Corporation using the Change in Control Price instead of the fair market value to determine the amount payable upon the exercise of such stock appreciation right. (b) For purposes of this Plan, a "Change in Control of the Corporation" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the date this Section was adopted as an amendment to the Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (D) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. (c) For purposes of this Plan, Change in Control Price shall mean the higher of (i) the highest price paid per share of Corporation common stock in any transaction constituting a Change in Control or (ii) the highest fair market value per share of Corporation common stock as reported in the Wall Street Journal at any time during the sixty-day period preceding the Change in Control. 11. Amendment, Modification and Termination of the Plan. The Board, at any time, may terminate, and at any time and from time to time, and in any respect, may amend or modify, the Plan; provided, however, that no such action by the Board, without approval of the stockholders, may (a) increase the total amount of common stock which may be purchased under options granted under the Plan or the maximum number of shares of common stock for which options may be granted under the Plan to any one individual, except as contemplated in Section 9, (b) permit options to be granted at less than fair market value, (c) permit any person while a member of the committee contemplated in Section 2 to be eligible to receive or hold an option or stock appreciation right under the Plan or (d) change the manner of computing the spread upon the exercise of a stock appreciation right. 12. Effective Date of the Plan. The Plan shall become effective upon approval by the Board; provided, however, that the Plan shall be submitted for ratification by the stockholders at the Annual Meeting to be held on November 7, 1977, and if not ratified shall be of no force and effect. All options and stock appreciation rights granted prior to such Annual Meeting shall be granted subject to ratification of the Plan by the stockholders of the Corporation at such Meeting and no option shall be exercisable before such ratification.   STK15.10

Exhibit 10(m)   CONFIDENTIAL   Contract No.   DELIVERY AND REDELIVERY SERVICES CONTRACT       BETWEEN       ENGAGE ENERGY US, LP. ("ENGAGE") - and - THE PEOPLES GAS LIGHT and COKE COMPANY ("PGLC")       DATE July 1,2000           Schedule "A" Schedule "B" Schedule "C"       CONFIDENTIAL   DELIVERY AND REDELIVERY SERVICES CONTRACT   CONTENTS   ARTICLE I   INTERPRETATION       ARTICLE II   GENERAL TERMS & CONDITIONS       ARTICLE III   TERM OF CONTRACT       ARTICLE IV   DELIVERY AND REDELIVERY       ARTICLE V   FORCE MAJEURE       ARTICLE VI   CHARGES AND RATES       ARTICLE VII   DELIVERY AND REDELIVERY PRESSURES       ARTICLE VIII   MEASUREMENT AND QUALITY       ARTICLE IX   NOMI NATIONS       ARTICLE X   REPRESENTATIONS AND WARRANTIES       ARTICLE XI   MISCELLANEOUS PROVISIONS       CONFIDENTIAL   THIS DELIVERY AND REDELIVERY SERVICES CONTRACT dated as of the 1st day of July 2000,   BETWEEN:   ENGAGE ENERGY US, LP. a limited partnership in good standing under the State of Delaware; (hereinafter referred to as "ENGAGE") and   THE PEOPLES GAS LIGHT and COKE COMPANY, a corporation organized and existing under the laws of the State of Illinois; (hereinafter referred to as "PGLC") Each of ENGAGE or PGLC may be referred to as "Party" or collectively as "Parties".   WHEREAS, ENGAGE provides certain bundled gas delivery and redelivery services;   AND WHEREAS, PGLC desires that ENGAGE provide the said delivery and redelivery services as defined herein;   AND WHEREAS this Contract, once executed, will supersede all previous contracts and/or correspondence between the Parties hereto related to this Delivery and Redelivery Service.   NOW THEREFORE, this Contract witnesses that, in consideration of the mutual covenants and agreements herein contained, and the exchange of One Dollar ($1.00) between the Parties hereto, the payment and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:   ARTICLE I - INTERPRETATION 1.01 Definitions: Capitalized terms and certain other terms used in this Contract and not specifically defined shall have the meaning set forth in Schedules "A", "B" and "C" hereto unless the context hereof otherwise clearly requires. 1.02 Divisions, Headings and Index: The division of this Contract into articles, sections and subsections, and the insertion of headings and any table of contents or index provided are for convenience of reference only, and shall not affect the construction or interpretation hereof. 1.03 Industry Usage: Words, phrases or expressions which are not defined herein and which, in the usage or custom of the business of the transportation, storage, and distribution or sale of natural gas have an accepted meaning shall have that meaning . 1.04 Extended Meaning: Unless the context otherwise requires, words importing the singular include the plural and vice versa, and words importing gender include all genders. The words "herein", "hereunder" and words of similar import refer to the entirety of this Contract, including the Schedules incorporated into this Contract, and not only to the section in which such use occurs. 1.05 Conflict: In the event of any conflict between the provisions of this Contract and those of Schedules "A", "B" and "C" attached to and incorporated into it, the provisions of this Contract shall prevail. 1.06 Currency: All reference to dollars in this Contract shall mean United States dollars.   ARTICLE II - GENERAL TERMS & CONDITIONS 2.01 The General Terms & Conditions contained in Schedule "B" hereto are hereby incorporated into, and form an integral part of, this Contract.   ARTICLE III - TERM OF CONTRACT 3.01 This Contract shall be effective as of the date of execution hereof, however, the service obligations, terms and conditions hereunder shall commence on July 1, 2000, (the "Commencement Date"), and shall continue in full force and effect through March 31, 2001 (the "Termination Date"), which period shall be the "Term". 3.02 Without limiting the generality of the foregoing, this Contract may be terminated in accordance with Section XI of the General Terms & Conditions or extended in accordance with Article V of this Contract.   ARTICLE IV - DELIVERY AND REDELIVERY 4.01 PGLC shall have the right to deliver gas to ENGAGE on a firm basis, in accordance with the daily delivery parameters set forth below, during the period beginning on the Commencement Date, through and including March 31, 2001 (referred to as the "Delivery Period"). The amount of gas equal to the difference between the quantity delivered to ENGAGE by PGLC, less the quantity redelivered to PGLC by ENGAGE, at any point during the Term of this Contract shall be the "PGLC Balance". The PGLC Balance during each Delivery Period shall not exceed a total volume of 1 Bcf ("Maximum Balance"). PGLC shall deliver to ENGAGE on a firm basis during the Delivery Period of each year during the Term, a daily volume of gas nominated by PGLC (the "Delivery Quantity") equal to the lesser of: (a) up to 10,000 MMBtu per day; or (b) the difference between the Maximum Balance and PGLC Balance. 4.02 All gas delivered by PGLC pursuant to this Contract shall be delivered to ENGAGE at the interconnect as set out in Schedule "C" attached hereto, hereinafter referred to as "Point of Delivery". 4.03 ENGAGE agrees to redeliver to PGLC on a firm basis during the period beginning on the Commencement Date, through and including March 31, 2001 (referred to herein as the "Redelivery Period"). ENGAGE shall redeliver to PGLC on a firm basis, during the Redelivery Period of each year during the Term, a daily volume of gas nominated by PGLC (the "Redelivery Quantity") equal to the lesser of: (a) up to 20,000 MMBtu; or (b) the PGLC Balance. 4 04 All gas redelivered by ENGAGE pursuant to the terms of this Contract shall be, as provided in PGLC's nomination, delivered at the interconnect as set out in Schedule "C" attached hereto, hereinafter referred to as the "Point of Redelivery". 4.05 ENGAGE shall have the right to commingle gas delivered or redelivered hereunder with other gas owned by ENGAGE. 4 06 The PGLC Balance, subject to Article 4.07, is to be zero at the Termination Date. n the event PGLC fails to obtain a zero balance on the Termination Date, that does not result from the actions or inactions of ENGAGE, then PGLC is responsible for all reasonable net charges incurred by ENGAGE as a result of ENGAGE holding PGLC's Balance beyond the Termination Date. 4.07 In the event that any gas remains in the PGLC Balance at the end of a Redelivery Period, or at the Termination Date, unless the Parties can reach a mutually acceptable agreement within 15 days thereafter, in lieu of redelivery of the remaining volumes, PGLC shall forfeit such volumes to ENGAGE. 4.08 Deliveries and redeliveries hereunder will be deemed to have equivalent heating values. 4.09 PGLC shall not schedule deliveries and redeliveries for the same day.   ARTICLE V - FORCE MAJEURE 5.01 An event of force majeure, as defined in Schedule "B" attached hereto, will excuse a delay in the redelivery of the gas hereunder, but subject to Article 4.07, it will not eliminate ENGAGE's obligation to redeliver the volumes specified. Any time delays caused by force majeure shall be added, day for day, to the Term hereof.   ARTICLE VI - CHARGES AND RATES 6.01 The applicable rates for services rendered, as negotiated between ENGAGE and PGLC, and which PGLC agrees to pay, are set forth in Schedule "A". 6.02 No payment shall be subject to adjustment unless the Party requesting the same does so by notice given within two years after such payment was originally due, or after receipt of the original invoice for that payment (if later). 6.03 Subject to the terms of this Contract. ENGAGE shall pay all taxes imposed with respect to the Gas redelivered to PGLC hereunder after delivery at the Points of Delivery and prior to redelivery at the Points of Redelivery and PGLC shall pay all taxes imposed upon PGLC with respect to such Gas prior to and at the Point of Delivery, and at and after redelivery thereof to PGLC at the Points of Redelivery. If any gas redelivered from ENGAGE to PGLC pursuant to this Contract shall be subject to sales, use, or gross receipts tax, such tax shall be borne by PGLC. PGLC shall provide to ENGAGE, upon request by ENGAGE, documentation of PGLC's exemption from any tax that may otherwise apply to Gas redelivered under this Contract.   ARTICLE VII - DELIVERY AND REDELIVERY PRESSURES 7.01 Deliveries of gas to ENGAGE for the account of PGLC, at the Point of Delivery, shall be made at a pressure sufficient to effect deliveries to the downstream transporter and meet any other operational standards imposed by the downstream transporter. 7.02 Redeliveries of gas by ENGAGE for the account of PGLC hereunder at the Points of Redelivery shall be made at a pressure sufficient to effect deliveries to the downstream transporter.   ARTICLE VIII - MEASUREMENT AND QUALITY 8.01 The quality of the gas and the measurement of the gas to be delivered hereunder is to be in accordance with the quality standards and measurement standards of the upstream transporter. 8.02 ENGAGE shall cause PGLC to secure measurement of the total volume and gross heating value of the gas to be delivered hereunder from the upstream transporter(s). 8.03 In the event of an error in metering or a meter failure, (such error or failure being determined through check measurement by ENGAGE or any other available method), then ENGAGE shall ask PGLC or PGLC's agent to invoke its rights as customer under its contracts with the upstream transporter(s). PGLC shall exercise due diligence in the enforcement of any inspection and/or verification rights and procedures which PGLC or PGLC's agent may have in relation to the meters owned and operated by the upstream transporter(s) at the Point of Delivery.   ARTICLE IX - NOMINATIONS 9.01 Nominations for deliveries or redeliveries of gas to be made by PGLC or received by PGLC must be made in writing before 9:30 a.m. in the Eastern Time Zone on the day before a delivery or redelivery is to occur, except that each such nomination must be made earlier if necessary under the nomination procedures of any upstream or downstream transporter for such gas. PGLC and ENGAGE shall use reasonable efforts to accept volumes greater than the Delivery Quantity and the Redelivery Quantity if requested. 9.02 A nomination for a daily volume of gas on any day shall remain in effect and apply to subsequent days unless and until ENGAGE receives a new nomination from PGLC or unless ENGAGE gives PGLC written notice that it is not acceptable in accordance with Article 9.01.   ARTICLE X - REPRESENTATIONS AND WARRANTIES 10.01 Warranty: Each Party warrants that it will, if required, maintain, or have maintained on its behalf, such certificates, permits, licenses and authorizations from regulatory bodies or other governmental agencies as are necessary to enable such Party, or others designated by it, to deliver to and accept redelivery the Points of Delivery and redeliver to and accept redelivery at the Points of Redelivery, the quantities of gas to be delivered and redelivered under this Contract. 10.02 Financial Representations: Both Parties represent and warrant that the financial assurances and representations provided to each other at the commencement of this Contract (if any) shall remain in place throughout the Term hereof, and/or should either Party, acting reasonably, solely determine that the other Party's financial condition warrants such, the requested Party shall within fourteen (14) days of receipt of such notice by the requesting Party, obtain and provide to the requesting Party a letter of credit or other security in the form reasonably required by the requesting Party (the "Security"). In the event that the requested Party does not provide to the requesting Party such Security, the requesting Party may deem a default under the Default and Termination provisions of the General Terms & Conditions attached hereto as Schedule "B".   ARTICLE Xl - MlSCELLANEOUS PROVISIONS 11.01 Assignment: Either Party may assign this Contract to an affiliate, who has at least the same level of creditworthiness and operational capability as the assigning Party, without prior consent of the other Party. Parties may not assign this Contract to a non-affiliated company, unless such assignment is to a person or entity who succeeds to all or substantially all of that Party's obligations and rights under this Contract, without the prior written consent of the other Party, not to be unreasonably withheld. Each Party shall notify be other Party of any such succession. 11.02 Notices: Subject to the express provisions of this Contract, all communications provided for or permitted hereunder shall be in writing, personally delivered to an officer or other responsible employee of the addressee or sent by registered mail, charges prepaid, or by telecopy or other means of recorded telecommunication, charges prepaid, to the applicable address set forth below or to such other address as either Party hereto may from time to time designate to the other in such manner, provided that no communication shall be sent by mail pending any threatened, or during any actual, postal strike or other disruption of the postal service. Any personal communication delivered shall be deemed to have been validly and effectively received on the date of such delivery. Any communication so sent by telecopy or other means of telecommunication shall be deemed to have been validly and effectively received on the business day following the day on which it is sent. Any communication so sent by mail shall be deemed to have been validly and effectively received on the third business day following the day on which it is post marked. Communications to the Parties hereto shall be directed as follows: IF TO PGLC: The Peoples Gas Light and Coke Company   Attention: Mr. Raulie de Lara   130 East Randolph Drive   22nd Floor   Chicago, Illinois 60601     Nominations: Attention: Mr. Jerry Slechta   Telephone: (312) 240-4362   Fax: (312)240-4211     Other. Attention: Mr. Dave Wear   Telephone: (312) 240-4554   Fax: (312) 240-4211     IF TO ENGAGE: Engage Energy US, L.P.   3000 Town Center, Suite 2800   Southfield, Michigan 48075     Nominations: Attention: Ms. Cheryl McNicol   Telephone: (248) 304-3254   Fax: (248) 304-8769     Other Attention: Mr. James Kozlowski   Telephone (708) 236-1797   Fax: (708) 236-1798 Each Party may from time to time change its address for the purpose of this Section by giving notice of such change to the other Party in accordance with this Section. 11.03 Law of Contract: The Parties agree that this Contract shall be construed exclusively in accordance with the laws of the State of Michigan. 11.04 Possession of Gas: ENGAGE accepts no responsibility for any gas prior to such gas being delivered to ENGAGE at the Point of Delivery or after its redelivery by ENGAGE at the Point of Redelivery. PGLC accepts no responsibility for any gas prior to such gas being received from ENGAGE at the Point of Redelivery and after such gas is delivered to ENGAGE at the Point of Delivery. As between the Parties hereto, ENGAGE shall be deemed to be in control and possession of and responsible for all such gas from the time that such gas is delivered to ENGAGE by PGLC at the Point of Delivery until such equivalent volumes are redelivered to PGLC by ENGAGE at the Point of Redelivery. 11.05 Title to Gas: Each Party represents and warrants to the other that each has good and marketable title to all gas delivered hereunder, free and clear of any lien, mortgage, security interest or other encumbrance whatsoever against such gas and each Party hereby agrees to transfer complete title and interest to the gas at the Point of Delivery or Redelivery as the case may be. Each Party further agrees to indemnify and save the other harmless from all suits, actions, debts, accounts, damages, costs, losses and expenses arising from or out of claims of any or all third parties to such gas on account of royalties, taxes, license fees, or other charges thereon. 11.06 Entire Contract: This Contract constitutes the entire agreement between the Parties hereto pertaining to the subject matter hereof. This Contract supersedes any prior or contemporaneous agreements, understandings, negotiations or discussions, whether oral or written, of the Parties in respect of the subject matter hereof. 11.07 Time of Essence: Time shall be of the essence hereof. 11.08 Counterparts: This Contract may be executed in any number of counterparts, each of which when so executed shall be deemed to be an originally executed copy, and it shall not be necessary in making proof of this Contract to produce all of such counterparts. 11.09 Amendments and Waivers: No amendment or waiver of any provision of this Contract nor consent to any departure by either Party hereto shall in any event be effective unless the same shall be in writing and signed by each of PGLC and ENGAGE and then such waiver or consent shall be effective only in the specific instance and for the specified purpose for which it was given. No failure on the part of PGLC or ENGAGE to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy under this Contract shall operate as a waiver thereof. 11.10 Severability: If any provision hereof is invalid or unenforceable in any jurisdiction, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intention of the Parties as nearly as possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of any provision in any other jurisdiction. 11.11 Non-Performance: In the event ENGAGE fails to redeliver the quantities of Gas as agreed herein for any reason other than force majeure, ENGAGE shall reimburse PGLC within 15 days of receipt of an invoice and supporting detail from PGLC, for the difference, if any, between the cost which PGLC would have incurred (based on this Contract including cost of gas, and related transport and delivery/redelivery fees) for the deficient portion of the redelivery quantity as nominated under this Contract, and the price, for the same quantity of Gas which PGLC or its agents may acquire in replacement thereof. PGLC shall use its reasonable efforts to obtain such replacement Gas at the lowest price reasonably possible. In addition, ENGAGE shall reimburse PGLC for incremental costs and expenses incurred by PGLC related to the underdelivery or to the replacement of Gas as a result of ENGAGE's failure to redeliver as agreed, including PGLC's transportation demand charges incurred without corresponding benefit to PGLC, pipeline overrun charges and penalties. ENGAGE's payment of replacement and incremental costs and expenses as set forth above shall constitute PGLC's sole and exclusive remedy for ENGAGE's failure to redeliver and ENGAGE shall not be liable to PGLC for redelivery of any volumes for which such replacement costs were paid, nor for any other costs, charges, expenses, losses or damages of any kind whether direct or indirect, consequential or incidental arising from or as a result of ENGAGE's failure to redeliver. 11.12 Confidentiality. ENGAGE and PGLC each agrees that the terms and conditions of this Contract shall remain confidential, except for any required disclosure to a regulatory body, governmental entity or agency having jurisdiction. In case of such disclosure, the disclosing Party shall attempt to obtain an appropriate protective order or enter into an appropriate protective agreement. Notwithstanding the foregoing, either Party may disclose relevant details of this Contract to its duly authorized agent, provided such disclosure is necessary to perform its obligations under the Contract. In such event, the disclosing Party will require appropriate non-disclosure commitments from the entities receiving confidential information.   THIS CONTRACT SHALL BE BINDING UPON and shall enure to the benefit of the Parties hereto and their respective successors and permitted and lawful assigns. IN WITNESS WHEREOF this Contract has been properly executed by the Parties hereto by their duly authorized officers as of the date first above written.     THE PEOPLES GAS LIGHT AND COKE COMPANY   ENGAGE ENERGY US., L.P.             By: /s/ William E. Morrow   By: /s/ Todd Karry William E. Morrow   Name: Todd Karry Executive Vice President   Title: Vice President       Schedule "A" Pricing Provision Schedule "B" General Terms & Conditions Schedule "C" Delivery and Redelivery Points       Contract No. SCHEDULE "A" ENGAGE ENERGY US, L.P. and THE PEOPLES GAS LIGHT AND COKE COMPANY     PRICING PROVISION   DELIVERY AND REDELIVERY STORAGE SERVICES     1. PGLC agrees to pay ENGAGE for all volumes delivered and redelivered pursuant to the terms of this Contract according to the following: a) A Fixed Demand Charge of $760,000 to be paid in equal monthly installments of $84,444.44. b) After a total of 1 Bcf has been redelivered to PGLC by ENGAGE, then subject to Maximum Balance and daily delivery/redelivery restrictions, PGLC may deliver gas to ENGAGE in one month for redelivery in a different month ("Inter Month Cycled Volume"). The charge payable for such Inter-Month Cycled Volumes shall be $.04 U.S. per MMBtu for all volumes delivered by PGLC and redelivered by ENGAGE. c) After a total of 1 Bcf has been redelivered to PGLC by ENGAGE, then subject to Maximum Balance and daily delivery/redelivery restrictions, PGLC may deliver gas to ENGAGE in one month for redelivery within the same month ("Intra Month Cycled Volume"). The charge payable for such lntra-Month Cycled Volumes shall be $0.02 U.S. per MMBtu for all volumes delivered by PGLC and redelivered by ENGAGE. 2. The foregoing prices are also subject to the provisions of Article 6.03.       CONFIDENTIAL   Dated: July 1, 2000 SCHEDULE "B" GENERAL TERMS & CONDITIONS   I. DEFINITIONS Except where the context expressly requires or states another meaning, the following terms, whether capitalized or in lower case, when used in these General Terms and Conditions and in any contract into which these General Terms and Conditions are incorporated, shall be construed to have the following meanings: "British Thermal Unit" and "BTU" shall mean the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit at 60 degrees Fahrenheit; "Business day" shall mean any day except a Saturday, a Sunday, or a day observed as a holiday by either Party or both Parties; "Commencement date" shall have the meaning ascribed to it in Article III of the Contract; "contract year" shall mean a period of three hundred and sixty-five (365) consecutive days, beginning on the day agreed upon by ENGAGE and PGLC as set forth in the Contract, or on any anniversary of such date; provided, however, that any such period which contains a date of February 29 shall consist of three hundred arid sixty-six (366) consecutive days; "PGLC", wherever it appears herein, shall also include PGLC's Agent(s); "PGLC Balance" shall have the meaning ascribed to it in Article IV of the Contract; "day" shall mean a period of twenty-four (24) consecutive hours beginning at 8:00 a.m. Eastern Prevailing Time. The reference date for any day shall be the calendar date upon which the twenty-four (24) hour period shall commence; "dekatherm" or "Dth" shall mean a heating value of 1,000,000 BTU's; "delivery" shall mean any gas that is delivered to ENGAGE; "Delivery Period" shall have the meaning ascribed to it in Article IV of the Contract; "Delivery Quantity" shall have the meaning ascribed to it in Article IV of the Contract; "Downstream Transporter" shall mean the pipeline receiving gas at a Delivery or Redelivery Point; "FERC" shall mean the Federal Energy Regulatory Commission or any successor to that agency; "firm" shall mean service not subject to curtailment or interruption except under Sections X and XII of this Schedule "B"; "gas", unless the context otherwise requires, shall mean the methane and heavier hydrocarbons remaining in the vapor phase after the treating or processing of gas well gas or oil well gas or the combination of both: "interruptible service" shall mean service subject to curtailment or interruption by either Party, after notice, at any time; "joule" shall mean the work done when the point of application of a force of one (1) newton is displaced a distance of one (1) metre in the direction of the force. The term "Gigajoule" ("GJ") shall mean 1,000,000,000 joules; "month" shall mean the period beginning at 8:00 a.m. Eastern Prevailing Time on the first day of a calendar month and ending at 8:00 a.m. Eastern Prevailing Time on the first day of the following calendar month; "Redelivery Period" shall have the meaning ascribed to it in Article IV of this Contract; "Redelivery Quantity" shall have the meaning ascribed to it in Article IV of this Contract; "TCPL" means TransCanada Pipelines Limited; "Union" means Union Gas Limited; "Upstream Transporter" shall mean the pipeline delivering gas to the Delivery or Redelivery point. II. QUALITY See Article VIII of the Contract Ill. MEASUREMENTS See Article VIII of the Contract IV. POINT OF DELIVERY AND POINT OF REDELIVERY 1. Unless otherwise specified in the Contract, the point or points of delivery for all gas to be covered hereunder shall be on the outlet side of the measuring stations located at or near the point or points of connection specified in the Contract, where ENGAGE takes possession of the gas. Whenever the phrase "delivery point" appears herein, it shall mean Point of Delivery as defined in this Section IV and Article IV of the Contract. 2. Unless otherwise specified in the Contract, the point or points of redelivery for all gas to be covered hereunder shall be on the outlet side of the measuring stations located at or near the point or points of connection as specified in the Contract where PGLC takes possession of the gas. Whenever the phrase "redelivery point" shall appear herein, it shall mean Point of Redelivery as defined in this Section IV and Article IV of the Contract. V. POSSESSION OF AND RESPONSIBILITY FOR GAS See Articles 11.04 and 11.05 of the Contract VI. FACILITIES ON PGLC's PROPERTY Not Applicable VII. MEASURING EQUIPMENT See Article VIII of the Contract VIII. BILLING 1. Monthly Billing Date: ENGAGE shall render bills on or before the 12th day of each month for all gas delivered and/or redelivered and gas services furnished during the preceding month. Such bills may include estimated quantities, if actual quantities are unavailable in time to prepare the billing. ENGAGE shall provide, in a succeeding month's billing, an adjustment based on any difference between actual quantities and estimated quantities. 2. Right of Examination: Both ENGAGE and PGLC shall have the right to examine at any reasonable time upon prior notice the books, records and charts of the other to the extent necessary to verify the accuracy of any statement, chart or computation made under or pursuant to the provisions of the Contract. IX. PAYMENTS 1. Monthly Payments: Except when such day is not a business day, in which case payment shall be made on the following business day, PGLC shall make payment to ENGAGE by fifteen (15) days after its receipt, which receipt may be by facsimile, of a bill from ENGAGE pursuant to Section VIII. 2. Remedies for Nonpayment: Should PGLC fail to pay all of the amount of any bill as herein provided when such amount is due, PGLC shall pay ENGAGE interest on the unpaid portion of the bill accruing at a rate equal to the prime rate of interest published under "Money Rates" by The Wall Street Journal plus two percent per annum from the date due until the date of payment. ENGAGE, in addition to any other remedy it may have under the Contract may suspend further redelivery of gas until amount is paid, provided however, that if PGLC, in good faith shall dispute the amount of any such bill or part thereof and shall pay to ENGAGE such amounts as it concedes to be correct, and at any time thereafter within two (2) Business days of a demand made by ENGAGE shall furnish good and sufficient security satisfactory to ENGAGE, guaranteeing payment to ENGAGE of the amount ultimately found due upon such bill after a final determination which may be reached either by agreement, arbitration decision or judgment of the courts, as may be the case, then ENGAGE shall not be entitled to suspend further delivery of gas because of such nonpayment unless and until default be made in the conditions of such bond or in payment for any further gas redelivered to PGLC hereunder. Notwithstanding the foregoing paragraph, this does not relieve PGLC from the obligation to continue its deliveries of gas to ENGAGE under the terms of any agreement, where PGLC has contracted to deliver specified volumes of gas to ENGAGE. 3. Billing Adjustments: If it shall be found that at any time or times PGLC has been overcharged or undercharged in any form whatsoever under the provisions of the Contract and PGLC shall have actually paid the bills containing such overcharge or undercharge, ENGAGE shall refund the amount of any such overcharge and interest shall accrue from and including the first day of such overcharge as paid to the date of refund and shall be calculated but not compounded at a rate per annum determined each day during the calculation period to be equal to the prime rate of interest published under "Money Rates" by The Wall Street Journal plus two percent, and PGLC shall pay the amount of any such undercharge, but without interest. In the event ENGAGE renders a bill to PGLC based upon measurement estimates, the required adjustment to reflect actual measurement shall be made on the bill next following the determination of such actual measurement, without any charge of interest. In the event an error is discovered in the amount billed in any statement rendered by ENGAGE, such error shall be adjusted by ENGAGE. Such overcharge, undercharge or error shall be adjusted by ENGAGE on the bill next following its determination (where the term "bill" next following shall mean a bill rendered at least fourteen (14) days after the day of its determination), provided that claim therefore shall have been made within two (2) years from the date of the incorrect billing. In the event any refund is issued with PGLC's gas bill, the aforesaid date of refund shall be deemed to be the date of the issue of invoice. X. FORCE MAJEURE The term "force majeure" as used herein shall mean acts of God, strikes, lockouts or any other industrial disturbance, acts of the public enemy, sabotage, wars, blockades, insurrections, riots, epidemics, landslides, lightening, earthquakes, fires, storms, floods, washouts, arrests and restraints of governments and people, civil disturbances, explosions, breakage or accident to machinery or lines of pipe, freezing of wells (if affecting other wells in the same geographic area) or lines of pipe, inability to obtain material, supplies, permits or labor, any laws, orders, rules regulations, acts or restraints of any governmental body or authority (civil or military), any act or omission that is excused by any event or occurrence of the character herein defined as constituting force majeure, any act or omission by parties not controlled by the Party having the difficulty and any other similar cases not within the control of the Party claiming suspension and which by the exercise of due diligence such Party is unable to prevent or overcome. In the event that either PGLC or ENGAGE is rendered unable, in whole or in part, by force majeure, to perform or comply with any obligation or condition of the Contract, such Party shall give notice and full particulars of such force majeure in writing delivered by hand, telegraph, telex or other direct written electronic means to the other Party as soon as possible after the occurrence of the cause relied on and subject to the provision of this Section. Neither Party shall be entitled to the benefit of the provisions of force majeure hereunder if any or all of the following circumstances prevail: (1) the failure resulting in a condition of force majeure was caused by the negligence of the Party claiming suspension; (2) the failure was caused by the Party claiming suspension where such Party failed to remedy the condition by making all reasonable efforts (short of litigation, if such remedy would require litigation); (3) the Party claiming suspension failed to resume the performance of such condition obligations with reasonable dispatch; (4) the failure was caused by lack of funds; (5) the Party claiming suspension did not as soon as possible after determining or within a period within which it should acting reasonably have determined that the occurrence was in the nature of force majeure and would affect its ability to observe or perform any of its conditions or obligations under the Contract give to the other Party the notice required hereunder; (6) the failure was due to an interruption or curtailment of interruptible transportation by either the Upstream or Downstream Transporter, unless firm transportation by such pipeline(s) is also being interrupted or curtailed. The Party claiming suspension shall likewise give notice as soon as possible after the force majeure condition is remedied, to the extent that the same has been remedied, and that such Party has resumed or is then in a position to resume the performance of the obligations and conditions of the Contract. Xl. DEFAULT AND TERMINATION In case of the breach or nonobservance or nonperformance on the part of either Party hereto of any covenant, proviso, condition, restriction or stipulation contained in the Contract (but not including herein failure to take or make delivery or redelivery in whole or in part of the gas delivered or redelivered hereunder for which a sole and exclusive remedy is provided in Article 11.11) which ought to be observed or performed by such Party and which has not been waived by the other Party, then and in every such case and as often as the same may happen, such last mentioned Party may give written notice to the Party first mentioned requiring it to remedy such default, and in the event of such first mentioned Party failing to remedy the same within a period of thirty (30) days from receipt of such notice, the other Party may, at its sole option, declare the Contract to be terminated and thereupon the Contract shall become and be terminated and be null and void for all purposes other than and except as to any liability of the first mentioned Party under the same incurred before and subsisting at the day when the Contract is declared by the other Party to be terminated as aforesaid. The right hereby conferred upon each Party shall be in addition to, and not in derogation of or in substitution for, any other right or remedy which the Parties respectively at law or in equity shall or may possess. XII. MODIFICATION Any modification of the terms and provisions of the Contract shall be in writing and shall be signed by all Parties to the Contract XIII. NONWAIVER AND FUTURE DEFAULT No waiver by either ENGAGE or PGLC of any one or more defaults by the other in the performance of any provisions of the Contract shall operate or be construed as a waiver of any future default or defaults, whether of a like or a different character. XIV. LAWS, REGULATIONS AND ORDERS The Contract and the respective rights and obligations of the Parties hereto are subject to all present and future valid laws, orders, rules and regulations of any competent legislative body, or duly constituted authority now or hereafter having jurisdiction and the Contract shall be varied and amended to comply with or conform to any valid order or direction of any board, tribunal or administrative agency which affects any of the provisions of the Contract. XV. LIMITATIONS ON CLAIMS Neither Party shall be liable for any damages for any breach of this Contract, unless a claim is presented within two (2) years after the alleged damages are discovered, but in no event after five years. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED FOR IN THIS CONTRACT, NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES ARISING OUT OF, OR RELATED TO, A BREACH OF THIS CONTRACT. XVI. THIRD PARTY BENEFICIARY PGLC and ENGAGE agree that there is no third party beneficiary of this Contract and that the provisions of this Contract do not impart enforceable rights to anyone who is not a Party.       CONFIDENTIAL   Contract No. SCHEDULE "C"     POINT OF DELIVERY The Point of Delivery hereunder is defined as follows: Primary: DAWN: At the junction of Union's and TCPL's facilities, at or adjacent to Union's Compressor Station site situated in the Northwest corner of Lot Twenty-Five (25), Concessions II, in the Township of Dawn, County of Lambton     POINT OF REDELIVERY   The Point of Redelivery hereunder is defined as follows: Primary: CHICAGO: PGLC Citygate or DAWN: At the junction of Union's and TCPL's facilities, at or adjacent to Union's Compressor Station site situated in the Northwest corner of Lot Twenty-Five (25), Concessions II, in the Township of Dawn, County of Lambton

Exhibit 10.1 AGREEMENT CONCERNING THE EXCHANGE OF COMMON STOCK AMONG AMERICAN CHAMPION ENTERTAINMENT, INC. ("ACEI") BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. ("B.A.Network") and THE SHAREHOLDERS OF BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. -------------------------------------------------------------------------------- TABLE OF CONTENTS Page No. ARTICLE 1 - EXCHANGE OF SECURITIES 9 1.1 - Issuance of Shares 9 1.2 - Exemption from Registration 9 ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF B.A. Network 9 2.1 - Organization 9 2.2 - Capital 10 2.3 - Subsidiaries 10 2.4 - Directors and Officers 10 2.5 - Financial Statements 10 2.6 - Investigation of Financial Condition 10 2.7 - Compliance with Laws 10 2.8 - Litigation 11 2.9 - Authority 11 2.10 - Ability to Carry Out Obligations 11 2.11 - Full Disclosure 11 2.12 - Material Contracts 11 2.13 - Indemnification 12 2.14 - Transactions with Officers and Directors 12 2.15 - Background of Officers and Directors 12 2.16 - Employee Benefits 13 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF ACEI 13 3.1 - Organization 13 3.2 - Capital 13 3.3 - Subsidiaries 14 3.4 - Directors and Officers 14 3.5 - Financial Statements 14 3.6 - Absence of Changes 14 3.7 - Absence of Undisclosed Liabilities 14 3.8 - Tax Returns 14 3.9 - Investigation of Financial Condition 14 3.10 - Trade Names and Rights 14 3.11 - Compliance with Laws 15 3.12 - Litigation 15 3.13 - Authority 15 3.14 - Ability to Carry Out Obligations 15 3.15 - Validity of ACEI Shares 15 3.16 - Full Disclosure 15 3.17 - Assets 15 3.18 - Material Contracts 16 3.19 - Compliance With SEC Reporting Requirements 16 ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 16 4.1 - Share Ownership 16 4.2 - Investment Intent 16 4.3 - (deleted) 17 4.4 - Legend 17 ARTICLE 5 - COVENANTS 17 5.1 - Investigative Rights 17 5.2 - Conduct of Business 18 ARTICLE 6 - CONDITIONS PRECEDENT TO ACEI'S PERFORMANCE 18 6.1 - Conditions 18 6.2 - Accuracy of Representations 18 6.3 - Performance 18 6.4 - Absence of Litigation 18 6.5 - Acceptance by B.A. Network Shareholders 18 6.6 - Officer's Certificate 19 6.7 - Opinion of Counsel to B.A. Network 19 ARTICLE 7-CONDITIONS PRECEDENT TO B.A. Network's PERFORMANCE 19 7.1 - Conditions 19 7.2 - Accuracy of Representations 19 7.3 - Performance 20 7.4 - Absence of Litigation 20 7.5 - Current Status 20 7.6 - Directors of ACEI 20 7.7 - Officers of ACEI 20 7.8 - blank 20 7.9 - Officer's Certificate 20 7.10 - Opinion of Counsel 20 ARTICLE 8 - CLOSING 20 8.1 - Closing 20 ARTICLE 9 - MISCELLANEOUS 21 9.1 - Captions and Headings 21 9.2 - Memos, Attachments and Exhibits 21 9.3 - No Oral Change 21 9.4 - Non-Waiver 22 9.5 - Entire Agreement 22 9.6 - Member to B.A. Network's Board of Directors 22 9.7 - Choice of Law 22 9.8 - Counterparts 22 9.9 - Notices 22 9.10 - (deleted) 23 9.11 - Binding Effect 23 9.12 - Mutual Cooperation 23 9.13 - Announcements 23 9.14 - Expenses 23 9.15 - Survival of Representations and Warranties 23 9.16 - Exhibits 24 EXHIBITS Exhibit 1.1 Allocation of B.A. Network Shares Exhibit 2.2 Authorized Capital of B.A. Network Exhibit 2.4 Directors and Officers of B.A. Network Exhibit 2.5 B.A. Network Financial Statements Exhibit 2.12 Material Contracts Exhibit 3.2 Outstanding options and warrants of ACEI Exhibit 3.3 Subsidiaries of ACEI Exhibit 3.4 Directors and Officers of ACEI Exhibit 3.5 ACEI Financial Statements Exhibit 7.10 Opinion of Counsel of ACEI Exhibit A B.A. Network's Revenue Projections -------------------------------------------------------------------------------- AGREEMENT AGREEMENT, made as of the 27th day of March, 2000, by and among American Champion Entertainment, Inc. of the United States of America, a Delaware corporation ("ACEI"), Beijing Wisdom Network Technology Company, Ltd., a corporation formed under the laws of the People's Republic of China ("B.A. Network") and the shareholders of Beijing Wisdom Network Technology Company, Ltd. (the "Shareholders"). This agreement is subject to review by the U.S. Securities and Exchange Commission ("SEC") and approval by the shareholders of ACEI, and shall become effective immediately upon satisfactory review by the SEC and approval by the shareholders at a meeting of the shareholders of ACEI. Once approval by shareholders is obtained, ACEI shall notify B.A. Network of the effectiveness of this agreement within the same day. WHEREAS, ACEI desires to acquire 80.00% of all of the issued and outstanding shares of B.A. Network, in exchange for a total value of $4,672,050 of either ACEI authorized but unissued shares of the common stock, $.0001 par value (the "Exchange Stock"), or partially in cash; and such Exchange Stock and cash, shall be granted in three parts: I. A number of shares equal to $300,000 in value, included in the Exchange Stock, or $300,000 in cash, is payable to B.A. Network as Part I of the exchange transaction. B.A. Network shall have to right to choose between payment in shares or in cash, and B.A. Network shall provide ACEI official written notice of its choice of payment not later than three business days after to the date of effectiveness of this agreement. 1.1 If B.A. Network elects to be paid in cash, then ACEI shall transfer by wire the amount of $300,000 into an account specified by B.A. Network within ten business days from the date of effectiveness of this agreement. 1.2 If B.A. Network elects to be paid in shares, then ACEI shall issue and transfer $300,000 in value of ACEI shares into a stock account specified by B.A. Network within ten business days from the date of effectiveness of this agreement. 1.2.1 The price of the shares shall be based on the average of the daily closing sales prices from the date of the Letter of Intent to the date of effectiveness of this agreement. 1.2.2 The shares shall have registration rights and become freely tradable without restrictions upon effectiveness of registration. II. For the year 2000, ACEI shall grant B.A. Network the amount of US$1,184,097 in shares of ACEI, or in cash, according to the following projections, as part II of the exchange transaction. B.A. Network shall have to right to choose between payment in shares or in cash, and B.A. Network shall provide ACEI official written notice of its choice of payment not later than three business days after to the delivery of reviewed financial statements to ACEI via one of the big five U.S. accounting firms. B.A. Network Revenue Projections 2000 2001 2002 (To be annually audited & quarterly reviewed by acceptable U.S. accounting firm.) Exchange Rate - RMB / US$: 8.3 / 1 Gross Revenue (RMB) 65,000,000 80,000,000 95,000,000 Gross Revenue (US$) $7,831,325 $9,638,554 $11,445,783 Gross Revenue (US$) x 80.00% $6,265,060 $7,710,843 $9,156,627 EBITDA (earnings before interests, taxes, depreciation & amortization) EBITDA (RMB) 3,250,000 4,000,000 4,750,000 EBITDA (US$) $391,566 $481,928 $572,289 EBITDA (US$) x 80.00% $313,253 $385,542 $457,831 18% of Gross Revenue, payable $1,127,711 $1,387,952 $1,648,193 in ACEI common stock 18% of EBITDA, payable $56,386 $69,398 $82,410 in ACEI common stock Total payable in ACEI common stock $1,184,097 $1,457,349 $1,730,603 Total payments over years 2000 to 2002, to be paid in ACEI common stock, $4,372,050 2.1 If B.A. Network elects to be paid in cash, and upon the delivery of reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall make the following quarterly payments: 2.1.1 Within 10 business days, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 50% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross and EBITDA amounts that are more than the figures in the above table. 2.1.2 Within 6 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 40% for Gross and EBITDA amounts that are more than the figures in the above table. 2.1.3 Within 9 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 20% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table. 2.1.4 Within 12 months, ACEI shall make payment by wire transfer to an account specified by B.A. Network of the amount of (Gross Revenue + EBITDA) x 80% x 18% x 10% for Gross Revenue and EBITDA amounts that are less than or equal to the figures in the above table, and (Gross Revenue + EBITDA) x 80% x 18% x 40% for Gross and EBITDA amounts that are more than the figures in the above table. 2.2 If B.A. Network elects to be paid in shares, and within ten business days from the delivery of quarterly reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall issue and transfer the amount of ACEI common stock, based on 80% X 18% of the Gross Revenue and EBITDA according to the figures in the above table, into a stock account specified by B.A. Network. The price of the shares shall be the average of the closing sales prices of ACEI shares within the applicable quarter, and be subject to the following restrictions: 2.2.1 For amounts less than and equal to the above tabulation, 50% shall not have restrictions, 20% shall be restricted from sales for 6 months from the date of issuance, 20% restricted for 9 months, and 10% restricted for 12 months. 2.2.2 For amounts more than the above tabulation, 20% shall not have restrictions, 40% shall be restricted from sales for 6 months from the date of issuance, and 40% shall be restricted for 12 months. III. As part III of the exchange transaction, ACEI shall issue shares of ACEI common stock to B.A. Network for the years 2001 and 2002, based of figures in the above table. 3.1 Within ten business days from the delivery of quarterly reviewed financial statements to ACEI via one of the big five U.S. accounting firms, then ACEI shall issue and transfer the amount of ACEI common stock, based on 80% X 18% of the Gross Revenue and EBITDA according to the figures in the above table, into a stock account specified by B.A. Network. 3.2 The price of the shares shall be the average of the closing sales prices of ACEI shares within the applicable quarter, and be subject to the following restrictions: 3.2.1 For amounts less than and equal to the above tabulation, 50% shall not have restrictions, 20% shall be restricted from sales for 6 months from the date of issuance, 20% restricted for 9 months, and 10% restricted for 12 months. 3.2.2 For amounts more than the above tabulation, 20% shall not have restrictions, 40% shall be restricted from sales for 6 months from the date of issuance, and 40% shall be restricted for 12 months. WHEREAS, the Shareholders desire to exchange their B.A. Network shares for the Exchange Stock as set forth herein; and WHEREAS, B.A. Network desires to assist ACEI in a business combination which will result in the Shareholders of B.A. Network owning approximately 16% of the then issued and outstanding shares of ACEI's Common Stock (with the understanding that since ACEI is currently in an expansion phase with multiple acquisition candidates in negotiation, the actual resulting ownership by B.A. Network of ACEI may be significantly less) and ACEI owning 80.00% of the issued and outstanding shares of B.A. Network's Capital Stock; NOW, THEREFORE, in consideration of the mutual promises, covenants and representations contained herein, the parties hereto agree as follows: ARTICLE I Exchange of Securities > 1.1 Issuance of Shares. Subject to all of the terms and conditions of this > Agreement, ACEI agrees to issue to the Shareholders the shares of the Exchange > Stock, or partially in cash, as described above in exchange for 80.00% of all > of the outstanding shares of B.A. Network capital stock owned by the > Shareholders, as set forth on Exhibit 1.1. > > 1.2 Exemption from Registration. Except as specified above for issuance of > shares with registration rights, the parties hereto intend that the Common > Stock to be issued by ACEI to the Shareholder shall be exempt from the > registration requirements of the Securities Act of 1933, as amended (the > "Act") pursuant to Section 4(2) of the Act and the rules and regulations > promulgated thereunder. ARTICLE 2 Representations and Warranties of B.A. Network B.A. Network and the Shareholders of B.A. Network represent to ACEI that: > 2.1 Organization. B.A. Network is a corporation duly organized and validly > existing and in good standing under the laws of the People's Republic of China > and has all necessary corporate powers to own its properties and to carry on > its business as now owned and operated by it, and is duly qualified to do > business and is in good standing where its business requires qualification. > (Further legal descriptions of B.A. Network, if necessary, such as transfer of > assets and liabilities of another entity, etc). > > 2.2 Capital. The authorized capital stock of B.A. Network is as set forth on > the annexed Exhibit 2.2, a copy of which is annexed hereto and made a part > hereof. The shares currently outstanding are owned by the Shareholders. All of > the issued and outstanding shares of B.A. Network are duly and validly issued, > fully paid, and non-assessable. There are no outstanding subscriptions, > options, rights, warrants, debentures, instruments, convertible securities, or > other agreements or commitments obligating B.A. Network to issue or to > transfer from treasury any additional shares of its capital stock of any > class. > > 2.3 Subsidiaries. As of the date of this Agreement, B.A. Network does not have > any subsidiaries or own any interest in any other enterprise. > > 2.4 (a) Directors and Officers. Exhibit 2.4 to this Agreement, the text of > which is incorporated herein by reference, contains the names and titles of > all directors and officers of B.A. Network as of the date of this Agreement. > > 2.5 (b) Financial Statements. The B.A. Network financial statements are to be > audited by a reputable international auditing firm for the year ending > December 31, 1999 which are annexed hereto as Exhibit 2.5 and must be > delivered to ACEI prior to the Closing. Such financial statements are to be > complete, accurate and fairly present the financial condition of B.A. Network > as of the date thereof and the results of operations for the year ending > December 31, 1999, for the business of B.A. Network that has been operated in > the normal course. There are no material liabilities, either fixed or > contingent, not reflected in such financial statements other than contracts or > obligations in the ordinary and usual course of business; and no such > contracts or obligations in the usual course of business constitute liens or > other liabilities which, if disclosed, would materially alter the financial > condition of B.A. Network as reflected in such financial statements. The > financial statements of B.A. Network are incorporated herein by reference and > deemed to be a part hereof. > > 2.6 Investigation of Financial Condition. Without in any manner reducing or > otherwise mitigating the representations contained herein, ACEI and/or its > attorneys shall have the opportunity to meet with accountants and attorneys of > ACEI to discuss the financial condition of B.A. Network. B.A. Network shall > make available to ACEI and/or its attorneys all books and records of B.A. > Network. If the transaction contemplated hereby is not completed, all > documents received by ACEI and/or its attorneys shall be returned to B.A. > Network and all information so received shall be treated as confidential. > > 2.7 Compliance with Laws. B.A. Network has complied with and are not in > violation of applicable national, state or local statutes, laws and > regulations (including, without limitation, any applicable building, zoning or > other law, ordinance or regulation) affecting its properties or the operation > of its business. All national, state and local income tax returns required to > be filed by B.A. Network have been filed and all required taxes have been paid > or an adequate reserve therefor has been established in the financial > statements. B.A. Network's tax returns have not been audited by any authority > empowered to do so. > > 2.8 Litigation. Neither B.A. Network nor the Shareholders are a party to any > suit, action, arbitration or legal, administrative or other proceeding, or > governmental investigation pending or, to the best knowledge of B.A. Network > and the Shareholders, threatened against or affecting B.A. Network or the > Shareholders, their assets or financial condition, except for matters which > would not have a material effect on B.A. Network, the Shareholders or their > respective properties. Neither B.A. Network nor the Shareholders are in > default with respect to any order, writ, injunction or decree of any national, > state, local or foreign court, department, agency or instrumentality > applicable to it. Neither B.A. Network nor Shareholders are engaged in any > lawsuits to recover any material amount of moneys due to B.A. Network or > Shareholders. > > 2.9 Authority. The Board of Directors of B.A. Network has authorized the > execution of this Agreement and the consummation of the transactions > contemplated herein, and upon obtaining any necessary shareholder approval, > B.A. Network will have full power and authority to execute, deliver and > perform this Agreement and this Agreement will be a legal, valid and binding > obligation of B.A. Network, enforceable in accordance with its terms and > conditions, except as may be limited by bankruptcy and insolvency laws and by > other laws affecting the rights of creditors generally. > > 2.10 Ability to Carry Out Obligations. The execution and delivery of this > Agreement by B.A. Network and the performance by B.A. Network of its > obligations hereunder in the time and manner contemplated will not cause, > constitute or conflict with or result in (a) any breach or violation of any of > the provisions of or constitute a default under any license, indenture, > mortgage, charter, instrument, articles of incorporation, by-laws, or other > agreement or instrument to which B.A. Network or Shareholders are a party or > by which either may be bound, nor will any consents or authorizations of any > party other than those hereto be required; (b) an event that would permit any > party to any agreement or instrument, to terminate it or to accelerate the > maturity of any indebtedness or other obligation of B.A. Network or > Shareholders; or (c) an event that would result in the creation or imposition > of any lien, charge, or encumbrance on any asset of B.A. Network or > Shareholders. > > 2.11 Full Disclosure. None of the representations and warranties made by B.A. > Network and the Shareholders herein, or in any exhibit, certificate or > memorandum furnished or to be furnished by B.A. Network, or on its behalf, > contains or will contain any untrue statement of material fact, or omit any > material fact, the omission of which would be misleading. > > 2.12 Material Contracts. Neither B.A. Network nor the Shareholders has any > material contracts to which either is a party or by which they are bound, > except for those agreements set forth on the annexed hereto as Exhibit 2.12. > > 2.13 Indemnification. B.A. Network and the Shareholders agree to defend and > hold harmless ACEI, its officers and directors against and in respect of any > and all claims, demands, losses, costs, expenses, obligations, liabilities, > damages, recoveries and deficiencies, including interest, penalties and > reasonable attorney's fees, that it shall incur or suffer, which arise out of, > result from or relate to any breach of or failure by B.A. Network to perform > any of its respective representations, warranties, covenants and agreements in > this Agreement or in any exhibit or other instrument furnished or to be > furnished by B.A. Network under this Agreement. > > 2.14 Transactions with Officers and Directors. Except as otherwise disclosed > in B.A. Network's financial statements dated December 31, 1999 and delivered > to ACEI, there have been, and through the date of Closing there will be (1) no > bonuses or unusual compensation to any of the officers or directors of B.A. > Network; (2) no loans, leases or contracts made to or with any of the officers > or directors of B.A. Network; (3) no dividends or other distributions declared > or paid by B.A. Network; and (4) no purchases by B.A. Network of any of its > capital shares. > > 2.15 Background of Officers and Directors. During the past five year period, > no officer or director of B.A. Network has been the subject of: > > > (a) A petition under the U.S. Federal Bankruptcy laws or any other > > insolvency law or has a receiver, fiscal agent or similar officer been > > appointed by a court for the business or property of such person, or any > > partnership in which he was a general partner at or within two years before > > the time of such filing, or any corporation or business association of which > > he was an executive officer at or within two years before the time of such > > filing; > > > > (b) A conviction in the United States in a criminal proceeding or a named > > subject of a pending criminal proceeding (excluding traffic violations and > > other minor offenses); > > > > (c) Any order, judgment or decree, not subsequently reversed, suspended or > > vacated, of any court of competent jurisdiction, permanently or temporarily > > enjoining him from, or otherwise limiting, the following activities: > > > > > (i) Acting as a futures commission merchant, introducing broker, > > > commodities trading advisor, commodity pool operator, floor broker, > > > leverage transaction merchant, any other person regulated by the United > > > States Commodity Futures Trading Commission or an associated person of any > > > of the foregoing, or as an investment advisor, underwriter, broker or > > > dealer in securities, or as an affiliated person, director or employee of > > > any investment company, bank, savings and loan association or insurance > > > company, or engaging in or continuing any conduct or practice in > > > connection with such activity; > > > > > > (ii) Engaging in any type of business practice; or > > > > > > (iii) Engaging in any activity in connection with the purchase and sale of > > > any security or commodity or in connection with any violation of U.S. > > > Federal, State or other securities law or commodities law. > > > > (d) Any order, judgment, decree, not subsequently reversed, suspended or > > vacated, of any U.S. Federal, State or local authority barring, suspending, > > or otherwise limiting for more than 60 days the right of such person to > > engage in any activity described in the preceding sub- paragraph, or to be > > associated with persons engaged in any such activity; > > > > (e) a finding by any court of competent jurisdiction in a civil action or by > > the United States Securities and Exchange Commission to have violated any > > securities law, and the judgment in such civil action or finding by such > > Commission has not been subsequently reversed, suspended or vacated; or > > > > (f) a finding by any court of competent jurisdiction in a civil action or by > > the United States Commodity Futures Trading Commission to have violated any > > commodities law, and the judgment in such civil action or finding by such > > Commission has not been subsequently reversed, suspended or vacated. > > 2.16 Employee Benefits. B.A. Network does not have any pension plan, profit > sharing or similar employee benefit plan. ARTICLE 3 Representations and Warranties of ACEI ACEI represents and warrants to B.A. Network that: > 3.1 Organization. ACEI is a corporation duly organized, validly existing and > in good standing under the laws of Delaware, and has all necessary corporate > powers to own properties and to carry on business. > > 3.2 Capital. The authorized capital stock of ACEI consists of 40,000,000 > shares of Common Stock, par value $.0001 per share and 6,000,000 shares of > Preferred Stock, par value $.0001 per share, which may be issued in one or > more series at the discretion of the board of directors. As of the date of > this Agreement, there were approximately 6,000,000 shares of Common Stock > outstanding, all of which were fully paid and non-assessable, and there was no > Preferred Stock outstanding. Except for the Options and common stock purchase > warrants as listed in Exhibit 3.2 and convertible debentures that ACEI has > sold and that the underlying common stock are registered on Form S-3's filed > with the U.S. Securities and Exchange Commission in February 2000, there are > no outstanding subscriptions, options, rights, warrants, convertible > securities, or other agreements or commitments obligating ACEI to issue or to > transfer from treasury any additional shares of its capital stock of any > class. > > 3.3 Subsidiaries. ACEI's subsidiaries are identified on Exhibit 3.3, annexed > hereto and made a part hereof. > > 3.4 Directors and Officers. Exhibit 3.4, annexed hereto and hereby > incorporated herein by reference, contains the names and titles of all > directors and officers of ACEI as of the date of this Agreement. > > 3.5 Financial Statements. Exhibit 3.5, annexed hereto and incorporated herein > by reference, consists of the ACEI audited financial statements as of December > 31, 1998, and unaudited financial statements for the three month periods ended > March 31, 1999 and June 30, 1999. > > 3.6 Changes Since December 31, 1998. Since December 31, 1998, there has been > not been any adverse change in the financial condition and operations of ACEI. > > 3.7 Absence of Undisclosed Liabilities. As of December 31, 1998, ACEI does not > have any material debt, liability, or obligation of any nature, whether > accrued, absolute, contingent, or otherwise, and whether due or to become due, > that is not reflected in ACEI balance sheet as of December 31, 1998 or as > presented in the Notes to the Financial Statements. There have been no new > liabilities incurred since December 31, 1998, except for those described in > the reports for the three month periods ended March 31, 1999 and June 30, 1999 > and those incurred in the ordinary course of business and in connection with > this transaction. > > 3.8 Tax Returns. Within the times and in the manner prescribed by law, ACEI > has filed all federal, state and local tax returns required by law and has > paid all taxes, assessments and penalties due and payable. The provisions for > taxes, if any, reflected in the balance sheet included in Exhibit 3.5 is > adequate for any and all federal, state, county and local taxes for the period > ending on the date of such balance sheet and for all prior periods, whether or > not disputed. There are no present disputes as to taxes of any nature payable > by ACEI. > > 3.9 Investigation of Financial Condition. Without in any manner reducing or > otherwise mitigating the representations contained herein, B.A. Network shall > have the opportunity to meet with ACEI's accountants and attorneys to discuss > the financial condition of ACEI. ACEI shall make available to B.A. Network all > books and records of ACEI. > > 3.10 Trade Names and Rights. Except for the subsidiaries of ACEI as described > in Exhibit 3.3 which own trademark and copyrights of intellectual properties, > ACEI does not use any trademark, service mark, trade name, or copyright in its > business, or own any trademarks, trademark registrations or applications. To > the best knowledge of ACEI, no person owns any trademark, trademark > registration or application, service mark, trade name, copyright, or copyright > registration or application the use of which is necessary or contemplated in > connection with the operation of ACEI's business as a holding company. > > 3.11 Compliance with Laws. ACEI has complied with and is not in violation of > applicable federal, state or local statutes, laws or regulations (including, > without limitation, any applicable building, zoning, securities or other law, > ordinance, or regulation) affecting its properties or the operation of its > business. > > 3.12 Litigation. ACEI is not a party to any suit, action, arbitration, or > legal, administrative, or other proceeding, or governmental investigation > pending or, to the best knowledge of ACEI, threatened against or affecting > ACEI or its business, assets or financial condition. ACEI is not engaged in > any legal action to recovery moneys due to it. > > 3.13 Authority. The Board of Directors and Shareholders of ACEI have > authorized the execution of this Agreement and the transactions contemplated > herein, and ACEI has full power and authority to execute, deliver and perform > this Agreement and this Agreement is the legal, valid and binding obligation > of ACEI, is enforceable in accordance with its terms and conditions, except as > may be limited by bankruptcy and insolvency laws and by other laws affecting > the rights of creditors generally. > > 3.14 Ability to Carry Out Obligations. The execution and delivery of this > Agreement by ACEI and the performance by ACEI of its obligations hereunder > will not cause, constitute, or conflict with or result in (a) any breach or > violation of any of the provisions of or constitute a default under any > license, indenture, mortgage, charter, instrument, articles of incorporation, > by-laws, or other agreement or instrument to which ACEI is a party, or by > which it may be bound, nor will any consents or authorizations of any party > other than those hereto be required; (b) an event that would permit any party > to any agreement or instrument to terminate it or to accelerate the maturity > of any indebtedness or other obligation of ACEI; or (c) an event that would > result in the creation or imposition of any lien, charge, or encumbrance on > any asset of ACEI. > > 3.15 Validity of ACEI Shares. The shares of ACEI Common Stock to be delivered > pursuant to this Agreement, when issued in accordance with the provisions of > this Agreement, will be duly authorized, validly issued, fully paid and > non-assessable. > > 3.16 Full Disclosure. None of the representations and warranties made by ACEI > herein, or in any exhibit, certificate or memorandum furnished or to be > furnished by ACEI, or on its behalf, contains or will contain any untrue > statement of material fact, or omit any material fact, the omission of which > would be misleading. > > 3.17 Assets. ACEI has good and marketable title to all of its property free > and clear of any and all liens, claims and encumbrances, except as disclosed > in its financial statements. > > 3.18 Material Contracts. Except as otherwise disclosed in this agreement and > in its Report on From 10-KSB for the year ended December 31, 1998 and the > three month periods ended March 31, 1999 and June 30, 1999, ACEI has no > material contracts to which it is a party or by which it is bound. > > 3.19 Complience With SEC Reporting Requirements. The Common Stock of ACEI is > registered under Section 12 of the Securities Exchange Act of 1934, as amended > (the "Exchange Act"). ACEI has duly filed all materials and documents required > to be filed pursuant to all reporting obligations under either Section 13(a) > or 15(d) of the Exchange Act prior to the consummation of the transaction > contemplated hereby. The Common Stock of ACEI is currently traded on the > Nasdaq SmallCap Market. ARTICLE 4 Representations and Warranties of Shareholders > 4.1 Share Ownership. The Shareholders represent that they hold shares of B.A. > Network's common stock as set forth in Exhibit 2.2 hereof, and that such > shares are owned of record and beneficially by such shareholders, and such > shares are not subject to any lien, encumbrance or pledge, and are restricted > securities as defined in Rule 144 of the Securities Act of 1933. The > Shareholders severally represent that they hold authority to exchange their > shares pursuant to this Agreement. > > 4.2 Investment Intent. The Shareholders understand and acknowledge that the > shares of Exchange Stock are being offered for exchange in reliance upon the > exemption provided in Section 4(2) of the Securities Act of 1933 for > non-public offerings; and The Shareholders make the following representations > and warranties with the intent that same may be relied upon in determining the > suitability of each such shareholder as a purchaser of securities. In the > event the following representations and warranties may cause discrepancies > from the meanings of above sections I, II, & III (particularly the > descriptions of "not restricted" and "freely tradable"), then the meanings of > above sections I, II, & III shall prevail. > > > (a) The Shareholders acknowledge that the Exchange Stock being acquired > > solely for the account of such Shareholders, for investment purposes only, > > and not with a view towards or for sale in connection with any distribution > > thereof, and with no present intention of distributing or re-selling any > > part of the Exchange Stock; > > > > (b) The Shareholders agree not to dispose of his Exchange Stock, or any > > portion thereof unless and until counsel for ACEI shall have determined that > > the intended disposition is permissible and does not violate the Securities > > Act of 1933 or any applicable state securities laws, or the rules and > > regulations thereunder; > > > > (c) The Shareholders acknowledge that ACEI has made all documentation > > pertaining to all aspects of the herein transaction available to them and to > > their qualified representatives, if any, and has offered such person or > > persons an opportunity to discuss such transaction with the officers of > > ACEI; > > > > (d) The Shareholders represent that they have relied solely upon ACEI's > > Report on Form 10-KSB for the period ended December 31, 1998 and all other > > filings made by ACEI with the Securities and Exchange Commission and > > independent investigations made by the Shareholders or their > > representatives, if any; > > > > (e) The Shareholders represent that they are knowledgeable and experienced > > in making and evaluating investments of this nature and desire to acquire > > the Exchange Stock on the terms and conditions herein set forth; > > > > (f) The Shareholders represent that they are able to bear the economic risk > > of an investment, as a result of the herein transaction, in the Exchange > > Stock; > > > > (g) The Shareholders represent that they understand that an investment in > > the Exchange Stock is not liquid, and The Shareholders represent that they > > have adequate means of providing for their current needs and personal > > contingencies and have no need of liquidity in this investment; and > > > > (h) The Shareholders represent that they are an "accredited investor" as > > that term is defined in Rule 501 of Regulation D, promulgated under the > > Securities Act of 1933. > > 4.3 (deleted) > > 4.4 Legend. The Shareholders agree that the certificates evidencing the > Exchange Stock acquired pursuant to this Agreement will have a legend placed > thereon stating that the securities have not been registered under the Act or > any state securities laws and setting forth or referring to the restrictions > on transferability and sale of such securities. ARTICLE 5 Covenants > 5.1 Investigative Rights. From the date of this Agreement until the Closing > Date, ACEI and B.A. Network shall provide to each other, and such other > party's counsels, accountants, auditors and other authorized representatives, > full access during normal business hours and upon reasonable advance written > notice of each party's properties, books, contracts, commitments and records > for the purpose of examining the same. Each party shall furnish the other > party with all information concerning each party's affairs as the other party > may reasonably request. > > 5.2 Conduct of Business. Prior to the Closing, ACEI and B.A. Network shall > each conduct its business in the normal course, and shall not sell, pledge, or > assign any assets, without the prior written approval of the other party > except in the regular course of business or as part of the transactions > contemplated hereby. Neither ACEI nor B.A. Network shall amend its Articles of > Incorporation or By-laws, declare dividends, redeem or sell stock or other > securities, incur additional or newly funded liabilities, acquire or dispose > of fixed assets, change employment terms, enter into any material or long term > contract, guarantee obligations of any third party, settle or discharge any > balance sheet receivable for less than its stated amount, pay more on any > liability than its stated amount, or enter into any other transaction other > than in the regular course of business. ARTICLE 6 Conditions Precedent to ACEI's Performance > 6.1 Conditions. ACEI's obligations hereunder shall be subject to the > satisfaction, at or before the Closing, of all the conditions set forth in > this Article 6. ACEI may waive any or all of these conditions in whole or in > part without prior notice; provided, however, that no such wavier of a > condition shall constitute a waiver by ACEI of any other condition or of any > of ACEI's other rights or remedies, at law or in equity, if B.A. Network or > the Shareholders shall be in default of any of their representations, > warranties or covenants under this Agreement. > > 6.2 Accuracy of Representations. Except as otherwise permitted by this > Agreement, all representations and warranties by Shareholders and B.A. Network > in this Agreement or in any written statement that shall be delivered to ACEI > by B.A. Network under this Agreement shall be true and accurate on and as of > the Closing Date as though made at that time. > > 6.3 Performance. B.A. Network shall have performed, satisfied, and complied > with all covenants, agreements and conditions required by this Agreement to be > performed or complied with by it, on or before the Closing Date. > > 6.4 Absence of Litigation. No action, suit or proceeding before any court or > any governmental body or authority, pertaining to the transaction contemplated > by this Agreement or to its consummation, shall have been instituted or > threatened against B.A. Network or the Shareholders on or before the Closing > Date. > > 6.5 Acceptance by B.A. Network Shareholders. The holders of an aggregate of > not less than 100% of the issued and outstanding shares of common stock of > B.A. Network shall have agreed to exchange a percentage of their shares as > stipulated in this Agreement, for shares of the Exchange Stock. > > 6.6 Officer's Certificate. B.A. Network shall have delivered to ACEI a > certificate, dated the Closing Date, and signed by the President of B.A. > Network, certifying that each of the conditions specified in Sections 6.2 > through 6.5 hereof have been fulfilled. > > 6.7 Opinion of Counsel to B.A. Network. B.A. Network shall have delivered to > ACEI an opinion of its Chinese and United States counsel, as applicable, dated > the Closing date, to the effect that: > > > (a) B.A. Network is a corporation duly organized, validly existing and in > > good standing under the laws of the People's Republic of China and the City > > of Beijing; > > > > (b) The authorized capital stock of B.A. Network is as set forth on the > > annexed Exhibit 2.2, a copy of which is annexed hereto and made a part > > hereof. All issued and outstanding shares are legally issued. > > > > (c) This Agreement has been duly and validly authorized, executed and > > delivered and constitutes the legal and binding obligation of B.A. Network, > > except as limited by bankruptcy and insolvency laws and by other laws > > affecting the rights of creditors generally; and ARTICLE 7 Conditions Precedent to B.A. Network's and Shareholders' Performance > 7.1 Conditions. B.A. Network's and Shareholders' obligations hereunder shall > be subject to the satisfaction, at or before the Closing, of all the > conditions set forth in this Article 7. B.A. Network and Shareholders may > waive any or all of these conditions in whole or in part without prior notice; > provided, however, that no such waiver of a condition shall constitute a > waiver by B.A. Network and Shareholders of any other condition or of any of > B.A. Network's and Shareholders' rights or remedies, at law or in equity, if > ACEI shall be in default of any of its representations, warranties or > covenants under this Agreement. > > 7.2 Accuracy of Representations. Except as otherwise permitted by this > Agreement, all representations and warranties by ACEI in this Agreement or in > any written statement that shall be delivered to B.A. Network and Shareholders > by ACEI under this Agreement shall be true and accurate on and as of the > Closing Date as though made at that time. > > 7.3 Performance. ACEI shall have performed, satisfied, and complied with all > covenants, agreements and conditions required by this Agreement to be > performed or complied with by it, on or before the Closing Date. > > 7.4 Absence of Litigation. No action, suit or proceeding before any court or > any governmental body or authority, pertaining to the transaction contemplated > by this Agreement or to its consummation, shall have been instituted or > threatened against ACEI on or before the Closing Date, except as disclosed > herein. > > 7.5 Current Status. ACEI shall have prepared and filed with the Securities and > Exchange Commission its Annual Report on Form 10-KSB for the period ended > December 31, 1998 and its Quarterly Report on Form 10-QSB for the three month > periods ended March 31, 1999 and June 30, 1999. > > 7.6 Directors of ACEI. ACEI's Board of Directors shall remain to serve until a > new board is elected at the next annual meeting of stockholders in the year > 2000. > > 7.7 Officers of ACEI. ACEI's officers shall remain in their office as per > terms of their employment agreements. > > 7.8 Intentionally Left Blank > > 7.9 Officers' Certificate. ACEI shall have delivered to B.A. Network and > Shareholders a certificate, dated the Closing Date and signed by the President > of ACEI certifying that each of the conditions specified in Sections 7.2 > through 7.7 have been fulfilled. > > 7.10 Opinion of Counsel. ACEI shall deliver an opinion of its counsel in the > form annexed hereto as Exhibit 7.10; ARTICLE 8 Closing > 8.1 Closing. The Closing of this transaction shall be held at the offices of > Sichenzia, Ross & Friedman LLP, Esqs., 135 West 50th Street, New York, New > York 10020, or such other place as shall be mutually agreed upon, on > ______________________ , 2000 or such other date as shall be mutually agreed > upon by the parties. At the Closing: > > > (a) Shareholder shall present the certificates representing their shares of > > B.A. Network being exchanged to ACEI, and such certificates will be duly > > endorsed in blank; > > > > (b) Shareholders shall receive a certificate or certificates representing > > the number of shares of ACEI Common Stock for which the shares of B.A. > > Network common stock shall have been exchanged; > > > > (c) ACEI shall deliver an officer's certificate, as described in Section 7.9 > > hereof, dated the Closing Date, that all representations, warranties, > > covenants and conditions set forth in this Agreement on behalf of ACEI are > > true and correct as of, or have been fully performed and complied with by, > > the Closing Date; > > > > (d) ACEI shall deliver a resolution of its Board of Directors of ACEI > > approving this Agreement and each matter to be approved by the Directors of > > ACEI under this Agreement; > > > > (e) ACEI shall deliver an opinion of its counsel, as described in Section > > 7.10 hereof, dated the Closing Date; > > > > (f) B.A. Network shall deliver an officer's certificate, as described in > > Section 6.6 hereof, dated the Closing Date, that all representations, > > warranties, covenants and conditions set forth in this Agreement on behalf > > of B.A. Network are true and correct as of, or have been fully performed and > > complied with by, the Closing Date. > > > > (g) B.A. Network shall deliver an opinion of its counsel, as described in > > Section 6.7 hereof, dated the Closing Date; and > > > > (h) B.A. Network shall deliver resolutions of its Board of Directors > > approving this Agreement and each matter to be approved by the Directors of > > B.A. Network under this Agreement. ARTICLE 9 Miscellaneous > 9.1 Captions and Headings. The Article and paragraph headings throughout this > Agreement are for convenience and reference only, and shall in no way be > deemed to define, limit, or add to the meaning of any provision of this > Agreement. > > 9.2 Memos, Attachments & Exhibits. Any memos, attachments & exhibits signed by > the parties are vital segments of this agreement and are valid and binding > between the parties along with this agreement. > > 9.3 No Oral Change. This Agreement and any provision hereof may not be waived, > changed, modified or discharged orally, but it can be changed by an agreement > in writing, signed by the party against whom enforcement of any waiver, > change, modification or discharge is sought. > > 9.4 Non-Waiver. Except as otherwise expressly provided herein, no waiver of > any covenant, condition or provision of this Agreement shall be deemed to have > been made unless expressly in writing and signed by the party against whom > such waiver is charged; and (i) the failure of any party to insist in any one > or more cases upon the performance of any of the provisions, covenants or > conditions of this Agreement or to exercise any option herein contained shall > not be construed as a waiver or relinquishment for the future of any such > provisions, covenants or conditions; (ii) the acceptance of performance of > anything required by this Agreement to be performed with knowledge of the > breach of failure of a covenant, condition or provision hereof shall not be > deemed a waiver of such breach or failure; and (iii) no waiver by any party of > one breach by another party shall be construed as a waiver with respect to any > other or subsequent breach. > > 9.5 Entire Agreement. This Agreement contains the entire agreement and > understanding between the parties hereto and supersedes all prior agreements > and understandings. > > 9.6 Member to B.A. Network's Board of Directors. Upon the effectiveness of > this agreement, ACEI shall appoint one member to B.A. Network's Board of > Directors. > > 9.7 Choice of Law. This Agreement and its application shall be governed by the > laws of the United States of America and by the laws of the People's Republic > of China. Disputes between the parties shall be settled amicable between the > parties. In the event disputes cannot be settled by the parties themselves, > then the matter shall be handed over to arbitration in a third country to be > mutually agreed upon between the parties. > > 9.8 Counterparts. This Agreement may be executed simultaneously in one or more > counterparts, each of which shall be deemed an original, but all of which > together shall constitute one and the same instrument. This Agreement may be > in the English and Chinese languages. In the event of discrepancies between > the two languages, the parties shall amicably negotiate to settle the > disputes. > > 9.9 Notices. All notices, requests, demands and other communications under > this Agreement shall be in writing and shall be deemed to have been duly given > on the date of service if served personally on the party to whom notice is to > be given, or on the third day after mailing if mailed to the party to whom > notice is to be given, by first class mail, registered or certified, postage > prepaid, and properly addressed as follows: > > > To ACEI: > > > > > > > Mr. Anthony K. Chan > > > President & CEO > > > American Champion Entertainment, Inc. > > > 22320 Foothill Boulevard, Suite 260 > > > Hayward, California 94541 > > > U. S. A. > > > Phone: 1-510-728-0200 > > > Fax: 1-510-728-9977 > > > E-mail: a.chan@americanchamp.com > > > > To B.A. Network: > > > > > Mr. Lin, Tao > > > General Manager > > > Beijing Wisdom Network Technology Company, Ltd. > > > No. 105 San Huan Bei Road, West Section > > > Ke Yuan Building, A-809 > > > Heiding District > > > Beijing > > > People's Republic of China > > > Phone: 86-10-8841-5090 > > > Fax: 86-10-8841-4987 > > > E-mail: lintao@banet.com.cn > > 9.10 (deleted) > > 9.11 Binding Effect. This Agreement shall inure to and be binding upon the > heirs, executors, personal representatives, successors and assigns of each of > the parties to this Agreement. > > 9.12 Mutual Cooperation. The parties hereto shall cooperate with each other to > achieve the purpose of this Agreement and shall execute such other and further > documents and take such other and further actions as may be necessary or > convenient to effect the transaction described herein. > > 9.13 Announcements. ACEI and B.A. Network will consult and cooperate with each > other as to the timing and content of any announcements of the transactions > contemplated hereby to the general public or to employees, customers or > suppliers. > > 9.14 Expenses. Each party will pay its own legal, accounting and any other > out-of-pocket expenses reasonably incurred in connection with this > transaction, whether or not the transaction contemplated hereby is > consummated. In no event shall one party be liable for any of the expenses of > the other party. ACEI shall be responsible for the expenses of the audit, by > one of the big five U.S. accounting firms, of B.A. Networks financial > statements for the years ended December 31, 1999 and 2000 only. > > 9.15 Survival of Representations and Warranties. The representations, > warranties, covenants and agreements of the parties set forth in this > Agreement or in any instrument, certificate, opinion or other writing provided > for in it, shall survive the Closing irrespective of any investigation made by > or on behalf of any party. > > 9.16 Exhibits. As of the execution hereof, the parties hereto have provided > each other with the Exhibits provided for hereinabove, including any items > referenced therein or required to be attached thereto. Any material changes to > the Exhibits shall be immediately disclosed to the other party. WHEREFORE, the above agreement is hereby agreed to and accepted as of the date first above written. AMERICAN CHAMPION ENTERTAINMENT, INC. > By: /s/ Anthony K. Chan > Anthony K. Chan > President & CEO BEIJING WISDOM NETWORK TECHNOLOGY COMPANY, LTD. > By: /s/ Lin, Tao > Lin, Tao > General Manager --------------------------------------------------------------------------------

Exhibit 10.1 SECURITY AGREEMENT                     SECURITY AGREEMENT (the "Agreement"), dated as of October 16, 2000 by and between SYSTEMAX INC., a Delaware corporation (the "Systemax"), and each of the direct and indirect subsidiaries of Systemax party hereto (together with Systemax, the "Grantors") and THE CHASE MANHATTAN BANK, as agent (in such capacity, the "Agent") for The Bank of New York ("BNY") and The Chase Manhattan Bank ("Chase"; and collectively with BNY, the "Banks").                      WHEREAS, (i) BNY has heretofore made loans and advances to Systemax and certain of the other Grantors pursuant to that certain Amended and Restated Master Promissory Note, dated April 19, 2000 (the "BNY Note"), (ii) BNY may, in the exercise of its sole discretion, continue to make loans and advances available to Systemax and certain of the other Grantors after the date hereof, and (iii) each of the Grantors shall derive benefits of the loans and advances made to Systemax by BNY; and                      WHEREAS, (i) Chase has heretofore made loans and advances to, and issued letters of credit for the account of Systemax pursuant to that certain Master Grid Note dated, June 30, 2000 as the same may be modified, extended or replaced from time to time (the "Chase Note"), (ii) Chase may, in the exercise of its sole discretion, continue to make loans and advances available to, and issue letters of credit for the account of, Systemax after the date hereof, and (iii) each of the Grantors shall derive benefits of the loans and advances made to Systemax by Chase; and                      WHEREAS, Systemax and certain of the Grantors may from time to time incur obligations to BNY and Chase in the form of overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with automated clearing house transfers of funds (the "ACH Obligations"); and                      WHEREAS, (i) to secure the performance of Systemax and certain of the other Grantors under the BNY Note and the Chase Note (collectively, the "Notes") and to secure the repayment by Systemax and certain of the other Grantors of loans and advances (the "Loans") made or to be made under the Notes or issuance of letters of credit (the "Letters of Credit") for the account of Systemax, (ii) as a condition precedent to the making of any additional Loans by the Banks and the issuance of any additional Letters of Credit and (iii) to secure the payment of the ACH Obligations, the Grantors shall have granted a security interest, pledge and lien on all of the Grantors' accounts receivable as more fully set forth herein; and                      NOW, THEREFORE, in consideration of the premises, the Grantors hereby agree with the Agent as follows:                      Section 1. Grant of Security.Each of the Grantors hereby transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over to the Agent for its benefit and the ratable benefit of the Banks and hereby grants to the Agent for its benefit and the ratable benefit of the Banks, a perfected pledge and security interest in all of the Grantors' right, title and interest in and to the following (the "Collateral"):                      (a)     all present and future accounts, accounts receivable and other rights of each of the Grantors to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance (collectively, the "Accounts"); and                      (b)     all proceeds and products of any of the foregoing, in any form including cash.                      Section 2. Security for Obligations. This Agreement and the Collateral secure the payment and performance of all obligations of each of the Grantors, now or hereafter existing, under the Notes, whether for principal, interest, fees, expenses or otherwise, the payment and performance of all ACH Obligations of each of the Grantors and all obligations of each of the Grantors now or hereafter existing under or in respect of this Agreement (all such obligations of the Grantor being herein called the "Obligations").                      Section 3. Representations and Warranties. Each Grantor, jointly and severally, represents and warrants (but only with regard to itself) as follows:                      (a)     The chief places of business and chief executive offices of each of the Grantors and the offices where each Grantor keeps its records concerning any Accounts and all originals of all chattel paper which evidence any Account are located at the places specified in Schedule 1 hereto.                      (b)     Other than as set forth on Schedule 2 hereto, (i) each of the Grantors owns the Collateral free and clear of any lien, security interest, charge or encumbrance except for the security interest created by this Agreement and (ii) no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Agent relating to this Agreement.                      Section 4. Further Assurances.                      (a)     Each of the Grantors agrees that from time to time, at the expense of the Grantors, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each of the Grantors will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby.                      (b)     Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by law.                      (c)     Each Grantor will furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request in connection with any prospective sale of Collateral pursuant to Section 10 hereof, all in reasonable detail.                      Section 5. As to Accounts.                      (a)     Each Grantor shall keep its chief place of business and chief executive office and the offices where it keeps its records concerning the Accounts, and the offices where it keeps all originals of all chattel paper which evidence Accounts, at the location or locations therefor specified in Section 3(a) or, upon 15 days' prior written notice to the Agent, at such other locations in a jurisdiction where all actions required by Section 4 shall have been taken with respect to the Accounts. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of the Agent, at any time during normal business hours and upon reasonable prior written notice, to inspect and make abstracts from such records and chattel paper.                      (b)     Except as otherwise provided in this subsection (b), each Grantor shall continue to collect in accordance with its customary practice, at its own expense, all amounts due or to become due to such Grantor under the Accounts and, prior to the occurrence and continuance of an Event of Default (as defined below), such Grantor shall have the right to adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon, all in accordance with its customary practices. In connection with such collections, the Grantors may, upon the occurrence and during the continuation of an Event of Default, take (and at the direction of the Agent shall take) such action as the Grantors or the Agent may reasonably deem necessary or advisable to enforce collection of the Accounts; provided, that upon written notice by the Agent to Systemax following the occurrence and during the continuation of an Event of Default, of its intention to do so, the Agent shall have the right to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to the Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Accounts, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After the notice provided for in the proviso to the preceding sentence, and unless and until such notice is rescinded by the Agent by written notice to Systemax (i) all amounts and proceeds (including instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Agent (for the ratable benefit of the Banks) hereunder, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (A) released to the Grantors if such Event of Default shall have been cured or waived or (B) if such Event of Default shall be continuing, applied as provided by Section 10, and (ii) the Grantors shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. As used herein, the term "Event of Default" shall mean (i) an Event of Default (as defined in the Chase Note), (ii) a default shall have occurred in the due observance or performance of any of the terms or provisions contained in the BNY Note, or (iii) a default shall have occurred in the due observance or performance of any of the provisions of this Agreement. Any action taken by the Agent pursuant to this clause (b) shall be subject to three (3) calendar days' notice to Systemax with an opportunity by Systemax during such three (3) calendar day period to cure the default which is the basis upon any action to be taken by the Agent pursuant to this clause (b) (it being understood that if Systemax cures such default within such period, the Agent shall refrain from taking any action pursuant to this clause (b)).                      Section 6. Transfers to Others; Liens. Each Grantor shall not:                      (a)     Sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except for dispositions (i) permitted by the Notes, (ii) in the ordinary course of business or (iii) other than in the ordinary course of business, provided the net cash proceeds thereof are promptly paid over to the Agent for application to the Obligations as provided for in Section 10(b).                      (b)     Create or suffer to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral to secure any obligation of any person or entity, except for the security interest created by this Agreement or except as disclosed on Schedule 2 hereto.                      Section 7. Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Agent such Grantor's attorney-in-fact (which appointment shall be irrevocable and deemed coupled with an interest), with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Agent's discretion, upon and during the occurrence and continuation of an Event of Default, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:    (i) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,    (ii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) above, and    (iii) to file any claims or take any action or institute any proceedings which the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral.                      Section 8. Agent May Perform. Subject to the last sentence of Section 5(b), if any Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Agent incurred in connection therewith (as to which invoices have been furnished) shall be payable by the Grantors under Section 11(b).                      Section 9. The Agent's Duties. The powers conferred on the Agent hereunder are solely to protect its interest and the interests of the Banks in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters.                      Section 10. Remedies. If any Event of Default shall have occurred and be continuing:                      (a)     The Agent may, upon instruction from the Banks, exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place to be designated by the Agent which is reasonably convenient to both parties and (ii) without notice except as specified in the following sentence, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of such sale shall be required by law, at least ten days' notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.                      (b)     All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be held by the Agent as collateral for, and promptly applied (after payment of any amounts payable to the Agent pursuant to Section 11 hereof) in whole or in part against, all or any part of the Obligations in such order as the Agent, upon instruction from the Banks, shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Obligations shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive such surplus.                      Section 11. Indemnity and Expenses.                      (a)     Each Grantor, jointly and severally, agrees to indemnify the Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities directly arising from the Agent's own gross negligence, willful misconduct or bad faith.                      (b)     The Grantors will upon demand pay to the Agent the amount of any and all reasonable expenses (as to which invoices have been furnished), including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder or (iv) the failure by any of the Grantors to perform or observe any of the provisions hereof.                      (c)     Each of the Grantors agrees that the Agent does not assume, and shall have no responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any of the Grantors, and except as the same may have resulted from the gross negligence, willful misconduct or bad faith of the Agent, each of the Grantors hereby jointly and severally agree to indemnify and hold the Agent harmless with respect to any and all claims by any person relating thereto.                      Section 12. Security Interest Absolute. All rights of the Agent and security interests hereunder, and all obligations of each of the Grantors hereunder, shall be absolute and unconditional, irrespective of any circumstance which might constitute a defense available to, or a discharge of, any guarantor or other obligor in respect of the Obligations.                      Section 13. Amendments; Etc. No amendment or waiver of any provision of this Agreement, nor any consent to any departure by any of the Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.                      Section 14. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telephonic, telex, facsimile or cable communications) and shall be mailed, telegraphed, telefaxed, transmitted, cabled or delivered:    If to any Grantor, to it at: c/o Systemax Inc. 22 Harbor Park Drive Port Washington, NY 11050 Attn: Mr. Steven M. Goldschein with a copy to: Stroock and Stroock and Lavan 180 Maiden Lane New York, NY 10038 Attn: Theodore S. Lynn, Esq. If to the Agent, to it at: The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attn: Mr. Gev Nentin with a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 Attn: Richard S. Toder, Esq.                      Section 15. Continuing Security Interest. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon each of the Grantors, their successors and assigns and (iii) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and each of the Banks and their respective successors, transferees and assigns. Upon the payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors subject to any existing liens, security interests or encumbrances on such Collateral. Upon any such termination, the Agent will, at the Grantor's expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination.                      Section 16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York and by Federal law to the extent the same has pre-empted the law of the State of New York or such other jurisdiction.                      Section 17. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. [SIGNATURE PAGES FOLLOW]                      IN WITNESS WHEREOF, each of the Grantors and the Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.    GRANTORS: SYSTEMAX INC. By:  /s/ Stephen M. Goldschein                                         Name:  Stephen M. Goldshein           Title:   Sr. V.P. CONTINENTAL DYNAMICS CORP. GLOBAL COMPUTER SUPPLIES INC. MIDWEST MICRO CORP. DARTEK CORP. NEXEL INDUSTRIES INC. TIGER DIRECT INC. By:  /s/ Stephen M. Goldschein                                         Name:  Stephen M. Goldshein           Title:   V.P. THE CHASE MANHATTAN BANK as Agent By:  /s/ Robert Addea                                         Name:  Robert Addea           Title:   Vice President SCHEDULE 1 Locations of Chief Executive Office, Chief Place of Business and Locations Where Records Concerning Accounts are Kept Systemax Inc. 22 Harbor Park Drive Port Washington, NY 11050 Continental Dynamics Corp. 22 Harbor Park Drive Port Washington, NY 11050 Global Computer Supplies Inc. 11 Harbor Park Drive Port Washington, NY 11050 Midwest Micro Corp. 6990 U.S. Route 36 East Fletcher, OH 45326 Dartek Corp. 175 Ambassador Drive Naperville, IL 60540 Nexel Industries Inc. 22 Harbor Park Drive Port Washington, NY 11050 Tiger Direct Inc. 7795 West Flagler Suite 35 Miami, FL 33144 SCHEDULE 2 Permitted Liens All of the following liens relate to certain inventory and the proceeds thereof (including accounts) of Tiger Direct, Inc., a Florida corporation and subsidiary of Systemax, Inc. The UCC Statements were filed with the Florida Secretary of State. Secured Party UCC Statement File Date File Number 1) Ingram Micro Inc. 1759 Wehele Dr. Williamsville, NY 14221 4/5/94 (Original) 94000006742 2) Ingram Micro 11/9/98 (Amendment) 980000250405 3) Ingram Micro 11/9/98 (Continuation) 980000250405 4) Hewlett Packard Company 5301 Stevens Creed Blvd. Santa Clara, CA 95052 10/10/95 (Original) 960000015183 5) Grana and Associates, Inc. d/b/a Direct Source Distributing 4548 McEwen Rd. Farmers Branch, Texas 75244 12/19/95 (Original) 950000253488

Second Amendment to Connecticut Natural Gas Corporation Employee Savings Plan Trust Agreement The Connecticut Natural Gas Corporation Employee Savings Plan Trust Agreement dated as of January 1, 1993 by and between Connecticut Natural Gas Corporation and Putnam Fiduciary Trust Company, as heretofore amended (the "Trust"), is hereby amended as follows effective as of April 25, 2000: 1. By adding the following new sentence after the first sentence of Section 3 of the Trust: "Each such eligible employee, former eligible employee or his beneficiary with an account balance under the Plan is sometimes herein referred to as a "Plan member"." 2. By deleting the phrase "securities issued by the Company" where it appears in the last sentence of Section 5 of the Trust and inserting in lieu thereof the phrase "securities issued by the Company or an affiliate". 3. By deleting the phrase "shares of stock of the Company" where it appears in the last sentence of the first paragraph of Section 6 of the Trust and inserting in lieu thereof the phrase "shares of stock of the Company or an affiliate". 4. By deleting the portion of the second sentence of Section 7 of the Trust up to and including the colon therein and inserting in lieu thereof the following: "Prior to the consummation of the merger (the "Merger") of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., such securities shall be common stock of CTG Resources, Inc., and on and after the date of the consummation of the Merger, such securities shall be common stock of Energy East Corporation or its successor or successors. Trust investments in such securities (referred to herein as "Company Stock") shall be subject to the following terms and conditions:" 5. By deleting the third sentence of Section 7(b) of the Trust and inserting in lieu thereof the following: "The Company hereby appoints as named fiduciaries solely with respect to the matters relating to Company Stock held in the Trust each Plan member who furnishes instructions to the Trustee on any such matter in accordance with Section 7(e), (f) or (g) hereof." 6. By deleting the first two sentences of the second paragraph of Section 7(c) of the Trust and inserting in lieu thereof the following: "The Trustee may purchase or sell Company Stock from or to the Company or an affiliate if the purchase or sale is for no more than adequate consideration (within the meaning of Section 3(18) of ERISA) and no commission is charged. To the extent that Company contributions under the Plan are to be invested in Company Stock, the Company or an affiliate may transfer Company Stock to the Trust in lieu of cash." 7. By deleting the fourth sentence of Section 7(e) of the Trust and inserting in lieu thereof the following: "The form shall show the number of full and fractional shares of Company Stock credited to the Plan member's accounts, whether or not vested, as of the record date established for such meeting." 8. By deleting the phrase "Compensation and Fringe Benefits Committee of the Board of Directors of the Company, which the Company hereby appoints as a named fiduciary solely with respect to the voting of such shares of Company Stock" where it appears in the last paragraph of Section 7(e) of the Trust and inserting in lieu thereof the phrase "Plan's Administrative Committee". 9. By adding a new paragraph at the end of Section 7(e) of the Trust and inserting in lieu thereof the following: "A Plan member's right to instruct the Trustee with respect to voting shares of Company Stock will not include rights concerning the exercise of any appraisal rights, dissenters' rights or similar rights granted by applicable law to the registered or beneficial holders of Company Stock. These matters will be exercised by the Trustee in accordance with the directions of the Plan's Administrative Committee." 10. By deleting Section 7(f) of the Trust and inserting in lieu thereof the following: "(f) Tender Offers/Conversion Election. Upon commencement of a tender offer for any Company Stock or in connection with the exercise of conversion rights in respect of the Merger, the Company shall notify each Plan member or cause each Plan member to be notified, and use its best efforts to timely distribute or cause to be distributed to Plan members the same information that is distributed to shareholders of the issuer of the Company Stock in connection with the tender offer or exercise of conversion rights, and after consulting with the Trustee shall provide at the Company's expense a means by which Plan members may direct the Trustee whether or not to tender or, in connection with the Merger, the form of merger consideration to be elected in respect of the Company Stock credited to their accounts (whether or not vested). The Company shall provide to the Trustee a copy of any material provided to Plan members and shall certify to the Trustee that the materials have been mailed or otherwise sent to Plan members. Each Plan member shall have the right to direct the Trustee to tender or not to tender or, in connection with the Merger, to elect a form of conversion consideration in respect of some or all of the shares of Company Stock credited to his accounts. Directions from a Plan member to the Trustee shall be communicated in writing or by facsimile or such similar means as is agreed upon by the Trustee and the Company. The Trustee shall tender or not tender shares or elect Merger conversion consideration in respect of Company Stock as directed by the Plan member. The Trustee shall not tender shares or elect Merger consideration in respect of Company Stock credited to a Plan member's accounts for which it has received no directions from the Plan members. The Trustee shall tender or not tender and shall elect Merger consideration in respect of the number of shares of Company Stock not credited to Plan members' accounts as directed by the Plan's Administrative Committee. A Plan member who has directed the Trustee to tender some or all of the shares of Company Stock credited to his accounts may, at any time before the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares, and the Trustee shall withdraw the directed number of shares from the tender offer before the tender offer withdrawal deadline. A Plan member shall not be limited as to the number of directions to tender or withdraw that he may give to the Trustee. A direction by a Plan member to the Trustee to tender or convert shares of Company Stock credited to his accounts shall not be considered a written election under the Plan by the Plan member to withdraw or to have distributed to him any or all of such shares. The Trustee shall credit to each account of the Plan member from which the tendered or converted shares were taken the proceeds received by the Trustee in exchange for the shares of Company Stock tendered or converted from that account. Pending receipt of directions through the Administrator from the Plan member as to the investment of the proceeds of the tendered shares, the Trustee shall invest the proceeds as the Administrator shall direct. In the case of the conversion of Company Stock in connection with the Merger, cash proceeds received upon the conversion and any dividends paid on Company Stock during the Merger conversion consideration election transition period implemented under the Plan will be invested, notwithstanding any other provision of this Agreement to the contrary, as soon as practicable after receipt in the Putnam Stable Value Fund until a Plan member directs otherwise under the Plan." 11. By deleting Section 7(g) of the Trust and inserting in lieu thereof the following: "(g) General. With respect to all rights other than those covered in Section 7(e) or (f), the Trustee shall follow the directions of the Plan member as to Company Stock credited to his accounts, and if no such directions are received, the directions of the Plan's Administrative Committee. The Trustee shall have no duty to solicit directions from Plan members. With respect to all rights other than those covered in Section 7(e) or (f), in the case of Company Stock not credited to Plan members' accounts, the Trustee shall follow the directions of the Plan's Administrative Committee. All provisions of this Section 7 shall apply to any securities as a result of a conversion of Company Stock." IN WITNESS WHEREOF, the parties hereby execute this Second Amendment as of the 25th day of April, 2000.   CONNECTICUT NATURAL GAS CORPORATION By: S/ Jean S. McCarthy                                                PUTNAM FIDUCIARY TRUST COMPANY                       By: Tina Campbell                                                         

EXHIBIT 10.1 SERIES 1 INCREMENTAL REVOLVING CREDIT AGREEMENT           SERIES 1 INCREMENTAL REVOLVING CREDIT AGREEMENT dated as of November 29, 2000 (this "Agreement") between CHART INDUSTRIES, INC. (the "Borrower"); each of the SUBSIDIARY BORROWERS party hereto; each of the SUBSIDIARY GUARANTORS party hereto; the SERIES 1 LENDERS party hereto; and THE CHASE MANHATTAN BANK, as Administrative Agent.           The Borrower, the Subsidiary Borrowers, the Subsidiary Guarantors, each of the lenders that is a signatory thereto and the Administrative Agent are parties to a Credit Agreement dated as of April 12, 1999 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for loans to be made by said lenders to the Borrower in an aggregate original principal amount not exceeding $300,000,000.           Section 2.01(d) of the Credit Agreement contemplates that at any time and from time to time prior to December 30, 2001, the Borrower may request that the Lenders (as defined therein) offer to enter into commitments to make Incremental Revolving Credit Loans under and as defined in said Section 2.01(d), which Incremental Revolving Credit Loans may be made in one or more separate " series" of revolving loans but which in the aggregate may not exceed $10,000,000. The Borrower has now requested that $7,500,000 of Incremental Revolving Credit Loans under said Section 2.01(d) be made available to it in a single series of revolving loans (the "Series 1 Loans"). The Series 1 Lenders (as defined below) are willing to make such loans on the terms and conditions set forth below and in accordance with the applicable provisions of the Credit Agreement and, accordingly, the parties hereto hereby agree as follows: ARTICLE I DEFINED TERMS           Terms defined in the Credit Agreement are used herein as defined therein. In addition, the following terms have the meanings specified below:           "Series 1 Availability Period" means the period beginning on the Series 1 Effective Date and ending on the Series 1 Commitment Termination Date.           "Series 1 Commitment" means, with respect to each Series 1 Lender, the commitment of such Lender to make Series 1 Loans hereunder. The amount of each Series 1 Lender's Series 1 Commitment is (i) set forth opposite such Series 1 Lender's signature hereto or (ii) evidenced by an assignment of such Series 1 Commitment pursuant to Section 10.04 of the Credit Agreement. The aggregate original amount of the Series 1 Commitments is $7,500,000.           "Series 1 Commitment Termination Date" means November 28, 2001.           "Series 1 Effective Date" means the date on which the conditions specified in Article IV are satisfied.           "Series 1 Lender" means (a) on the date hereof, a Lender that has executed and delivered this Agreement and (b)  thereafter, the Lenders from time to time holding Series 1 Commitments or Series 1 Loans after giving effect to any assignments thereof pursuant to Section 10.04 of the Credit Agreement. ARTICLE II SERIES 1 LOANS           Section 2.01.    Commitments. Subject to the terms and conditions set forth herein and in the Credit Agreement, each Series 1 Lender commits to make Series 1 Loans to the Borrower during the Series 1 Availability Period in an aggregate principal amount equal to such Series 1 Lender's Series 1 Commitment. The proceeds of Series 1 Loans shall be available for any use permitted under Section 6.08 of the Credit Agreement.           Section 2.02.    Termination of Commitments. Unless previously terminated, the Series 1 Commitments shall terminate on the Series 1 Commitment Termination Date.           Section 2.03.    Repayment of Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Series 1 Lender the outstanding principal amount of the Series 1 Loans on the Series 1 Commitment Termination Date.           Section 2.04.    Applicable Margin. The Applicable Margin for Series 1 Loans shall be 2.50% for ABR Loans and 3.50% for Eurodollar Loans.           Section 2.05.    Commitment Fee. The Borrower agrees to pay to the Administrative Agent for account of each Series 1 Lender a commitment fee, which shall accrue at a rate per annum equal to 0.75% on the average daily unused amount of the Series 1 Commitment of such Series 1 Lender during the period from and including the Series 1 Effective Date to but excluding the earlier of the date such Series 1 Commitment terminates and the Series 1 Commitment Termination Date           Section 2.06.    Status of Agreement. The Series 1 Commitments of each Series 1 Lender constitute Incremental Revolving Credit Commitments, the Series 1 Lenders constitute Incremental Revolving Credit Lenders and the Series 1 Loans constitutes a single "Series" of Incremental Revolving Credit Loans under Section 2.01(d) of the Credit Agreement. Series 1 Incremental Revolving Credit Agreement ARTICLE III REPRESENTATION AND WARRANTIES; NO DEFAULTS           The Borrower represents and warrants to the Lenders that (i) the representations and warranties set forth in Article IV of the Credit Agreement are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Article IV to "this Agreement" included reference to this Agreement and (ii) no Default has occurred and is continuing. ARTICLE IV CONDITIONS           The obligations of the Series 1 Lenders to make the Series 1 Loans is subject to the satisfaction of each of the following conditions precedent:           (a)    Counterparts of Agreement. The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.           (b)    Opinions of Counsel to the Obligors. The Administrative Agent shall have received favorable written opinions (addressed to the Administrative Agent and the Series 1 Lenders and dated the Series 1 Effective Date) of counsel for the Obligors, covering such matters relating to the Obligors or this Agreement as the Administrative Agent shall request (and each Obligor hereby requests such counsel to deliver such opinions).           (c)    Corporate Matters. The Administrative Agent shall have received such documents and certificates as the Administrative Agent may reasonably request relating to the organization, existence and good standing of each Obligor, the authorization of the Borrowings of Series 1 Loans and any other legal matters relating to the Obligors, the Credit Agreement or this Agreement, all in form and substance reasonably satisfactory to the Administrative Agent.           (d)    Fees and Expenses. The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Series 1 Effective Date, including reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. Series 1 Incremental Revolving Credit Agreement           (e)    Additional Conditions. The Administrative Agent shall have received a certificate, dated the Series 1 Effective Date and signed by a Financial Officer confirming that after giving effect to any Borrowing of Series 1 Loans (under the assumption that any such Borrowing had been consummated on the first day of the respective periods for which calculations are to be made under the covenants in Section 7.09 of the Credit Agreement (as amended by Amendment No. 2 dated as of October 10, 2000 thereto)), the Borrower would have been in compliance with the applicable provisions of Section 7.09 of the Credit Agreement. ARTICLE V CONFIRMATION OF COLLATERAL SECURITY           Each Obligor hereby confirms that the obligations of the Borrower in respect of the Series 1 Loans under the Credit Agreement are entitled to the benefits of each of the Security Documents and shall constitute obligations that are secured by the collateral under and for all purposes of each Security Document. ARTICLE VI MISCELLANEOUS           SECTION 6.01.    Expenses. The Obligors jointly and severally agree to pay, or reimburse the Administrative Agent for, (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy LLP, in connection with the syndication of the Series 1 Loans provided for herein and the preparation of this Agreement.           SECTION 6.02.    Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when this Agreement shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.           SECTION 6.03.    Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. Series 1 Incremental Revolving Credit Agreement           SECTION 6.04.    Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. Series 1 Incremental Revolving Credit Agreement           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.   CHART INDUSTRIES, INC.         By    /s/  Don A. Baines                                       Name: Don A. Baines     Title: Chief Financial Officer and Treasurer       SUBSIDIARY BORROWERS       CHART HEAT EXCHANGERS LIMITED         By   /s/  Don A. Baines                                        Name: Don A. Baines     Title: Director       CHART-AUSTRALIA PTY, LTD.       By   /s/  Don A. Baines                                        Name: Don A. Baines     Title: Attorney-In-Fact Series 1 Incremental Revolving Credit Agreement SUBSIDIARY GUARANTORS   ALTEC, INC.         By   /s/   Don A. Baines                                           Name: Don A. Baines     Title: Assistant Secretary   CHART HEAT EXCHANGERS LIMITED        PARTNERSHIP        By:     CHART MANAGEMENT COMPANY, INC., as its sole general partner             By /s/ Don A. Baines                                    Name: Don A. Baines     Title: Secretary and Treasurer   CHART INDUSTRIES FOREIGN SALES        CORPORATION         By   /s/   Don A. Baines                                          Name: Don A. Baines     Title: Secretary and Treasurer   CHART INTERNATIONAL INC.         By    /s/   Don A. Baines                                          Name: Don A. Baines     Title: Treasurer and Chief Financial Officer Series 1 Incremental Revolving Credit Agreement   CHART MANAGEMENT COMPANY, INC.         By /s/ Don A. Baines                             Name: Don A. Baines     Title: Secretary and Treasurer   CHART LEASING, INC.         By /s/ Don A. Baines                                             Name: Don A. Baines     Title: Secretary and Treasurer   CHART CRYOGENIC SERVICES, INC.         By   /s/   Don A. Baines                          Name: Don A. Baines     Title: Assistant Secretary   CHART, INC.         By   /s/   Don A. Baines                            Name: Don A. Baines     Title: Secretary and Treasurer   CHART INTERNATIONAL HOLDINGS, INC.         By    /s/  Don A. Baines                            Name: Don A. Baines     Title: Secretary and Treasurer   CHART ASIA, INC.         By   /s/   Don A. Baines                            Name: Don A. Baines     Title: Secretary and Treasurer Series 1 Incremental Revolving Credit Agreement   CAIRE INC.         By   /s/  Don A. Baines                                Name: Don A. Baines     Title: Secretary and Treasurer       ADMINISTRATIVE AGENT       THE CHASE MANHATTAN BANK,      as Administrative Agent               By   /s/  Henry W. Centa                               Name: Henry W. Centa     Title: Vice President Series 1 Incremental Revolving Credit Agreement SERIES 1 LENDERS $2,500,000 THE CHASE MANHATTAN BANK         By   /s/   Henry W. Centa                      Name: Henry W. Centa     Title: Vice President $2,500,000 NATIONAL CITY BANK         By   /s/  Anthony J. DiMare                        Name: Anthony J. DiMare     Title: Senior Vice President $2,500,000 BANK ONE, MICHIGAN         By   /s/  Patrick F. Dunphy                     Name: Patrick F. Dunphy     Title: Vice President Series 1 Incremental Revolving Credit Agreement

Exhibit 10.12 RETENTION AGREEMENT This Agreement is entered into effective July 6, 1999, by and between JDS Uniphase Inc. (the "Company") and Zita Cobb ("Employee"). I. For the purposes of this Agreement, the following definitions apply: (a) "Cause" means: i. willful malfeasance by Employee, which has a material adverse effect on the Company; ii. substantial and continuing willful refusal by Employee to perform duties ordinarily performed by an employee in the same position and having similar duties as Employee; iii. conviction of Employee for an indictable offense which has a material adverse effect on the Company's goodwill if Employee is retained as an employee of the Company; iv. willfull failure by Employee to comply with material policies and procedures of the Company. (b) "Good Reason" means: i. a material reduction in Employee's salary without Employee 's prior written consent; ii. a material adverse change in Employee's position, duties or responsibilities without Employee's prior written consent; iii. an actual change in Employee's principal work location by more than 50 kilometers without Employee's prior written consent; or iv. failure by the Company to obtain from any successor company the assumption of the Company's obligations under this Agreement. (c) "Disabled" means a mental or physical disability, illness or injury, evidenced by medical reports from a duly qualified medical practitioner, which renders the Employee unable to perform the essential duties of his or her position, and "Disability" has a corresponding meaning. (d) "Effective Date" means: i. in the event the Company terminates the employment of Employee, the date designated by the Company as the last day of Employee's employment; ii. in the event the Employee resigns his or her employment with the Company, the date designated by the Company as the effective date of resignation; iii. in the event the Employee dies, the date of death; iv. in the event the Employee becomes Disabled, the date designated by the Company as the last day of Employee's employment. 2. This Agreement expires five years from the date hereof (the "Expiry Date"). 3. If at any time up to and including the Expiry Date: (a) the employment of the Employee is terminated without Cause; (b) Employee dies; (c) the employment of the Employee ceases due to Disability; or (d) Employee resigns his or her employment with the Company for Good Reason, then in addition to Employee's entitlement to salary, benefits and unused paid vacation, all as accrued to the Effective Date, on providing to the Company a full and final release in form and substance acceptable to the Company, acting reasonably, i. Employee shall receive and accept payment of a sum equivalent to three year's salary (calculated based on the salary rate in effect at the Effective Date), plus three year's bonus (calculated based on the average of the bonus awarded to Employee in each of the previous three years of employment with the Company) less any amounts to which Employee is otherwise entitled under any statutory and/or company long or short term disability plan, in full and final satisfaction of any statutory, contractual or common law entitlements which Employee has or could have as a result of the cessation of employment (which sum shall be subject to applicable statutory deductions); and ii. Employee's right, title and entitlement to any unvested options or any other securities or similar Incentives which have been granted or issued to Employee in existence as of the Effective Date shall Vest immediately with Employee, free from any restrictions, provided that all such securities shall continue to be exercisable (if applicable) for 90 days from the Effective Date or until the time that such securities would have otherwise expired (if applicable) whichever is earlier. 4. Employee and the Company acknowledge and agree that this Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario, Canada. If either party takes any legal proceedings of any nature in respect of this Agreement, such proceedings must be commenced in the Regional Municipality of Ottawa-Carleton, in the Province of Ontario, Canada, and are to be governed by the applicable statutory or civil procedural rules of Ontario. Employee and the Company agree that they hereby attorn to the jurisdiction of the Ontario Courts. 5. This Agreement constitutes the entire Agreement between the parties as to Employee's rights and entitlements upon the cessation of the employment relationship between them) where such cessation occurs on or before the Expiry Date. Employee and the Company each agree and acknowledge that no promises or representations have been made to or by the other, and that there are no terms or understandings relating to this Agreement, other than those expressly set out in this written document. The foregoing does not limit any obligation the Employee would otherwise have under any proprietary, invention or similar agreement or under any incentive plan in which the Employee is a participant. 6. Employee and the Company each specifically agree and acknowledge that they each waive recourse to any remedies in tort, and further agree and acknowledge their intent that all rights and liabilities pertaining to the cessation of the employment relationship between them, where such cessation occurs on or before the Expiry Date, be as set out in this Agreement (or in any subsequent modification of this Agreement, provided that the modification is in writing and signed by both parties). 7. Employee and the Company acknowledge that they have received, or have been provided with sufficient opportunity to receive, independent legal advice prior to executing this Agreement.   JDS Uniphase Inc.   By:      /s/ Michael C. Phillips     --------------------------------------------------------------------------------   Name:  Michael C. Phillips   Title:  Vice President   Witness: /s/ Konstantin Kotzeff Employee: /s/ Mary Zita Cobb -------------------------------------------------------------------------------- AGREEMENT REGARDING CHANGE OF CONTROL This Agreement is entered into effective July 6, 1999 by and between JDS Uniphase Inc., (the "Company"), and Zita Cobb ("Executive"). RECITALS Executive is employed by the Company and is a valued officer of the Company. As an inducement to Executive to remain in the employ of the Company, the Company wishes to provide for certain rights in favour of Executive to exercise options to purchase shares of Common Stock (as defined below) held by Executive upon a Change of Control (as defined below) of the Company upon the terms herein provided. NOW THEREFORE, in consideration of the foregoing and the mutual promises herein contained, the parties agree as follows: AGREEMENT Section 1. Definition For purposes of this Agreement, the following definitions shall apply: "Change of Control" means the occurrence of one or more of the following with respect to the Company or with respect to JDS Uniphase Corporation: i. the acquisition by any person (or related group of persons), whether by tender or exchange offer made directly to the shareholders, open market purchases or any other transaction or series of transactions, of shares of the Company or of Common Stock, as the case may be, possessing sufficient voting power in the aggregate to elect an absolute majority of the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be; ii. a merger or consolidation in which the Company or JDS Uniphase Corporation, as the case may be, is not the surviving entity, except for a transaction in which securities representing more than fifty percent (50%) of the total combined voting power of the surviving entity are held by persons who held shares of the Company or Common Stock, as the case maybe, immediately prior to such merger or consolidation and the members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger or consolidation constitute a majority of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately after such merger or consolidation; iii. any reverse merger in which the Company or JDS Uniphase Corporation, as the case may be, is the surviving entity but in which either securities representing more than fifty (50%) of the total combined voting power of the outstanding securities of the Company or of JDS Uniphase Corporation, as the case maybe, are transferred or issued to holders different from those who held such securities immediately prior to such merger or those members of the Board of Directors of the Company or of JDS Uniphase Corporation, as the case may be, immediately before such merger do not constitute a majority of the Board of Directors immediately after such merger; or iv. the sale, transfer or other disposition of all or substantially all of the assets of the Company or of JDS Uniphase Corporation, as the case may be;   but any such event in respect of the Company that does not result in any change in the beneficial ownership of the Company by JDS Uniphase Corporation is deemed not to be a Change of Control. "Closing Date" means the date of the first closing of the transaction constituting a Change of Control. "Common Stock" means the aggregate of: (a) the issued and outstanding $.001 par value, common stock of JDS Uniphase Corporation; and, (b) the issued and outstanding exchangeable shares in the capital of 3506967 Canada Inc. (the name of which has been or will be changed to JDS Uniphase Canada Ltd.), an indirect subsidiary of JDS Uniphase Corporation; "Executive's Stock Options" shall mean any options to purchase Common Stock held by Executive that have been issued to Executive by the Company or by JDS Uniphase Corporation prior to a Closing Date. Section 2. Acceleration of Options on a Change in Control The Company agrees that the right of Executive to exercise the Executive's Stock Options shall be accelerated as of the Closing Date of a Change of Control so that Executive's Stock Options shall become fully exercisable as of the Closing Date as to all shares of the Common Stock subject thereto and, subject to the terms of this Section 2, remain exercisable thereafter in accordance with their terms. The foregoing acceleration of the right of Executive to exercise Executive's Stock Options shall apply notwithstanding any contrary terms in any stock option plan pursuant to which such Options are granted or any stock option agreement executed by the Company or by JDS Uniphase Corporation with respect to Executive's Stock Options, including, without limitation, any stock option plan terms that are adopted or any stock option agreement executed after the date hereof. Such acceleration of the exercisability of the Executive's Stock Options shall apply and occur without further action on the part of the Company, its Board of Directors, stockholders, Executive or any other party. As a condition to an acceleration of the Executive's Stock Options as provided in this Section 2, Executive agrees that Executive's Stock Options shall terminate as of the Closing Date to the extent unexercised as of such Closing Date if the terms and conditions of such Change of Control require that all employee stock options terminate as of such Closing Date. In no event shall this Section 2 be interpreted to cause the Executive's Stock Options to be exercisable for a greater number of shares of Common Stock than were subject to the Executive's Stock Options immediately prior to the Closing Date. Section 3. No Employment Agreement Except as previously herein provided. Executive and the Company each acknowledge and agree that this Agreement does not provide for the terms and conditions of Executive's employment with the Company and does not require or obligate Executive to provide services to the Company or the Company to continue to employ Executive. Section 4. Notices All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to the Company at: > JDS Uniphase Inc. > 570 West Hunt Club Road > Nepean Ontario K2G 5W8 > > Or to the Executive at: > 200 Rideau Terrace > Apt. 1401 > Ottawa, ON KIM 023 Notice of change of address shall be effective only when done in accordance with this Section. Section 5. Successors This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns. Section 6. Ontario Law The laws of the Province of Ontario shall govern the interpretation, performance and enforcement of this Agreement IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.   JDS Uniphase Inc.   By:      /s/ Michael C. Phillips     --------------------------------------------------------------------------------   Name:  Michael C. Phillips   Title:  Vice President   Witness: /s/ Konstantin Kotzeff Employee: /s/ Mary Zita Cobb --------------------------------------------------------------------------------

EXHIBIT 10.1 CONTINENTAL AIRLINES, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN As Amended and Restated as of April 24, 2000 1. Purpose. The Continental Airlines, Inc. 1997 Employee Stock Purchase Plan (the "Plan") is intended to provide an incentive for employees of Continental Airlines, Inc. (the "Company") and any Participating Company (as defined in paragraph 3) to acquire or increase a proprietary interest in the Company through the purchase of shares of the Company's Class B common stock, par value $.01 per share (the "Stock"). The Plan is intended to qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall be construed in a manner consistent with the requirements of that section of the Code. 2. Administration of the Plan. The Plan shall be administered by the Human Resources Committee (the "Committee") of the Board of Directors of the Company (the "Board"). Subject to the provisions of the Plan, the Committee shall interpret the Plan and all options granted under the Plan, make such rules as it deems necessary for the proper administration of the Plan and make all other determinations necessary or advisable for the administration of the Plan. In addition, the Committee shall correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any option granted under the Plan, in the manner and to the extent that the Committee deems desirable to carry the Plan or any option into effect. The Committee shall, in its sole discretion, make such decisions or determinations and take such actions, and all such decisions, determinations and actions taken or made by the Committee pursuant to this and the other paragraphs of the Plan shall be conclusive on all parties. The Committee shall not be liable for any decision, determination or action taken in good faith in connection with the administration of the Plan. The Committee shall have the authority to delegate routine day-to-day administration of the Plan to such officers and employees of the Company as the Committee deems appropriate. 3. Participating Companies. The Committee may designate any present or future parent or subsidiary corporation of the Company that is eligible by law to participate in the Plan as a "Participating Company" by written instrument delivered to the designated Participating Company. Such written instrument shall specify the effective date of such designation and shall become, as to such designated Participating Company and persons in its employment, a part of the Plan. The terms of the Plan may be modified as applied to the Participating Company only to the extent permitted under Section 423 of the Code. Transfer of employment among the Company and Participating Companies (and among any other parent or subsidiary corporation of the Company) shall not be considered a termination of employment hereunder. Any Participating Company may, by appropriate action of its Board of Directors, terminate its participation in the Plan. Moreover, the Committee may, in its discretion, terminate a Participating Company's Plan participation at any time. 4. Eligibility. Subject to the provisions hereof, all employees of the Company and the Participating Companies who are employed by the Company or any Participating Company as of a Date of Grant (as defined in subparagraph 6(a)) shall be eligible to participate in the Plan; provided, however, that no option shall be granted to an employee if such employee, immediately after the option is granted, owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of its parent or subsidiary corporations (within the meaning of Sections 423(b)(3) and 424(d) of the Code). 5. Stock Subject to the Plan. Subject to the provisions of paragraph 12, the aggregate number of shares that may be sold pursuant to options granted under the Plan shall not exceed 1,750,000 shares of the authorized Stock, which shares may be unissued or reacquired shares, including shares bought on the market or otherwise for purposes of the Plan. Should any option granted under the Plan expire or terminate prior to its exercise in full, the shares theretofore subject to such option may again be subject to an option granted under the Plan. Any shares that are not subject to outstanding options upon the termination of the Plan shall cease to be subject to the Plan. 6. Grant of Options. (a) General Statement; "Date of Grant"; "Option Period"; "Date of Exercise". Following the effective date of the Plan and continuing while the Plan remains in force, the Company shall offer options under the Plan to purchase shares of Stock to all eligible employees who elect to participate in the Plan. Except as otherwise determined by the Committee, these options shall be granted on January 1, 1997, and, thereafter, on the first day of each successive July, October, January and April (each of which dates is herein referred to as a "Date of Grant"). Except as provided in paragraph 12, the term of each option granted on January 1, 1997, shall be for six months, and the term of each option granted thereafter shall be for three months (each of such six-month and three-month periods is herein referred to as an "Option Period"), which shall begin on a Date of Grant and end on the last day of each Option Period (herein referred to as a "Date of Exercise"). Subject to subparagraph 6(e), the number of shares subject to an option for a participant shall be equal to the quotient of (i) the aggregate payroll deductions withheld on behalf of such participant during the Option Period in accordance with subparagraph 6(b), divided by (ii) the Option Price (as defined in subparagraph 7(b)) of the Stock applicable to the Option Period, including fractions; provided, however, that the maximum number of shares that may be subject to any option for a participant may not exceed 2,500 (subject to adjustment as provided in paragraph 12). (b) Election to Participate; Payroll Deduction Authorization. An eligible employee may participate in the Plan only by means of payroll deduction. Except as provided in subparagraph 6(g), each eligible employee who elects to participate in the Plan shall deliver to the Company, within the time period prescribed by the Committee, a written payroll deduction authorization in a form prepared by the Company whereby he gives notice of his election to participate in the Plan as of the next following Date of Grant, and whereby he designates an integral percentage of his Eligible Compensation (as defined in subparagraph 6(d)) to be deducted from his compensation for each pay period and paid into the Plan for his account. The designated percentage may not be less than 1% nor exceed 10%. (c) Changes in Payroll Authorization. A participant may withdraw from the Plan as provided in paragraph 8. In addition, a participant may decrease the percentage rate of his payroll deduction authorization referred to in subparagraph 6(b) or suspend or resume payroll deductions during the relevant Option Period by delivering to the Company a new payroll deduction authorization in a form prepared by the Company. Such decrease, suspension or resumption will be effective as (d) "Eligible Compensation" Defined. The term "Eligible Compensation" means regular straight-time earnings or base salary, except that such term shall not include payments for overtime, incentive compensation, bonuses or other special payments. (e) $25,000 Limitation. No employee shall be granted an option under the Plan which permits his rights to purchase Stock under the Plan and under all other employee stock purchase plans of the Company and its parent and subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market value of such Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time (within the meaning of Section 423( the next following Date of Exercise. (f) Leaves of Absence. During a paid leave of absence approved by the Company and meeting the requirements of Treasury Regulation Paragraph 1.421-7(h)(2), a participant's elected payroll deductions shall continue. A participant may not contribute to the Plan during an unpaid leave of absence. If a participant takes an unpaid leave of absence that is approved by the Company, meets the requirements of Treasury Regulation Paragraph 1.421-7(h)(2), and begins within 90 days p urchase Stock under the Plan on the Date of Exercise relating to such Option Period. If a participant takes a leave of absence that is not described in the first or third sentence of this subparagraph 6(f), then he shall be considered to have withdrawn from the Plan pursuant to the provisions of paragraph 8 hereof. (g) Continuing Election. Subject to the limitation set forth in subparagraph 6(e), a participant (i) who has elected to participate in the Plan pursuant to subparagraph 6(b) as of a Date of Grant and (ii) who takes no action to change or revoke such election as of the next following Date of Grant and/or as of any subsequent Date of Grant prior to any such respective Date of Grant shall be deemed to have made the same election, including the same attendant payroll deducti 7. Exercise of Options. (a) General Statement. Subject to the limitation set forth in subparagraph 6(e), each participant in the Plan automatically and without any act on his part shall be deemed to have exercised his option on each Date of Exercise to the extent of his unused payroll deductions under the Plan and to the extent the issuance of Stock to such participant upon such exercise is lawful. (b) "Option Price" Defined. The term "Option Price" shall mean the per share price of Stock to be paid by each participant on each exercise of his option, which price shall be equal to 85% of the fair market value of the Stock on the Date of Exercise or on the Date of Grant, whichever amount is lesser. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing price of the Stock on the New York Stock Exch (c) Delivery of Shares; Restrictions on Transfer. As soon as practicable after each Date of Exercise, the Company shall deliver to a custodian selected by the Committee one or more certificates representing (or shall otherwise cause to be credited to the account of such custodian) the total number of whole shares of Stock respecting options exercised on such Date of Exercise in the aggregate (for both whole and fractional shares) of all of the participating eligible emp 8. Withdrawal from the Plan. (a) General Statement. Any participant may withdraw in whole from the Plan at any time prior to the Date of Exercise relating to a particular Option Period. Partial withdrawals shall not be permitted. A participant who wishes to withdraw from the Plan must timely deliver to the Company a notice of withdrawal in a form prepared by the Company. The Company, promptly following the time when the notice of withdrawal is delivered, shall refund to the participant the amoun (b) Eligibility Following Withdrawal. A participant who withdraws from the Plan shall be eligible to participate again in the Plan upon expiration of the Option Period during which he withdrew (provided that he is otherwise eligible to participate in the Plan at such time). 9. Termination of Employment. (a) General Statement. Except as provided in subparagraph 9(b), if the employment of a participant terminates for any reason whatsoever, then his participation in the Plan automatically and without any act on his part shall terminate as of the date of the termination of his employment. The Company shall promptly refund to him the amount of his payroll deductions under the Plan which have not yet been otherwise returned to him or used upon exercise of options, and the (b) Termination by Retirement, Death or Disability after April 24, 2000. If the employment of a participant terminates after April 24, 2000 due to (i) retirement that entitles the participant to an early or normal retirement benefit under any defined benefit pension plan of the Company or a Participating Company, (ii) death or (iii) permanent and total disability (within the meaning of Section 22(e)(3) of the Code), the participant, or (in the event of the participant's (1) withdraw all of the accumulated unused payroll deductions and shares of Stock credited to the participant's account under the Plan (whether or not the Restriction Period with respect to such shares has expired); or (2) exercise the participant's option for the purchase of Stock on the last day of the Option Period during which termination of employment occurs for the purchase of the number of full shares of Stock which the accumulated payroll deductions at the date of the participant's termination of employment will purchase at the applicable Option Price (subject to subparagraph 6(e)), with any excess cash in such account to be returned to the participant or such designated beneficiary. The participant or, if applicable, such designated beneficiary, must make such election by giving written notice to the Committee in such manner as the Committee prescribes. In the event that no such written notice of election is timely received by the Committee, the participant or designated beneficiary will automatically be deemed to have elected as set forth in clause (2) above, and promptly after the exercise so described in clause (2) above, all shares of Stock in such participant's be distributed to the participant or such designated beneficiary. (c) Beneficiary Designation. Each participant shall have the right to designate a beneficiary to exercise the rights specified in subparagraph 9(b) in the event of such participant's death. Any designation (or change in designation) of a beneficiary must be filed with the Committee in a time and manner designated by the Committee in order to be effective. Any such designation of a beneficiary may be revoked by the participant by filing a later valid designation or an instr Committee in a time and manner designated by the Committee. If no beneficiary is designated, the designated beneficiary will be deemed to be the participant's personal representative. 10. Restriction Upon Assignment of Option. An option granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution. Subject to subparagraph 9(b), each option shall be exercisable, during his lifetime, only by the employee to whom granted. The Company shall not recognize and shall be under no duty to recognize any assignment or purported assignment by an employee of his option or of any rights under his option or under the 11. No Rights of Stockholder Until Exercise of Option. With respect to shares of Stock subject to an option, an optionee shall not be deemed to be a stockholder, and he shall not have any of the rights or privileges of a stockholder, until such option has been exercised. With respect to an individual's Stock held by the custodian pursuant to subparagraph 7(c), the custodian shall, as soon as practicable, pay the individual any cash dividends attributable thereto and shal 12. Changes in Stock; Adjustments. Whenever any change is made in the Stock, by reason of a stock dividend or by reason of subdivision, stock split, reverse stock split, recapitalization, reorganization, combination, reclassification of shares or other similar change, appropriate action will be taken by the Committee to adjust accordingly the number of shares subject to the Plan, the maximum number of shares that may be subject to any option, and the number and Option Pr If the Company shall not be the surviving corporation in any merger or consolidation (or survives only as a subsidiary of another entity), or if the Company is to be dissolved or liquidated, then, unless a surviving corporation assumes or substitutes new options (within the meaning of Section 424(a) of the Code) for all options then outstanding, (i) the Date of Exercise for all options then outstanding shall be accelerated to a date fixed by the Committee prior to the effective date o 13. Use of Funds; No Interest Paid. All funds received or held by the Company under the Plan shall be included in the general funds of the Company free of any trust or other restriction, and may be used for any corporate purpose. No interest shall be paid or credited to any participant. 14. Term of the Plan. The Plan shall be effective upon the date of its adoption by the Board, provided the Plan is approved by the stockholders of the Company within 12 months thereafter. Notwithstanding any provision in the Plan, no option granted under the Plan shall be exercisable prior to such stockholder approval, and, if the stockholders of the Company do not approve the Plan by the Date of Exercise of the first option granted hereunder, then the Plan shall automa 15. Amendment or Termination of the Plan. The Board in its discretion may terminate the Plan at any time with respect to any Stock for which options have not theretofore been granted. The Board and the Committee shall each have the right to alter or amend the Plan or any part thereof from time to time; provided, however, that no change in any option theretofore granted may be made that would impair the rights of the optionee without the consent of such optionee. 16. Securities Laws. The Company shall not be obligated to issue any Stock pursuant to any option granted under the Plan at any time when the offer, issuance or sale of shares covered by such option has not been registered under the Securities Act of 1933, as amended, or does not comply with such other state, federal or foreign laws, rules or regulations, or the requirements of any stock exchange upon which the Stock may then be listed, as the Company or the Committee de pinion of legal counsel for the Company, there is no exemption from the requirements of such laws, rules, regulations or requirements available for the offer, issuance and sale of such shares. Further, all Stock acquired pursuant to the Plan shall be subject to the Company's policies concerning compliance with securities laws and regulations, as such policies may be amended from time to time. The terms and conditions of options granted hereunder to, and the purchase of shares by, persons subject to Section e Act of 1934, as amended (the "Exchange Act"), shall comply with any applicable provisions of Rule 16b-3. As to such persons, this Plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required from time to time by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. 17. No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any option granted under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any subsidiary as a result of 18. Miscellaneous Provisions. (a) Parent and Subsidiary Corporations. For all purposes of the Plan, a corporation shall be considered to be a parent or subsidiary corporation of the Company only if such corporation is a parent or subsidiary corporation of the Company within the meaning of Sections 424(e) or (f) of the Code. (b) Number and Gender. Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender. (c) Headings. The headings and subheadings in the Plan are included solely for convenience, and if there is any conflict between such headings or subheadings and the text of the Plan, the text shall control. (d) Not a Contract of Employment; No Acquired Rights. The adoption and maintenance of the Plan shall not be deemed to be a contract between the Company or any Participating Company and any person or to be consideration for the employment of any person. Participation in the Plan at any given time shall not be deemed to create the right to participate in the Plan, or any other arrangement permitting an employee of the Company or any Participating Company to purchase St (e) Compliance with Applicable Laws. The Company's obligation to offer, issue, sell or deliver Stock under the Plan is at all times subject to all approvals of and compliance with any governmental authorities (whether domestic or foreign) required in connection with the authorization, offer, issuance, sale or delivery of Stock as well as all federal, state, local and foreign laws. Without limiting the scope of the preceding sentence, and notwithstanding any other pro (f) Severability. If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein. (g) Governing Law. All provisions of the Plan shall be construed in accordance with the laws of Texas except to the extent preempted by federal law.

  EXHIBIT 10   AMENDMENT NUMBER ONE TO THE OVERSEAS SHIPHOLDING GROUP, INC. 1998 STOCK OPTION PLAN   WHEREAS, Overseas Shipholding Group, Inc. (the "Company") maintains the Overseas Shipholding Group, Inc. 1998 Stock Option Plan (the "Plan"); and WHEREAS, subject to the approval of the stockholders of the Company, the Board of Directors of the Company (the "Board") may amend the Plan to increase the aggregate number of shares of the Company's common stock (the "Shares") that may be issued under the Plan; and WHEREAS, subject to the approval of the stockholders of the Company, the Board desires to amend the Plan to increase the aggregate number of Shares that may be issued under the Plan effective as of February 1, 2000. NOW, THEREFORE , the Plan is hereby amended as follows: 1. The first sentence of Section 4.1(a) of the Plan is amended, effective as February 1, 2000, to read as follows: "The aggregate number of shares of Common Stock which may be issued under the Plan shall not exceed 2,800,000 shares (subject to any increase or decrease pursuant to Section 4.2), which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both." IN WITNESS WHEREOF, the Board has caused this Amendment to be executed this 1st day of February, 2000   OVERSEAS SHIPHOLDING GROUP, INC.   By:                                                                    

EXHIBIT 2.1 PURCHASE AND SALE AGREEMENT This agreement (this "Agreement") made and entered into this____ day of October, 2000, by and between Gladstone Energy, Inc. (referred to in this agreement as "Seller"), and EXCO Resources, Inc. (referred to in this Agreement as "Buyer") evidences the agreement of Seller to sell and convey to Buyer, and the agreement of Buyer to purchase and acquire from Seller, the Subject Properties, as that term is defined below, upon the terms and conditions set forth below. 1. DEFINITION OF THE SUBJECT PROPERTIES. As used herein, the term "Subject Properties" means all interest owned by Seller as of the Effective Date, as defined in Paragraph 6. Below, to the following properties, rights and interests: (a) the working interests and net revenue interests in and to the oil, gas and mineral leases described on the schedule attached hereto as Exhibit "A", insofar as such leases cover the lands and depths described on Exhibit "A", such leases, insofar as they cover such land, being referred to in this Agreement collectively as the "Leases"; (b) all wells located on the Leases (whether producing, non-producing, shut-in, abandoned or temporarily abandoned and whether oil wells, gas wells, saltwater disposal wells, injection wells or water wells), together with all of the personal property and equipment used or obtained in connection with such well or wells, including, but not limited to, all casing, pipe, tubing, rods, separators, well-head and in-hole equipment, tanks, motors, fixtures and other such personal property and equipment; (c) all permits, licenses, orders, pooling or unitization orders and agreements, communitization agreements, operating agreements, exploration agreements, farmin or farmout agreements, letter agreements, processing, transportation or lease agreements, and other contracts and agreements which, and only insofar as the same cover, relate or pertain to the Leases and the wells described in (b) above; (d) all rights-of-way, easements, servitudes, surface leases, treating facilities, pipelines and gathering systems which cover, relate or pertain to the Leases and the wells described in (b) above, or which may be necessary or convenient to be used in connection therewith; and 2. PURCHASE PRICE. The purchase price ("Purchase Price") payable to Seller for the Subject Properties is $267,000. 2.1 ADJUSTMENT. The Purchase Price shall be adjusted prior to closing by an amount determined as follows: (a) The Purchase Price shall be increased by the following amounts: (i) The amount of any and all operating expenses which have been paid by Seller in connection with the Subject Properties which are attributable to work done or materials supplied on or after the Effective Date. (ii) The value of any oil in the tanks (above the pipeline connection) which was produced from the Subject Properties prior to the Effective Date which was attributable to the Subject Properties. The value of oil in the tanks as of the Effective Date shall be deemed to be the amount actually received for such oil when sold. (b) The Purchase Price shall be decreased by the following amounts: (i) Any and all amounts received by Seller which are attributable to the sale of oil or gas produced from the Subject Properties on or after the Effective Date; (ii) The amount of any and all unpaid operating expenses pertaining to Seller's interest in the Subject Properties which are attributable to work done or materials supplied prior to the Effective Date; (iii) An amount equal to 7/12 of the estimated ad valorem taxes assessed against Seller's interest in the Subject Properties for the year 2000. Buyer and Seller agree to cooperate in the determination of the above-described amounts; provided, however, Buyer's obligation to close the purchase of the Subject Properties and to pay the Purchase Price shall be contingent upon reaching an agreement as to such amounts prior to closing. 2.2        POST CLOSING ADJUSTMENT. Buyer and Seller acknowledge that the adjustment to the Purchase Price described in Paragraph 2.1 above is a preliminary estimate only and that there may be additional revenues or expenses discovered after the closing which should have been included in such adjustment. Therefore, within ninety (90) days after closing (the "Post Closing Date"), the parties shall make a final determination of the expenses and revenues described in paragraphs 2.1 (a) and (b) above which are attributable to the Subject Properties. If it is determined that there were additional revenues or expenses which were properly includable in the adjustment to the Purchase Price and such additional revenues or expenses caused an error in the adjustment of the Purchase Price of more than $500.00, the party in whose favor such error was made agrees to pay the other party an amount equal to the amount of such error (the "Adjustment Amount").   3. REPRESENTATIONS OF SELLER. Seller represents that: (a) Since the Effective Date, there has not any material damage, destruction or loss to or of the Subject Properties not covered by insurance; (b) With respect to the Leases: (i) to the best of Seller's knowledge, the Leases are presently in full force and effect; however, Seller's representation herein is limited to Federal Lease No. SF 078476 insofar as it covers Section 11: E/2, and Section 13: W/2. (said lease pertains to the following wells: Federal "J" No. 1A, Federal "J" No. 1R, and the Federal "E" No. 3A); and there being no representation made by Seller as to status of the other Federal Leases described in Exhibit "A" hereto; (ii) to the best of Seller's knowledge, all payments, including royalties, delay rentals and shut-in royalties; however, Seller's representation herein is limited to Federal Lease No. SF 078476 insofar as it covers Section 11: E/2 and Section 13: W/2. (said lease pertains to the following wells: Federal "J" No. 1A, Federal "J" No. 1R, and the Federal "E" No. 3A); and there being no representation made by Seller as to status of the other Federal Leases described in Exhibit "A" hereto; (iii) neither Seller nor, to the knowledge of Seller, any other party to any of the Leases has given or threatened to give notice of any action to terminate, cancel, rescind or procure a judicial reformation of any of the Leases or any provisions thereof; (iv) to the best of Seller's knowledge, there are no obligations to engage in continuous drilling or development operations in order to maintain any of the Leases in force; and (v) to the best of Seller's knowledge, Seller's interest in the Subject Properties represents .37500 of the Working Interest in the Subject Properties and will entitle the owner thereof to receive not less than an undivided .28125 of the oil and gas produced, saved and marketed form the Leases. (c) Subject to the other terms of this Agreement, including (without limitation) the special warranty of title by Seller to be contained in the Assignment, Bill of Sale and Conveyance to be delivered by Seller to Buyer at Closing, Seller represents that Seller owns the Subject Properties, free and clear of any Title Defects. (d) To the best of Seller's knowledge, there are no actions, suits, charges, investigations or proceedings pending or threatened before any court or agency that would result in a loss or impairment of Subject Properties, obstruct operation of the Subject Properties, or significantly reduce the value of the Subject Properties. (e) To the best of Seller's knowledge, the Subject Properties are being operated in compliance with all applicable laws, rules and regulations of the Oil Conservation Division of the Energy, Mineral and Natural Resources Department of the State of New Mexico and any other governmental agency or authority having jurisdiction. (f) To the best of Seller's knowledge, there are no agreements or circumstances which would require Buyer to deliver hydrocarbons produced from any of the Subject Properties at some future time without receiving full payment for such production or which would require Buyer to make payment at some future time for hydrocarbons already produced and sold from the Subject Properties. (g) To the best of Seller's knowledge, Seller is not in default under any of the Leases or any contract or agreement relating thereto, and the same are in full force and effect. (h) With respect to the Subject Properties: (i) Since the date(s) on which Seller acquired the Subject Properties, the Subject Properties have been used by Seller solely for oil and gas operations and related operations; and not for the generation, storage or disposal of a hazardous substance or as a landfill or other waste disposal site. (ii) To the best of Seller's knowledge, there are no underground storage tanks on any of the Leases; (iii) Seller has not entered into and, to the knowledge of Seller, no predecessor to Seller has entered into, or is subject to, any agreements, consent orders, decrees, judgments, license or permit conditions or other directives of governmental authorities in existence at this time based on any environmental laws that relate to the future use of any of the Subject Properties or that require any change in the present condition of any of the Subject Properties. 4. ENVIRONMENTAL REVIEW. Buyer shall have until the Closing to examine, test, evaluate, and otherwise conduct an environmental investigation of the Subject Properties for actual and potential environmental damage or liability, if any. On the Closing, Buyer will advise Seller of the results thereof. If the Environmental Review by Buyer reflects a material reduction in the value of the Subject Properties, Buyer shall have the option to either terminate this Agreement without penalty or waive the requirement or condition which caused such termination right to exist. Any actual or potential environmental damages, or liability shall be of such nature, extent or consequence, that under current statutes or regulations regarding such matters, any reasonable, prudent person would regard it as a material potential environmental damage or liability. Buyer may exercise such option to terminate, if applicable, at or before Closing. 5.        ENVIRONMENTAL ACCEPTANCE. Notwithstanding any other provision herein to the contrary, if Buyer purchases the Subject Properties, Buyer shall have accepted the Subject Properties "As Is", and Buyer shall be liable for any environmental cleanup required on the Subject Properties. 6. CLOSING. The purchase and sale transaction described in and contemplated by this Agreement shall take place on October 9, 2000, at 12:00 p.m. Dallas, Texas time, but in any event not later than October 13, 2000. Closing shall take place in the office of Buyer at 5735 Pineland, Suite 235, Dallas, Texas 75231, or at such other place and time agreed upon between Buyer and Seller. The Effective Date of the purchase and sale contemplated by this Agreement shall be at 7 a.m. on the first day of August, 2000. At Closing: (a) Buyer shall deliver to Seller the Purchase Price by wire transfer, certified or cashier's check or other immediately available funds; and (b) Seller shall concurrently deliver to Buyer (3) three or more properly executed and acknowledged Assignments, Conveyances and Bills of Sale effective to convey to Buyer the Subject Properties. Such instruments shall be in form attached hereto as Exhibit "B" and shall be subject to this Agreement and the operating agreement which is described in Exhibit "C" hereto. 7. CONDITIONS TO OBLIGATIONS OF BUYER AT CLOSING. The obligations of Buyer to purchase the Subject Properties under and pursuant to this Agreement is subject to the satisfaction, at or before Closing, of the following conditions : (a) Compliance; Accuracy of Representations. Except as otherwise provided in this Agreement, Seller shall have performed, satisfied, and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed, satisfied, or complied with by it on or before the Closing, and all representations and warranties of Seller in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as though they had been made on the Closing Date. (b) No Orders or Lawsuits. No order, writ, injunction, or decree shall have been entered and be in effect by any court of competent jurisdiction or any Governmental Authority, and no Law shall have been promulgated or enacted and be in effect, that restrains, enjoins, or invalidates the transactions contemplated hereby. No Proceeding initiated by a third party shall be pending before any court or Governmental Authority seeking to restrain or prohibit or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement. (c) No Material Adverse Change. Since the date of this Agreement, there shall not have been a Material Adverse Effect. The term "Material Adverse Effect" shall mean any circumstance, change, development, or event which has had or is reasonably expected to have a material adverse effect on the Subject Properties or the operations, revenues, or prospects with respect thereto; provided that the term "Material Adverse Effect" shall not include changes in general economic, industry, or market conditions, or changes in law, environmental law, or any Governmental Authority's policy, orders, or opinions. (d) Conveyance Documents. Seller shall have duly executed and delivered to Buyer the conveyance documents described in this Agreement. (e) Due Diligence. Buyer shall have satisfactorily completed its due diligence inquiries prior to the Closing. (f) Third Party and Governmental Consents. Seller shall have obtained all third party and governmental consents or waivers necessary to consummate the transactions contemplated by this Agreement in form and substance reasonably satisfactory to Buyer. (g) Seller shall present to Buyer a fully executed release (in a form acceptable to Buyer) of any and all liens of any kind or character pertaining to Seller's interest in the Subject Properties. 8. INDEMNITIES AND ASSUMPTION OF LIABILITIES. With the exception of environmental conditions (as stated in Paragraph 5. Above) for a period of three (3) years from and after Closing, Seller agrees to indemnify and hold Buyer harmless from all actions, damages, liabilities, claims and expenses (including reasonable attorney's fees) arising out of or relating to any act or omission by Seller with respect to its interest in the Subject Properties occurring prior to the Effective Date, and for any liability and damages caused by Sellers' negligence or breach of this Agreement prior to Closing. Buyer agrees to indemnify and hold Seller harmless against and form all actions, damages, liabilities, claims, and expenses (including reasonable attorney's fees) arising out of or relating to the Subject Properties from and after the Effective Date and for all acts or omissions of Buyer occurring from and after the Effective Date. As to the Subject Properties, Seller shall remain responsible for all claims relating to the drilling, operations, production and sale of hydrocarbons from the Subject Properties and the proper accounting and payment by Seller to parties for their interests therein, and any retroactive payment, refunds or penalties to any party or entity, insofar as such claims relate to occurrences and periods of time prior to the Effective Date, and Seller shall defend, indemnify and hold Buyer harmless from all such claims. Buyer shall be responsible for all such claims that relate to act and omissions relating to the Subject Properties from and after the Effective Date. All proceeds from the sale of production actually sold and delivered by Seller prior to the Effective Date and attributable to the Subject Properties shall belong to and be retained by Seller, and all proceeds from the sale of production actually sold and delivered after the Effective Date attributable to the Subject Properties shall belong to and be the property of Buyer. 9. PRORATION OF TAXES. Ad valorem, property, production, severance, excise, and similar taxes relating to the Subject Properties shall be prorated as of the Effective Date. Seller shall be responsible for all such items relating to the period of time prior to the Effective Date and Buyer shall be responsible for all such items that relate to the period from and after the Effective Date. 10. FURTHER ASSURANCES. Each party shall execute and deliver to the other such further instruments and assurances, and shall take such other actions as may be necessary to carry out the intent of this Agreement. Seller agrees to execute appropriate transfer orders or letters in lieu of transfer orders effective as of the Effective Date. 11. LOSS. Any loss to the wells comprising part of the Subject Properties between the date of this Agreement and the date of Closing resulting from fire, lightning, storm, or other casualty or from negligence of Seller, its operator, agents or employees, or the breach of this Agreement by Seller, shall be borne by Seller, and if there is material damage to such wells, Buyer shall have the option to terminate this Agreement upon written notice to Seller. 12. PROHIBITED ACTIONS. Prior to Closing, Seller shall not, without Buyer's prior written consent: (a) dispose of or make any changes to the Subject Properties; or (b) incur any liabilities, encumbrances or liens in respect to the Subject Properties which are not in the ordinary course of operations and will not be discharged at or before closing. 13. EXPENSES. Each party shall pay the fees and expenses of its own counsel and accountants incurred in connection with this transaction. 14. BROKERS. Each party represents that to the best of its knowledge and belief, no outside parties have participated in the negotiation of this transaction on behalf of either party, and no firm or person shall be entitled to any finder's or broker's fee with respect to the transaction contemplated by this Agreement. 15. INCORPORATION OF EXHIBITS. All exhibits to this Agreement constitute an integral part of and are incorporated in this Agreement. 16. LAW. Texas law shall govern the rights and obligations of the parties under this Agreement. 17. CERTAIN DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein" and "hereunder," and words of similar import, when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) The terms defined in the singular shall have a comparable meaning when used in the plural and vice versa. (c) Whenever a statement is qualified by the term "knowledge," "best knowledge," or similar term or phrase, it is intended to indicate that the person or party to whom or to which such phrase is attributed, in the exercise of good faith, is not aware of acts, omissions, or facts which would render the statement or representation being made with such "knowledge" or "best knowledge," or similar terms or phrase, untrue in any material respect. (d) Pronouns denoting gender shall include the neutral pronoun "it" or the possessive case thereof and vice versa. 18. NOTICES. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given if delivered in person or by facsimile transmission (FAX) or when deposited with the United States Postal Service registered or certified mail, return receipt requested, postage prepaid, addressed to the party to receive such notice at the address set forth below: If to Seller : Gladstone Energy, Inc. 3500 Oak Lawn, Suite 590 L.B. 49 Dallas, Texas 75219 Attention: Johnathan M. Hill If to Buyer : EXCO Resources, Inc. 5735 Pineland, Suite 235 Dallas, Texas 75231 Attention: Richard E. Miller 19. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Texas, County of Dallas, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world such party may be found. 20. FURTHER ASSURANCES. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 21. WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 22. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to the subject matter hereof. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 23. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. None of the parties may assign any of their rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns. 24. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 25. PARAGRAPH HEADINGS, CONSTRUCTION. The headings of Paragraphs in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 26. TIME OF ESSENCE. With regard to all dates and time periods provided for in this Agreement, time is of the essence. 27. GOVERNING LAW. This Agreement will be governed by the laws of the State of Texas. 28. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. SELLER: Gladstone Energy, Inc. By:     /s/ Johnathan M. Hill                          Johnathan M. Hill, President BUYER: EXCO Resources, Inc. By:       /s/ Ted W. Eubank, President            Ted W. Eubank, President EXHIBIT "A" ATTACHED TO AND A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED EFFECTIVE AUGUST 1, 2000 BY AND BETWEEN GLADSTONE ENERGY, INC., AS SELLER, AND EXCO RESOURCES, INC., AS BUYER THE LEASES   A. The following described oil and gas leases insofar as such leases cover the operating rights under such leases in and to the Mesaverde Formation in and upder the respective lands described below:   Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3-A   Lease No. SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" No. 2A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 078480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico     B. The following described oil and gas leases insofar as such leases cover the operating rights under such leases in and to the Chacra Formation in and under the respective lands described below:   Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3A   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less in San Juan County, New Mexico         Well Name: Federal "E" No. 2-A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 0768480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico   EXHIBIT "B" ATTACHED TO AND A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED EFFECTIVE AUGUST 1ST, 2000 BY AND BETWEEN GLADSTONE ENERGY, INC., AS SELLER, AND EXCO RESOURCES, INC., AS BUYER ASSIGNMENT OF OPERATING RIGHTS This Assignment entered into by and between GLADSTONE ENERGY, INC., a Delaware corporation, with offices at 3500 Oak Lawn, Suite 590, LB 49, Dallas, Texas 75219, hereinafter referred to as "Assignor", and EXCO RESOURCES, INC., a Texas corporation, with offices at 5735 Pineland, Suite 235, Dallas, TX 75231, hereinafter referred to as "Assignee". W I T N E S S E T H: Assignor, for $10.00 cash and other valuable consideration, the receipt of which is acknowledged, does hereby assign, transfer and convey unto Assignee, its successors and assigns, the following: (i) all of Assignor's undivided 37.5% interest in the operating rights in the Mesaverde Formation in and under the leases and lands specifically described under A below, (ii) all of Assignor's undivided 37.5% interest in the operating rights in the Chacra Formation in and under the leases and lands specifically described in B below, and (iii) all of Assignor's undivided 37.5% interest in and to each of the related properties, rights and interests described in C below:      A. MESAVERDE FORMATION OPERATING RIGHTS         Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3-A   Lease No. SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" No. 2A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 078480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico            B. CHACRA FORMATION OPERATING RIGHTS         Well Name: Federal "J" Nos. 1-A and 1-R   Lease No.: SF 078476   Land: Township 27 North, Range 8 West     Section 11: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 3 and 3A   Lease No.: SF 078476   Land: Township 27 North, Range 8 West NMPM     Section 13: W/2     Containing 320 acres, more or less in San Juan County, New Mexico         Well Name: Federal "E" No. 2-A   Lease No.: SF 078478   Land: Township 27 North, Range 8 West NMPM     Section 23: E/2     Containing 320 acres, more or less, in San Juan County, New Mexico         Well Name: Federal "E" Nos. 1 and 4   Lease No.: SF 0768480   Land: Township 27 North, Range 8 West NMPM     Section 25: W/2     Containing 320 acres, more or less, in San Juan County, New Mexico            C. RELATED PROPERTIES, RIGHTS AND INTERESTS   (1) All wells (whether producing, non-producing, shut-in, abandoned or temporarily abandoned and whether oil wells, gas wells, saltwater disposal wells, injection wells or water wells) located on the leases and lands described in A and B above, together with all of the personal property and equipment used or obtained in connection with such wells, including, but not limited to, all casing, pipe, tubing, rods, separators, well-head and in-hole equipment, tanks, motors, fixtures and other such personal property and equipment;         (2) All permits, licenses, orders, pooling or unitization orders and agreements, communitization agreements, operating agreements, exploration agreements, farmin or farmout agreements, letter agreements, processing, transportation or lease agreements, and other contracts and agreements which, and only insofar as the same cover, relate or pertain to the leases, lands, and wells described in A, B and C. (1) above; and         (3) All rights-of-way, easements, servitudes, surface leases, treating facilities, pipelines and gathering systems which cover, relate or pertain to the leases and the wells described in A, B and C. (1) above, or which may be necessary or convenient to be used in connection therewith;   all of the foregoing, together with all appurtenances and additions thereto, and reversionary and carried interests therein, being herein collectively called the "Subject Properties". TO HAVE AND TO HOLD the Subject Properties to Assignee, its successors and assigns, subject, however, to the following: This Assignment of Operating Rights shall cover and relate to said leases and any modifications or extensions thereof insofar as said extensions or modifications pertain to the formations and lands specifically described above. The interests herein assigned and conveyed are subject to their proportionate 37.5% share of the royalties provided for in the leases described above and the outstanding overriding royalties under said leases which, when taken together, equal 25% of 8/8 of the oil and gas produced, saved and marketed from the operating rights described above. Assignor and Assignee agree to comply with all the provisions of Section 202 (1) to (7), inclusive, of Executive Order 11246 (30 F.R. 12319) which are hereby incorporated by reference. The interests herein assigned are subject to all the terms and covenants, conditions and provisions of: (i) the Assignment of Operating Rights and Working Interest dated June 16, 1972, from Atlantic Richfield Company to R. C. Wynn covering the operating rights in the leases and lands described above; and (ii) that certain Operating Agreement dated August 12, 1980, executed by and among AAA Operating Company, Inc., as Operator, and Gladstone Resources, Inc., et al, as Non-Operator, covering the above described leases, lands and operating rights.   The interests herein assigned are subject to all the terms and covenants, conditions and provisions of that certain Purchase and Sale Agreement dated effective August 1, 2000 by and between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Buyer, hereinafter called the "PSA". NOTWITHSTANDING any provision in this instrument or the PSA to the contrary, any warranties of title of Assignor made herein shall be only as against persons claiming by, through or under Assignor, and not otherwise. IN WITNESS WHEREOF , this Assignment of Operating Rights is executed on the dates of the acknowledgements hereto, effective however, on the 1st day of August, 2000 at 7:00 a.m. San Juan County, New Mexico time. ASSIGNOR ATTEST: GLADSTONE ENERGY, INC. ___________________________ By: _______ Secretary Jonathan M. Hill, President     ASSIGNEE ATTEST: EXCO RESOURCES, INC. ________________________ By: _____________________________ Richard E. Miller, Secretary Ted W. Eubank, President     ACKNOWLEDGEMENTS STATE OF TEXAS COUNTY OF DALLAS The foregoing instrument was acknowledged before me this _____ day of September, 2000, by Jonathan M. Hill, as President of Gladstone Energy, Inc. on behalf of said corporation.   (SEAL)                                                                                           Notary Public   STATE OF TEXAS COUNTY OF DALLAS The foregoing instrument was acknowledged before me this _____ day of September, 2000, by Ted W. Eubank, as President of EXCO Energy, Inc. on behalf of said corporation. (SEAL)                                                                                                             Notary Public   EXHIBIT "C" ATTACHED TO AND A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED SEPTEMBER 8TH , 2000 BY AND BETWEEN GLADSTONE ENERGY, INC., AS SELLER, AND EXCO RESOURCES, INC., AS BUYER   That certain Operating Agreement dated August 12, 1980, by and among AAA Operating Company, Inc., as Operator, and Gladstone Resources, Inc, et al, as Non-Operators, covering the following lands insofar and only insofar as they cover and pertain to the Mesaverde and Chacra Formations to wit:                 T27N, R8W, N.M.P.M., San Juan, New Mexico Section 11: E/2 Section 13: W/2 Section 23: E/2 Section 25: W/2        

EXHIBIT 10.3 SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT         THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into as of June 1, 2000, by and between Eric Moser (the “Employee”) and Waste Connections, Inc., a Delaware corporation (the “Company”), and amends and restates the First Amended and Restated Employment Agreement entered into by the parties as of October 1, 1997, with reference to the following facts.         The Company desires to engage the services and employment of the Employee for the period provided in this Agreement, and the Employee is willing to accept employment by the Company for such period, on the terms and conditions set forth below.         NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions herein, the Company and the Employee agree as follows:         1.  Employment. The Company agrees to employ the Employee, and the Employee agrees to accept employment with the Company, for the Term stated in Section 3 hereof and on the other terms and conditions herein.         2.  Position and Responsibilities. During the Term, the Employee shall serve as the Company’s Vice President—Corporate Controller and Treasurer, reporting directly to the Company’s Chief Accounting Officer, and shall perform such other duties and responsibilities as the Chief Accounting Officer or the Board of Directors (the “Board”) of the Company may reasonably assign to the Employee from time to time. The Employee shall be based at the Company’s corporate headquarters in Folsom, California. The Employee shall devote such time and attention to his duties as are necessary to the proper discharge of his responsibilities hereunder. The Employee agrees to perform all duties consistent with (a) policies established from time to time by the Company and (b) all applicable legal requirements.         3.  Term. The period of the Employee’s employment under this Agreement (the “Term”) commenced on October 1, 1997, and shall continue through May 31, 2003, unless terminated earlier as provided herein or extended by the Board. On each anniversary of the date of this Agreement, commencing June 1, 2001, this Agreement shall be extended automatically for an additional year, thus extending the Term to three years from such date, unless either party shall have given the other notice of termination hereof as provided herein.         4.  Compensation, Benefits and Reimbursement of Expenses.               (a)  Compensation. The Company shall compensate the Employee during the Term of this Agreement as follows:                      (1)  Base Salary. The Employee shall be paid a base salary (“Base Salary”) of not less than One Hundred Fifteen Thousand Dollars ($115,000) per year in installments consistent with the Company’s usual practices. The Board shall review the Employee’s Base Salary on October 1 of each year or more frequently, at the times prescribed in salary administration practices applied generally to management employees of the Company.                      (2)  Performance Bonus. The Employee shall be entitled to an annual cash bonus (the “Bonus”) based on the Company’s attainment of reasonable financial objectives to be determined annually by the Board. The maximum annual Bonus will equal thirty-five percent (35%) of the applicable year’s ending Base Salary and will be payable if the Board determines, in its sole and exclusive discretion, that that year’s financial objectives have been fully met. The Bonus shall be paid in accordance with the Company’s bonus plan, as approved by the Board; provided that in no case shall any portion of the Bonus with respect to any such fiscal year be paid more than seventy-five (75) days after the end of such fiscal year.                      (3)  Grant of Options. The Employee shall be eligible for annual grants of stock options (“Options”) commensurate with his position and with option grants to other management employees of the Company, based on the recommendation of the Company’s President and as approved by the Board. The terms of the Options shall be described in more detail in Stock Option Agreements to be entered into between the Employee and the Company. 1 --------------------------------------------------------------------------------                      (4)  Grant of Restricted Stock. On October 1, 1997, the Company sold to the Employee, for $0.01 per share in cash, 10,000 shares of the Company’s Common Stock (the “Restricted Stock”). Such Restricted Stock was not transferable initially by the Employee, but 3,333 shares of Restricted Stock became unrestricted and freely transferable (subject to compliance with all applicable Federal and state securities laws) on each of October 1, 1998, and October 1, 1999, and the remaining 3,334 shares of Restricted Stock shall become unrestricted and freely transferable (subject to compliance with all applicable Federal and state securities laws) on October 1, 2000. If a Change in Control of the Company (as defined in Section 10(b)) occurs before all of the Employee’s Restricted Stock has become unrestricted and freely transferable under this Section 4(a)(4), all of the Employee’s shares of Restricted Stock shall immediately become unrestricted and freely transferable on such Change of Control, and all shares of Restricted Stock granted to the Employee hereunder shall be treated as owned by the Employee without restriction for the purpose of determining the Employee’s percentage ownership of the Company on such Change of Control. If before all of the Employee’s Restricted Stock has become unrestricted and freely transferable under this Section 4(a)(4), the Employee’s employment is terminated by the Company without Cause (as defined in Section 7(a)) or by the Employee for Good Reason (as defined in Section 8(a)), all of the Employee’s shares of Restricted Stock shall immediately become unrestricted and freely transferable on such termination. If the Employee’s employment is terminated by the Company for Cause or by the Employee without Good Reason before all of the Restricted Stock has become unrestricted and freely transferable, the Company may, within 90 days after such termination of employment, repurchase from the Employee for $0.01 per share in cash any shares of Restricted Stock that are subject to restrictions on transfer under this Section 4(a)(4) as of the termination date. The Employee may in his sole discretion file an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to the Restricted Stock.               (b)  Other Benefits. During the Term, the Company shall provide the Employee with a cellular telephone and will pay or reimburse the Employee’s monthly service fee and costs of calls attributable to Company business. During the Term, the Employee shall be entitled to receive all other benefits of employment generally available to other management employees of the Company and those benefits for which management employees are or shall become eligible, including, without limitation and to the extent made available by the Company, medical, dental, disability and prescription coverage, life insurance and tax-qualified retirement benefits. The Employee shall be entitled to three (3) weeks of paid vacation each year of his employment.               (c)  Reimbursement of Other Expenses. The Company agrees to pay or reimburse the Employee for all reasonable travel and other expenses (including mileage for business use of employee’s personal automobile at the maximum rate permitted under Internal Revenue Service regulations) incurred by the Employee in connection with the performance of his duties under this Agreement on presentation of proper expense statements or vouchers. All such supporting information shall comply with all applicable Company policies relating to reimbursement for travel and other expenses.               (d)  Withholding. All compensation payable to the Employee hereunder is subject to all withholding requirements under applicable law.         5.  Confidentiality. During the Term of his employment, and at all times thereafter, the Employee shall not, without the prior written consent of the Company, divulge to any third party or use for his own benefit or the benefit of any third party or for any purpose other than the exclusive benefit of the Company, any confidential or proprietary business or technical information revealed, obtained or developed in the course of his employment with the Company and which is otherwise the property of the Company or any of its affiliated corporations, including, but not limited to, trade secrets, customer lists, formulae and processes of manufacture; provided, however, that nothing herein contained shall restrict the Employee’s ability to make such disclosures during the course of his employment as may be necessary or appropriate to the effective and efficient discharge of his duties to the Company.         6.  Property. Both during the Term of his employment and thereafter, the Employee shall not remove from the Company’s offices or premises any Company documents, records, notebooks, files, correspondence, reports, memoranda and similar materials or property of any kind unless necessary in accordance with the duties and responsibilities of his employment. In the event that any such material or property is removed, it shall be returned to its proper file or place of safekeeping as promptly as possible. The Employee shall not make, retain, remove or distribute any copies, or divulge to any third person the nature or contents of any of the foregoing or of any other oral or written information to which he may have access, except as disclosure shall be necessary in the performance of his assigned duties. On the termination of his employment with the Company, the Employee shall leave with or 2 -------------------------------------------------------------------------------- return to the Company all originals and copies of the foregoing then in his possession or subject to his control, whether prepared by the Employee or by others.         7.  Termination By Company.               (a)  Termination for Cause. The employment of the Employee may be terminated for Cause at any time by the Board; provided, however, that before the Company may terminate the Employee’s employment for Cause for any reason that is susceptible to cure, the Company shall first send the Employee written notice of its intention to terminate this Agreement for Cause, specifying in such notice the reasons for such Cause and those conditions that, if satisfied by the Employee, would cure the reasons for such Cause, and the Employee shall have 60 days from receipt of such written notice to satisfy such conditions. If such conditions are satisfied within such 60-day period, the Company shall so advise the Employee in writing. If such conditions are not satisfied within such 60-day period, the Company may thereafter terminate this Agreement for Cause on written Notice of Termination (as defined in Section 9(a)) delivered to the Employee describing with specificity the grounds for termination. Immediately on termination pursuant to this Section 7(a), the Company shall pay to the Employee in a lump sum his then current Base Salary under Section 4(a)(1) on a prorated basis to the Date of Termination (as defined in Section 9(b)). On termination pursuant to this Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such termination occurs, and (ii) all outstanding but unvested Options and other options and rights relating to capital stock of the Company, and all shares of Restricted Stock that as of the termination date are still subject to the restrictions on transfer imposed by Section 4(a)(4) shall be subject to repurchase by the Company as provided in Section 4(a)(4). For purposes of this Agreement, Cause shall mean:                      (1)  a material breach of any of the terms of this Agreement that is not immediately corrected following written notice of default specifying such breach;                      (2)  a breach of any of the provisions of Section 12;                      (3)  repeated intoxication with alcohol or drugs while on Company premises during its regular business hours to such a degree that, in the reasonable judgment of the other managers of the Company, the Employee is abusive or incapable of performing his duties and responsibilities under this Agreement;                      (4)  conviction of a felony; or                      (5)  misappropriation of property belonging to the Company and/or any of its affiliates.               (b)  Termination Without Cause. The employment of the Employee may be terminated without Cause at any time by the Board on delivery to the Employee of a written Notice of Termination (as defined in Section 9(a)). On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the Company shall, in lieu of any payments under Section 4(a)(1) and 4(a)(2) for the remainder of the Term, pay to the Employee an amount equal to the sum of (i) all Base Salary payable under Section 4(a)(1) through the termination date, (ii) the full (not pro-rated) maximum Bonus available to the Employee under Section 4(a)(2) for the year in which the termination occurs, and (iii) an amount equal to three times the Employee’s current annual Base Salary under Section 4(a)(1) plus three times his maximum Bonus under Section 4(a)(2) (whether or not the entire amount was actually earned or paid) for the year in which the termination occurs. Such amount shall be paid as follows: one third on the Date of Termination and, provided that Employee has complied with the provisions of Section 12 hereof, one third on each of the first and second anniversaries of the Date of Termination of the Employee’s employment. In addition, on termination of the Employee under this Section 7(b), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination. The Employee acknowledges that extending the term of any incentive stock options pursuant to this Section 7(b), or Section 7(c), 7(d) or 8(a), could cause such option to lose its tax-qualified status if such Option is an incentive stock option under the Code and agrees that the Company shall have no obligation to compensate the Employee for any additional taxes he incurs as a result.               (c)  Termination on Disability. If during the Term the Employee should fail to perform his duties hereunder on account of physical or mental illness or other incapacity which the Board shall in good faith determine renders the Employee incapable of performing his duties hereunder, and such illness or other incapacity 3 -------------------------------------------------------------------------------- shall continue for a period of more than six (6) consecutive months (“Disability”), the Company shall have the right, on written Notice of Termination (as defined in Section 9(a)) delivered to the Employee to terminate the Employee’s employment under this Agreement. During the period that the Employee shall have been incapacitated due to physical or mental illness, the Employee shall continue to receive the full Base Salary provided for in Section 4(a)(1) hereof at the rate then in effect until the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of Termination pursuant to this Section 7(c), the Company shall pay to the Employee in a lump sum an amount equal to (i) the Base Salary remaining payable to the Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a pro-rated portion of the maximum Bonus available to the Employee under Section 4(a)(2) for the year in which the termination occurs. In addition, on such termination, all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination.               (d)  Termination on Death. If the Employee shall die during the Term, the employment of the Employee shall thereupon terminate. On the Date of Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the Company shall pay to the Employee’s estate the payments and other benefits applicable to termination without Cause set forth in Section 7(b) hereof. In addition, on termination of the Employee under this Section 7(d), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination. The provisions of this Section 7(d) shall not affect the entitlements of the Employee’s heirs, executors, administrators, legatees, beneficiaries or assigns under any employee benefit plan, fund or program of the Company.         8.  Termination By Employee.               (a)  Termination for Good Reason. The Employee may terminate his employment hereunder for Good Reason (as defined below). On the Date of Termination pursuant to this Section 8(a), the Employee shall be entitled to receive, and the Company agrees to pay and deliver, the payments and other benefits applicable to termination without Cause set forth in Section 7(b) hereof at the times and subject to the conditions set forth therein. In addition, on termination of the Employee under this Section 8(a), all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable. The term of any such options and rights shall be extended to the third anniversary of the Employee’s termination.         For purposes of this Agreement, “Good Reason” shall mean:                      (1)  assignment to the Employee of duties inconsistent with his responsibilities as they existed on the date of this Agreement; a substantial alteration in the title(s) of the Employee (so long as the existing corporate structure of the Company is maintained); or a substantial alteration in the status of the Employee in the Company organization as it existed on the date of this Agreement;                      (2)  the relocation of the Employee to a location more than fifty (50) miles from Vancouver;                      (3)  a reduction by the Company in the Employee’s Base Salary without the Employee’s prior approval;                      (4)  a failure by the Company to continue in effect, without substantial change, any benefit plan or arrangement in which the Employee was participating or the taking of any action by the Company which would adversely affect the Employee’s participation in or materially reduce his benefits under any benefit plan (unless such changes apply equally to all other management employees of Company);                      (5)  any material breach by the Company of any provision of this Agreement without the Employee having committed any material breach of his obligations hereunder, which breach is not cured within twenty (20) days following written notice thereof to the Company of such breach; or 4 --------------------------------------------------------------------------------                      (6)  the failure of the Company to obtain the assumption of this Agreement by any successor entity.               (b)  Termination Without Good Reason. The Employee may terminate his employment hereunder without Good Reason on written Notice of Termination delivered to the Company setting forth the effective date of termination. If the Employee terminates his employment hereunder without Good Reason, he shall be entitled to receive, and the Company agrees to pay on the effective date of termination specified in the Notice of Termination, his current Base Salary under Section 4(a)(1) hereof on a prorated basis to such date of termination. On termination pursuant to this Section 8(b), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such termination occurs, and (ii) all outstanding but unvested Options and other options and rights relating to capital stock of the Company, and all shares of Restricted Stock that as of the termination date are still subject to the restrictions on transfer imposed by Section 4(a)(4) shall be subject to repurchase by the Company as provided in Section 4(a)(4).         9.  Provisions Applicable to Termination of Employment.               (a)  Notice of Termination. Any purported termination of Employee’s employment by the Company pursuant to Section 7 shall be communicated by Notice of Termination to the Employee as provided herein, and shall state the specific termination provisions in this Agreement relied on and set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment (“Notice of Termination”). If the Employee terminates under Section 8, he shall give the Company a Notice of Termination.               (b)  Date of Termination. For all purposes, “Date of Termination” shall mean, for Disability, thirty (30) days after Notice of Termination is given to the Employee (provided the Employee has not returned to duty on a full-time basis during such 30-day period), or, if the Employee’s employment is terminated by the Company for any other reason or by the Employee, the date on which a Notice of Termination is given.               (c)  Benefits on Termination. On termination of this Agreement by the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all profit-sharing, deferred compensation and other retirement benefits payable to the Employee under benefit plans in which the Employee then participated shall be paid to the Employee in accordance with the provisions of the respective plans.         10.  Change In Control.               (a)  Payments on Change in Control. Notwithstanding any provision in this Agreement to the contrary, unless the Employee elects in writing to waive this provision, a Change in Control (as defined below) of the Company shall be deemed a termination of the Employee without Cause, and the Employee shall be entitled to receive and the Company agrees to pay to the Employee the same amount determined under Section 7(b) that is payable to the Employee on termination without Cause provided, however, that such amount shall be payable in a lump sum on the Date of Termination and not in installments as provided in Section 7(b). In addition, on a Change of Control, all of the Employee’s outstanding but unvested Options and other options and rights relating to capital stock of the Company shall immediately vest and become exercisable, the term of any such options and rights shall be extended to the third anniversary of the Employee’s termination, and all shares of the Employee’s Restricted Stock shall immediately become unrestricted and freely transferable.         After a Change in Control, if any previously outstanding Option or other option or right (the “Terminated Option”) relating to the Company’s capital stock does not remain outstanding, the successor to the Company or its then Parent (as defined below) shall either:                      (1)  Issue an option, warrant or right, as appropriate (the “Successor Option”), to purchase common stock of such successor or Parent in an amount such that on exercise of the Successor Option the Employee would receive the same number of shares of the successor’s/Parent’s common stock as the Employee would have received had the Employee exercised the Terminated Option immediately prior to the transaction resulting in the Change in Control and received shares of such successor/Parent in such transaction. The aggregate exercise price for all of the shares covered by such Successor Option shall equal the aggregate exercise price of the Terminated Option; or                      (2)  Pay the Employee a bonus within ten (10) days after the consummation of the Change in Control in an amount agreed to by the Employee and the Company. Such amount shall be at least 5 -------------------------------------------------------------------------------- equivalent on an after-tax basis to the net after-tax gain that the Employee would have realized if he had been issued a Successor Option under clause (i) above and had immediately exercised such Successor Option and sold the underlying stock, taking into account the different tax rates that apply to such bonus and to such gain, and such amount shall also reflect other differences to the Employee between receiving a bonus under this clause (ii) and receiving a Successor Option under clause (i) above.               (b)  Definitions. For the purposes of this Agreement, a Change in Control shall be deemed to have occurred if (i) there shall be consummated (aa) any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction, (bb) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or if (ii) any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company’s outstanding voting securities (except that for purposes of this Section 10(b), “person” shall not include any person or any person that controls, is controlled by or is under common control with such person, who as of the date of this Agreement owns ten percent (10%) or more of the total voting power represented by the outstanding voting securities of the Company, or a trustee or other fiduciary holding securities under any employee benefit plan of the Company, or a corporation that is owned directly or indirectly by the stockholders of the Company in substantially the same percentage as their ownership of the Company) or if (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least one-half of the membership thereof unless the election, or the nomination for election by the Company’s shareholders, of each new director was approved by a vote of at least one-half of the directors then still in office who were directors at the beginning of the period.         The term “Parent” means a corporation, partnership, trust, limited liability company or other entity that is the ultimate “beneficial owner” (as defined above) of fifty percent (50%) or more of the Company’s outstanding voting securities.         11.  Gross Up Payments. If all or any portion of any payment or benefit that the Employee is entitled to receive from the Company pursuant to this Agreement (a “Payment”) constitutes an “excess parachute payment” within the meaning of Section 280G of the Code, and as such is subject to the excise tax imposed by Section 4999 of the Code or to any similar Federal, state or local tax or assessment (the “Excise Tax”), the Company or its successors or assigns shall pay to the Employee an additional amount (the “Gross-Up Payment”) with respect to such Payment. The amount of the Gross-Up Payment shall be sufficient that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c) any interest and penalties imposed in respect of the Excise Tax, the Employee shall retain an amount equal to the full amount of the Payment. For the purpose of determining the amount of any Gross-Up Payment, the Employee shall be deemed to pay Federal income taxes at the highest marginal rate applicable in the calendar year in which the Gross-Up Payment is made, and state and local income taxes at the highest marginal rate applicable in the state and locality where the Employee resides on the date the Gross-Up Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from deducting such state and local taxes.         The Gross-Up Payment with respect to any Payment shall be paid to the Employee within ten (10) days after the Internal Revenue Service or any other taxing authority issues a notice stating that an Excise Tax is due with respect to the Payment, unless the Company undertakes to challenge the taxing authority on the applicability of such Excise Tax and indemnifies the Employee for (a) any amounts ultimately determined to be payable, including the Excise Tax and any related interest and penalties, (b) all expenses (including attorneys’ and experts’ fees) reasonably incurred by the Employee in connection with such challenge, as such expenses are incurred, and (c) all amounts that the Employee is required to pay to the taxing authorities during the pendency of such challenge (such amounts to be repaid by the Employee to the Company if they are ultimately refunded to the Employee by the taxing authority). 6 --------------------------------------------------------------------------------         12.  Non-Competition and Non-Solicitation.               (a)  In consideration of the provisions hereof, for the Restricted Period (as defined below), the Employee will not, except as specifically provided below, anywhere in any county in the state of California or anywhere in any other state in which the Company is engaged in business as of such termination date (the “Restricted Territory”), directly or indirectly, acting individually or as the owner, shareholder, partner or management employee of any entity, (i) engage in the operation of a solid waste collection, transporting or disposal business, transfer facility, recycling facility, materials recovery facility or solid waste landfill; (ii) enter the employ as a manager of, or render any personal services to or for the benefit of, or assist in or facilitate the solicitation of customers for, or receive remuneration in the form of management salary, commissions or otherwise from, any business engaged in such activities in such counties; or (iii) receive or purchase a financial interest in, make a loan to, or make a gift in support of, any such business in any capacity, including without limitation, as a sole proprietor, partner, shareholder, officer, director, principal agent or trustee; provided, however, that the Employee may own, directly or indirectly, solely as an investment, securities of any business traded on any national securities exchange or quoted on any NASDAQ market, provided the Employee is not a controlling person of, or a member of a group which controls, such business and further provided that the Employee does not, in the aggregate, directly or indirectly, own two percent (2%) or more of any class of securities of such business. The term “Restricted Period” shall mean the earlier of (i) the maximum period allowed under applicable law and (ii)(x) in the case of a Change of Control, until the third anniversary of the effective date of the Change of Control, (y) in the case of a termination by the Company without Cause pursuant to Section 7(b) or by the Employee for Good Reason pursuant to Section 8(a) and provided the Company has made the payments required under Section 7(b) or 8(a), as the case may be, until the third anniversary of the Date of Termination, or (z) in the case of Termination for Cause by the Company pursuant to Section 7(a) or by the Employee without Good Reason pursuant to Section 8(b), until the first anniversary of the Date of Termination.               (b)  After termination of this Agreement by the Company or the Employee pursuant to Section 7 or 8 or termination of this Agreement upon a Change in Control pursuant to Section 10, the Employee shall not (i) solicit any residential or commercial customer of the Company to whom the Company provides service pursuant to a franchise agreement with a public entity in the Restricted Territory (ii) solicit any residential or commercial customer of the Company to enter into a solid waste collection account relationship with a competitor of the Company in the Restricted Territory, (iii) solicit any such public entity to enter into a franchise agreement with any such competitor, (iv) solicit any officer, employee or contractor of the Company to enter into an employment or contractor agreement with a competitor of the Company or otherwise interfere in any such relationship, or (v) solicit on behalf of a competitor of the Company any prospective customer of the Company in the Restricted Territory that the Employee called on or was involved in soliciting on behalf of the Company during the Term, in each case until the third anniversary of the date of such termination or the effective date of such Change of Control (whichever is later), unless otherwise permitted to do so by Section 12(a).               (c)  If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 12 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specified words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.         13.  Indemnification. As an employee and agent of the Company, the Employee shall be fully indemnified by the Company to the fullest extent permitted by applicable law in connection with his employment hereunder.         14.  Survival of Provisions. The obligations of the Company under Section 13 of this Agreement, and of the Employee under Section 12 of this Agreement, shall survive both the termination of the Employee’s employment and this Agreement.         15.  No Duty to Mitigate; No Offset. The Employee shall not be required to mitigate damages or the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other sources or offset against any other payments made to him or required to be made to him pursuant to this Agreement. 7 --------------------------------------------------------------------------------         16.  Assignment; Binding Agreement. The Company may assign this Agreement to any parent, subsidiary, affiliate or successor of the Company. This Agreement is not assignable by the Employee and is binding on him and his executors and other legal representatives. This Agreement shall bind the Company and its successors and assigns and inure to the benefit of the Employee and his heirs, executors, administrators, personal representatives, legatees or devisees. The Company shall assign this Agreement to any entity that acquires its assets or business.         17.  Notice. Any written notice under this Agreement shall be personally delivered to the other party or sent by certified or registered mail, return receipt requested and postage prepaid, to such party at the address set forth in the records of the Company or to such other address as either party may from time to time specify by written notice.         18.  Entire Agreement; Amendments. This Agreement contains the entire agreement of the parties relating to the Employee’s employment and supersedes all oral or written prior discussions, agreements and understandings of every nature between them. This Agreement may not be changed except by an agreement in writing signed by the Company and the Employee.         19.  Waiver. The waiver of a breach of any provision of this Agreement shall not operate or as be construed to be a waiver of any other provision or subsequent breach of this Agreement.         20.  Governing Law and Jurisdictional Agreement. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California. The parties irrevocably and unconditionally submit to the jurisdiction and venue of any court, federal or state, situated within Sacramento County, California, for the purpose of any suit, action or other proceeding arising out of, or relating to or in connection with, this Agreement.         21.  Severability. In case any one or more of the provisions contained in this Agreement is, for any reason, held invalid in any respect, such invalidity shall not affect the validity of any other provision of this Agreement, and such provision shall be deemed modified to the extent necessary to make it enforceable.         22.  Enforcement. It is agreed that it is impossible to measure fully, in money, the damage which will accrue to the Company in the event of a breach or threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the Employee waives the claim or defense that the Company has an adequate remedy at law and will not assert the claim or defense that such a remedy at law exists. The Company is entitled to injunctive relief to enforce the provisions of such sections as well as any and all other remedies available to it at law or in equity without the posting of any bond. The Employee agrees that if the Employee breaches any provision of Section 12, the Company may recover as partial damages all profits realized by the Employee at any time prior to such recovery on the exercise of any warrant, option or right to purchase the Company’s Common Stock and the subsequent sale of such stock, and may also cancel all outstanding such warrants, options and rights.         23.  Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute one and the same instrument.         24.  Due Authorization. The execution of this Agreement has been duly authorized by the Company by all necessary corporate action. 8 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties have executed and delivered this Second Amended Employment Agreement as of the day and year set forth above.      WASTE CONNECTIONS, INC., a Delaware corporation   By:        --------------------------------------------------------------------------------      Ronald J. Mittelstaedt President and Chief Executive Officer      EMPLOYEE:           --------------------------------------------------------------------------------      Eric Moser   9

Exhibit 10.01 MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES AMENDMENT NO. 3 TO THE MARTIN MARIETTA MATERIALS, INC. INCENTIVE STOCK PLAN       This Amendment No. 3 to the Martin Marietta Materials, Inc. Incentive Stock Plan, as previously amended (the “Plan”) hereby makes the following amendments, effective as of May 23, 2000.       Section 6.06 of the Plan is amended to add the following sentences:         “A Participant whose distribution of Common Shares is reduced to satisfy the withholding tax obligation may not request tax to be withheld at greater than the minimum rate. A Participant who is paying the withholding tax in cash may pay the withholding at greater than the minimum rate.”           All other terms and provisions of the Plan remain in full force and effect.

Exhibit 10.13 FIRST AMEMDMENT TO EMPLOYMENT AGREEMENT This First Amendment, dated as of May 17, 2000 is between JDS Uniphase Corporation, a Delaware corporation (the "Company") and Kevin Kalkhoven ("Employee"). PREMISES WHEREFORE, 1. Employee and the Company are parties to an Employment Agreement, dated as of September 29, 1999 (the "Employment Agreement"). 2. Employee has indicated his desire to retire from his current positions as an officer and director of the Company and from full-time employment with the Company. The Company wishes to retain Employee as a part-time employee until July 31, 2001 to assist the Company on strategic and operational issues as herein specified. 3. The parties wish to amend the Employment Agreement to provide for such retirement and part-time employment on the terms herein provided. NOW, THEREFORE, the parties hereby amend the Employment Agreement as follows: FIRST AMENDMENT 1. Scope of First Amendment. This Employment Agreement shall only serve to modify and amend those sections and provisions of the Employment Agreement specifically modified and amended herein, and the Employment Agreement shall remain in full force and effect, as so modified and amended by this First Amendment. To the extent of any conflict between this First Amendment and the Employment Agreement, this First Amendment shall prevail, take precedence and govern the rights and obligations of the parties. Except as specifically herein provided, defined terms set forth in the Employment Agreement shall have the same meaning for purposes of this First Amendment. Retirement and Resignation. Effective as of the date hereof, Employee resigns as officer and director of the Company, and the Company accepts such resignations. Such resignations shall not serve to terminate Employee's employment with the Company, which continue on the terms herein provided and in the Employment Agreement. Amendment to Exhibit A: Terms of Part-Time Employment. For all periods, on and after the date hereof, during the Term, Exhibit A to the Employment Agreement shall be amended in its entirety to be as set forth in Exhibit 1-A attached hereto, and Sections 2(a), 3 and 5 of the Employment Agreement shall be amended to reflect Exhibit 1-A to replace prior Exhibit A to the Employment Agreement. During any period of part-time employment by Employee, Employee shall perform such services at such times and places as directed by the Company in accordance with Exhibit I-A hereto and in accordance with the Company's general policies, procedures and requirements for part-time employees. Term Section 4 of the Employment Agreement shall be amended to change all references to July 6, 2004 therein from July 6, 2004 to July 31, 2001. Any rights of Employee under Section 5 of the Employment Agreement shall be determined on the basis of a Severance Period that shall in any event terminate on July 31, 2001. Upon July 31, 2001, the Term shall expire, and Employee's employment with the Company shall terminate, unless the parties shall agree otherwise in writing to extend such employment on at will basis. Upon such expiration, Employee shall have no rights to further salary, compensation, benefits or other payments or consideration of any kind for periods after July 31, 2001.   JDS Uniphase Corporation By: /s/ Michael C. Phillips Title: Senior Vice President /s/ Kevin Kalkhoven Kevin Kalkhoven -------------------------------------------------------------------------------- Exhibit A JDS Uniphase Nova Scotia Company JDS Uniphase, Inc. AFC Technologies, Inc. Oprel Technologies, Inc. JDS Uniphase Holdings, Inc. EXHIBIT 1-A Employee Position: Employee shall be employed on a full-time basis until July 31, 2000. Thereafter, Employee shall be a part-time employee providing 20 hours of service per week at such times as the Chief Executive Officer of the Company - shall reasonably designate at the Company's facilities located in San Jose, California. Employee shall report to the Chief Executive Officer or such person designated by the Chief Executive Officer on 90 days notice to Employee. Employee shall work on such strategic and operational issues and projects as directed by the person to whom Employee reports as provided in Paragraph (b) above. Such issues and projects shall include strategic relationships with third parties and acquisitions by the Company. The initial projects shall be specified in writing to Employee upon execution of this First Amendment. Base Salary: Current date to July 31, 2000: $400,000 per annum August 1,2000 to July 31, 2001: $200,000 per annum Target Bonus: FY ending 6/30/00: $300,000 FY ending 6/30/01: $150 000 Bonus is contingent and based on such individual, division and company-wide performance parameters as determined by the Company from time to time. Severance Period: Period of time from the Effective Date until July 31, 2001. Other Agreements: Change of Control Agreement. Such Agreement shall apply as to any Change of Control (as defined therein) that is consummated by way of a closing of such transaction within ninety (90) days of the Effective Date.         --------------------------------------------------------------------------------

LOAN AND SECURITY AGREEMENT Date: June 26, 2000       THIS AGREEMENT is made between       BROWN BROTHERS HARRIMAN & CO. (the "Lender"), a limited partnership organized under the laws of the State of New York with offices at 40 Water Street, Boston, Massachusetts        and       WESTERBEKE CORPORATION (the "Borrower"), a Delaware corporation with its principal executive offices at Avon Industrial Park, Avon, Massachusetts in consideration of the mutual covenants contained herein and benefits to be derived herefrom, WITNESSETH: ARTICLE 1 - DEFINITIONS .       As herein used, the following terms have the following meanings or are defined in the section of the within Agreement so indicated: "Acceptable Accounts ":       (a)    Such of the Borrower's Accounts and Accounts Receivable (as defined below) as arise in the ordinary course of the Borrower's business for goods sold and/or services rendered by the Borrower (net of Reserves), which Accounts and Accounts Receivable have been determined by the Lender to be satisfactory and have been earned by performance and are owed to the Borrower by such of the Borrower's trade customers as the Lender determines to be satisfactory, in the Lender's sole discretion in each instance, as to which Accounts and Accounts Receivable the Lender has a perfected security interest which is prior and superior to all security interests, claims and Encumbrances.       (b)    The following is a partial listing of those types of accounts or accounts receivable which are not Acceptable Accounts:           (i)    Any which is more than ninety (90) days old from invoice as shown on the agings of the Borrower's accounts receivable furnished the Lender from time to time (each of which agings shall be prepared in accordance with generally accepted auditing standards).           (ii)    Any which, when aggregated with all of the accounts of that Account Debtor, exceeds 40% of the then aggregate of Acceptable Accounts.           (iii)    Any which arises out of the sale by the Borrower of goods consigned or delivered to the Borrower or to the Account Debtor on sale or return terms (whether or not compliance has been made with Section 2-326 of the Uniform Commercial Code).           (iv)    Any which arises out of any sale made on a "bill and hold," dating, or delayed shipping basis.           (v)    Any which is owed by any Account Debtor whose principal place of business is not within the continental United States or the District of Columbia.           (vi)    Any which is owed by any Related Entity           (vii)    Any as to which the Account Debtor holds or is entitled to any claim, counterclaim, set off, or chargeback (but only to the extent of such right of claim, counterclaim, set off or chargeback).           (viii)    Any which is evidenced by a promissory note.           (ix)    Any which is owed by any person employed by, or a salesperson of, the Borrower.           (x)    Any which the Lender in its reasonable discretion considers unacceptable for any reason. "Acceptable Inventory": such of the Borrower's Inventory, at such locations, and of such types, character, qualities and quantities, (net of Inventory Reserves) as the Lender in its reasonable discretion from time to time determines to be acceptable for borrowing, as to which Inventory, the Lender has a perfected security interest which is prior and superior to all security interests, claims, and Encumbrances. "Acceptances": any acceptance, by the Lender, of a draft on the Borrower. "Accounts " and "Accounts Receivable" include, without limitation, "accounts" as defined in the UCC, and also all: accounts, accounts receivable, credit card receivables, notes, drafts, acceptances, and other forms of obligations and receivables and rights to payment for credit extended and for goods sold or leased, or services rendered, whether or not yet earned by performance; all "Contract Rights" as formerly defined in the UCC; all Inventory which gave rise thereto, and all rights associated with such Inventory, including the right of stoppage in transit; all reclaimed, returned, rejected or repossessed Inventory (if any) the sale of which gave rise to any Account, excluding foreign tax refunds and foreign tax abatements. "Account Debtor": has the meaning given that term in the UCC. "Affiliate": means, with respect to any two Persons, a relationship in which (a) one holds, directly or indirectly, not less than Twenty Five Percent (25%) of the capital stock, beneficial interests, partnership interests, or other equity interests of the other; or (b) one has, directly or indirectly, Control of the other; or (c) not less than Twenty Five Percent (25%) of their respective ownership is directly or indirectly held by the same third Person. "Availability": is defined in Section 2-1(b). "Bankruptcy Code": Title 11, U.S.C., as amended from time to time. "Base": The Base Rate announced from time to time by the Lender (or any successor in interest to the Lender). In the event that said bank (or any such successor) ceases to announce such a rate, "Base" shall refer to that rate or index announced or published from time to time as the Lender, in good faith, designates as the functional equivalent to said Base Rate. Any change in "Base" shall be effective, for purposes of the calculation of interest due hereunder, when such change is made effective generally by the bank on whose rate or index "Base" is being set. "Base Margin Loan": Each Revolving Credit Loan while bearing interest at the Base Margin Rate. "Base Margin Rate": Base plus zero (0%) per annum. "Borrower": is defined in the Preamble. "Borrowing Base": The lesser, on any day, of       (a)    the amount determined in accordance with Section 2-1(b)(i); or       (b)    the amount determined in accordance with Section 2-1(b)(ii) hereof, in each instance ((a) or (b)) determined without deduction from said amount of the unpaid principal balance of the Loan Account on that day. "Borrowing Base Certificate": is defined in Section 9-4. "Business Day": any day other than (a) a Saturday, Sunday; (b) a day on which the Lender is not open to the general public to conduct business; or (c) a day on which banks in Boston, Massachusetts generally are not open to the general public for the purpose of conducting commercial banking business, provided, however, for purposes of the selection or renewal of, or conversion to any Libor Loan, "Business Day" shall also exclude any day on which the London interbank market is not open. "Capital Lease": any lease which may be capitalized in accordance with GAAP. "Change in Control": The occurrence of any of the following:       (a)    The acquisition, by any group of persons (within the meaning of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of 20% or more of the issued and outstanding capital stock of the Borrower having the right, under ordinary circumstances, to vote for the election of directors of the Borrower       (b)    More than half of the persons who were directors of the Borrower on the first day of any period consisting of Twelve (12) consecutive calendar months (the first of which Twelve (12) month periods commencing with the first day of the month during which this Agreement was executed), cease, for any reason other than death or disability, to be directors of the Borrower. "Chattel Paper": has the meaning given that term in the UCC. "Collateral": is defined in Section 3-1. "Concentration Account": is defined in Section 7-1(b). "Control": Person(s) shall be deemed to Control another Person if such Person(s) directly or indirectly possess the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of voting securities, by contract, or otherwise. "Costs of Collection": includes, without limitation, all reasonable fees and reasonable out-of-pocket expenses incurred by the Lender's attorneys, and all reasonable costs incurred by the Lender in the administration of the Liabilities and/or the Loan Documents, including, without limitation, reasonable costs and expenses associated with travel on behalf of the Lender, which costs and expenses are directly or indirectly related to or in respect of the Lender's: administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or the Lender's rights and remedies against or in respect of any guarantor or other person liable in respect of the Liabilities (whether or not suit is instituted in connection with such efforts). "Deposit Account": has the meaning given that term in the UCC. "Documents": has the meaning given that term in the UCC. "Documents of Title": has the meaning given that term in the UCC. "Employee Benefit Plan": as defined in ERISA. "Encumbrance": each of the following:       (a)    security interest, mortgage, pledge, hypothecation, lien, attachment, or charge of any kind (including any agreement to give any of the foregoing); the interest of a lessor under a Capital Lease; conditional sale or other title retention agreement; sale of accounts receivable or chattel paper; or other arrangement pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person or which constitutes an interest in property to secure an obligation; each of the foregoing whether consensual or non-consensual and whether arising by way of agreement, operation of law, legal process or otherwise.       (b)    The filing of any financing statement under the UCC or comparable law of any jurisdiction. "Environmental Laws": (a) any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements which regulates or relates to, or imposes any standard of conduct or liability on account of or in respect to environmental protection matters, including, without limitation, Hazardous Materials, as is now or hereafter in effect; and (b) the common law relating to damage to Persons or property from Hazardous Materials. "Equipment": includes (other than Excluded Equipment), without limitation, "equipment" as defined in the UCC, and also all motor vehicles, rolling stock, machinery, data processing equipment, office equipment, plant equipment, tools, dies, molds, store fixtures, furniture, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of the Borrower's business, and any and all accessions, additions thereto, and substitutions therefor. "ERISA": the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate": any Person which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended. "Events of Default": is defined in Article 10. "Excluded Equipment": as set forth on EXHIBIT 1. "Fixtures": has the meaning given that term in the UCC. "GAAP": Principles which are consistent with those promulgated or adopted by the Financial Accounting Standards Board and its predecessors (or successors) in effect and applicable to that accounting period in respect of which reference to GAAP is being made, provided, however, in the event of a Material Accounting Change, then unless otherwise specifically agreed to by the Lender and the Borrower, the Borrower shall include, with its monthly, quarterly, and annual financial statements a schedule, certified by the Borrower's chief financial officer, on which the effect of such Material Accounting Change to the statement with which provided shall be described. "General Intangibles": includes, without limitation, "general intangibles" as defined in the UCC; and also all: rights to payment for credit extended; deposits; amounts due to the Borrower; credit memoranda in favor of the Borrower; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of the Borrower to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; patents, patent applications, patents pending, and other intellectual property; internet addresses and domain names; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data; computer software programs (including the source and object codes therefor), computer records, computer software, rights of access to computer record service bureaus, service bureau computer contracts, and computer data; tapes, disks, semi-conductors chips and printouts; trade secrets rights, copyrights, mask work rights and interests, and derivative works and interests; user, technical reference, and other manuals and materials; trade names, trademarks, service marks, and all goodwill relating thereto; applications for registration of the foregoing; and all other general intangible property of the Borrower in the nature of intellectual property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by the Borrower or credit extended or services performed, by the Borrower, whether intended for an individual customer or the general business of the Borrower, or used or useful in connection with research by the Borrower, excluding foreign tax refunds and foreign tax abatements. "Goods": has the meaning given that term in the UCC. "Hazardous Materials": any (a) hazardous materials, hazardous waste, hazardous or toxic substances, petroleum products, which (as to any of the foregoing) are defined or regulated as a hazardous material in or under any Environmental Law and (b) oil in any physical state. "Indebtedness": all indebtedness and obligations of or assumed by any Person: (i) in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) or evidenced by a promissory note, bond, debenture or other written obligation to pay money; (ii) for the payment, deferred for more than Thirty (30) days, of the purchase price of goods or services (other than current trade liabilities of such Person incurred in the ordinary course of business and payable in accordance with customary practices); (iii) in connection with any letter of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated); (iv) in connection with the sale or discount of accounts receivable or chattel paper of the Borrower; (v) on account of deposits or advances; and (vi) as lessee under Capital Leases. "Indebtedness" of any Person shall also include: (x) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (y) Any guaranty, endorsement, suretyship or other undertaking pursuant to which that Person may be liable on account of any obligation of any third party; and (z) the Indebtedness of a partnership or joint venture in which such Person is a general partner or joint venturer. "Indemnified Person": is defined in Section 14-11. "Instruments": has the meaning given that term in the UCC. "Interest Period":       (a)    With respect to each Libor Loan, the period commencing on the date of the making or continuation of or conversion to such Libor Loan and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Conversion.       (b)    With respect to each Base Margin Loan, the period commencing on the date of the making or continuation of or conversion to such Base Margin Loan and ending on that date as of which the subject Base Margin Loan is converted to a Libor Loan, as the Borrower may elect in the applicable Notice of Borrowing or Conversion. Provided that:           (i)    any Interest Period (other than an Interest Period determined pursuant to clause (iii) below) that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day except, with respect to Libor Loans, if such Business Day falls in the next calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;           (ii)    any Interest Period applicable to a Libor Loan that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end, subject to clause (iii) below, on the last Business Day of a calendar month;           (iii)    any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date except that no Libor Loan shall have an Interest Period of less than one (1) month. "Interest Payment Date": With reference to:       (a)    any Libor Loan the first day of each month and the last day of each Interest Period.       (b)    any Base Margin Loan, the first day of each month and the Termination Date. "Inventory": includes, without limitation, "inventory" as defined in the UCC and also all: packaging, advertising, and shipping materials related to any of the foregoing, and all names or marks affixed or to be affixed thereto for identifying or selling the same; Goods held for sale or lease or furnished or to be furnished under a contract or contracts of sale or service by the Borrower, or used or consumed or to be used or consumed in the Borrower's business; Goods of said description in transit: returned, repossessed and rejected Goods of said description; and all documents (whether or not negotiable) which represent any of the foregoing. "Investment Property": has the meaning given that term in the UCC. "L/C": any letter of credit, the issuance of which is procured by the Lender for the account of the Borrower and any acceptance made on account of such letter of credit. "L/C Agreement": is defined in Section 2-14. "Lease": any lease or other agreement, no matter how styled or structured, pursuant to which the Borrower is entitled to the use or occupancy of any space. "Lender": is defined in Preamble. "Lender's Rights and Remedies": is defined in Section 11-6. "Liabilities" includes, without limitation, all and each of the following, whether now existing or hereafter arising:       (a)    Any and all direct and indirect liabilities, debts, and obligations of the Borrower arising from this Agreement to the Lender, each of every kind, nature, and description.       (b)    Each obligation to repay any loan, advance, indebtedness, note, obligation, overdraft, or amount now or hereafter owing by the Borrower to the Lender arising from this Agreement (including all future advances whether or not made pursuant to a commitment by the Lender), whether or not any of such are liquidated, unliquidated, primary, secondary, secured, unsecured, direct, Indirect, absolute, contingent, or of any other type, nature, or description, or by reason of any cause of action which the Lender may hold against the Borrower.       (c)    All notes and other obligations of the Borrower now or hereafter assigned to or held by the Lender arising from this Agreement, each of every kind, nature, and description.       (d)    All interest, fees, and charges and other amounts arising from this Agreement which may be charged by the Lender to the Borrower and/or which may be due from the Borrower to the Lender from time to time.       (e)    All reasonable costs and expenses incurred or paid by the Lender in respect of this Agreement (including, without limitation, Costs of Collection, and all reasonable court and litigation costs and expenses).       (f)    Any and all covenants of the Borrower to or with the Lender and any and all obligations of the Borrower to act or to refrain from acting in accordance with this Agreement. "Libor Loan": any loan bearing interest at the Libor Rate. "Libor Rate": for any Interest Period with respect to a Libor Loan, that per annum rate determined by application of the following formula: Libor Offer Rate plus two hundred fifty (250) basis points. In the event that it is determined that the Lender may be subject to the Reserve Percentage the Libor Rate shall be revised to mean with respect to any Interest Period for each Libor Loan, an interest rate per annum equal at all times during such Interest Period to the sum of (i) the Libor Offer Rate divided by (ii) one minus the Reserve Percentage plus (iii) two hundred fifty (250) points. "Libor Offer Rate": that rate of interest (rounded upwards, if necessary, to the next 1/100 of 1%) determined by the Lender to be the prevailing rate per annum at which deposits on U.S. Dollars are offered to the Lender by first-class banks in the London interbank market in which the Lender regularly participates at a time reasonably contemporaneous to the giving of a Renewal/Conversion Notice, not less Two (2) Business Days before the first day of the Interest Period of the loan referenced in such Renewal/Conversion Notice, for a deposit approximately in the amount of the subject loan for a period of time approximately equal to such Interest Period. "Loan Account": is defined in Section 2-5. "Loan Documents": this Agreement, each instrument and document executed and/or delivered as contemplated by Article 4, below, and each other instrument or document from time to time executed and/or delivered in connection with the arrangements contemplated hereby, as each may be amended from time to time. "Material Accounting Change": any change in GAAP applicable to accounting periods subsequent to the Borrower's fiscal year most recently completed prior to the execution of this Agreement, which change has a material effect on the Borrower's financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrower, when compared with such condition or results as if such change had not taken place. "Outstanding": when referring to any L/C or Acceptance, any L/C or Acceptance which has not then expired, on which payment has not then been made. "Person": any natural person, and any corporation, trust, partnership, joint venture, or other enterprise or entity. "Proceeds": include, without limitation, "Proceeds" as defined in the UCC (defined below), and each type of property described in Sections 3-1, below. "Receipts": all cash, cash equivalents, checks, and credit card slips and receipts as arise out of the sale of the Collateral. "Receivables Collateral": refers to that portion of the Collateral which consists of the Borrower's Accounts, Accounts Receivable, contract rights, General Intangibles, Chattel Paper, Instruments, Documents of Title, Documents, Securities, letters of credit for the benefit of the Borrower, and bankers' acceptances held by the Borrower, and any rights to payment. "Related Entity": refers to (a) any Affiliate; and (b) any corporation, trust, partnership, joint venture, or other enterprise which: is a parent, brother-sister, subsidiary, or affiliate, of the Borrower; could have such enterprise's tax returns or financial statements consolidated with the Borrower's; could be a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which the Borrower is a member; Controls or is Controlled by the Borrower or any Affiliate of the Borrower. "Renewal / Conversion Notice": is defined in Section 2-9(a). "Requirement of Law": as to any Person: (a)(i) all statutes, rules, regulations, orders, or other requirements having the force of law and (ii) all court orders and injunctions, arbitrator's decisions, and/or similar rulings, in each instance ((i) and (ii)) of or by any federal, state, municipal, and other governmental authority, or court, tribunal, panel, or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible; (b) that Person's charter, certificate of incorporation, articles of organization, and/or other organizational documents, as applicable; and (c) that Person's by-laws and/or other instruments which deal with corporate or similar governance, as applicable. "Reserve Percentage": the decimal equivalent of that rate applicable to the Lender under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement of the Lender with respect to "Eurocurrency liabilities" as defined in such regulations. The Reserve Percentage applicable to a particular Libor Loan shall be based upon that in effect during the subject Interest Period, with changes in the Reserve Percentage which take effect during such Interest Period to take effect (and to consequently change any interest rate determined with reference to the Reserve Percentage) if and when such change is applicable to such loans. "Reserves": such reserves as may be established by the Lender from time to time in its reasonable discretion. "Revolving Credit": is defined in Section 2-1. "Revolving Credit Note": is defined in Section 2-6. "Securities": has the meaning given that term in the UCC. "Stated Amount": the maximum amount for which an L/C or Acceptance may be honored. "Termination Date": is defined in Section 13-1. "UCC": the Uniform Commercial Code in effect from time to time in the Commowealth of Massachusetts (Mass. Gen. Laws, Ch. 106). ARTICLE 2- THE REVOLVING CREDIT .       2-1.    Establishment of Revolving Credit.       (a)    The Lender hereby establishes a discretionary revolving line of credit (the "Revolving Credit") in the Borrower's favor pursuant to which the Lender, subject to, and in accordance with, this Agreement, may make loans and advances and otherwise provide financial accommodations to and for the account of the Borrower in the Lender's discretion. Without any obligation of the Lender to make any such loan or advance, or to provide any such financial accommodation, the amount of the Revolving Credit may be determined by the Lender by reference to Availability (as defined below), as determined by the Lender from time to time hereafter. All loans made by the Lender under this Agreement, and all of the Borrower's other Liabilities (as defined below) to the Lender under or pursuant to this Agreement, are payable ON WRITTEN DEMAND.       (b)    As used herein, the term "Availability" refers at any time to the lesser of (i) or (ii), below, where: (i) is up to:     (A) Five Million Dollars ($5,000,000.00).   Minus     (B) The then unpaid principal balance of the Loan Account.   Minus     (C) The aggregate amounts then undrawn on all outstanding L/C's, Acceptances, foreign exchange contracts, or any other accommodations issued or incurred, or caused to be issued or incurred, by the Lender for the account and/or the benefit of the Borrower. (ii) is up to:     (A) Eighty (80%) percent of the face amount (determined by the Lender in the Lender's reasonable discretion) of each of the Borrower's Acceptable Accounts (as defined below).   Plus     (B) The lesser of     (I)    Three Million Five Hundred Thousand Dollars ($3,500,000.00) or     (II)    Forty (40%) percent of the value of the Borrower's Acceptable Inventory, as defined below (Acceptable Inventory being valued at the lower of cost or market after deducting all transportation, processing, handling charges, and all other costs and expenses affecting the value thereof, subject to such Inventory Reserves as the Lender may establish from time to time, all as determined by the Lender in its reasonable discretion ).   Minus     (C) The then unpaid principal balance of the Loan Account.   Minus     (D) The aggregate amounts then undrawn on all outstanding L/C's, Acceptances, foreign exchange contracts, or any other accommodations issued or incurred, or caused to be issued or incurred, by the Lender for the account and/or the benefit of the Borrower.       (c)    Availability shall be based upon Borrowing Certificates furnished as provided in Section 9-4, below.       (d)    The proceeds of borrowings under the Revolving Credit shall be used solely for working capital purposes of the Borrower.       2-2.    Discretionary Advances.       (a)    The Revolving Credit is not a committed line of financing. The formulae included in Section 2-1(b), above, are solely for the Lender's guidance and for the monitoring of the Borrower's financial condition.       (b)    The making of loans, advances, and credits by the Lender in excess of the Borrowing Base is for the benefit of the Borrower and does not affect the obligations of the Borrower hereunder; such loans constitute Liabilities. The making of any such loans, advances, and credits in excess of the Borrowing Base on any one occasion shall not obligate the Lender to make any such loans, credits, or advances on any other occasion nor to permit such loans, credits, or advances to remain outstanding. The Borrower recognizes that Availability is only one of several factors considered by the Lender in its determination whether to make a loan, credit, or advance under the Revolving Credit.       2-3.    Risks of Value of Accounts and Inventory. The Lender's reference to a given asset for monitoring concerning the Lender's making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit shall not be deemed a determination by the Lender relative to the actual value of the asset in question. All risks of the creditworthiness of all Accounts and Accounts Receivable are and remain upon the Borrower. Reference by the Lender to a particular Account owed by a particular Account Debtor for guidance and/or monitoring shall not obligate the Lender to rely upon any other Account owed by the same Account Debtor to be acceptable for lending or to continue to rely upon that account. All risks of the saleability of the Borrower's Inventory are and remain upon the Borrower. All Collateral secures the prompt, punctual, and faithful performance of the Liabilities whether or not relied upon by the Lender in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit.       2-4.    Procedures Under Revolving Credit.       (a)    The Borrower may request loans and advances under the Revolving Credit from time to time under, in each instance in accordance with such procedures as may from time to time be acceptable to the Lender.       (b)    The Lender, subject to the terms and conditions of this Agreement, and in the Lender's discretion in each instance, may provide the Borrower with the loan so requested.       (c)    A loan or advance shall be deemed to have been made under the Revolving Credit upon the date that the Borrower received unconditional access to such loan or advance or the date on which the amount of such loan or advance was otherwise charged to the Loan Account in accordance with the terms of this Agreement.           (i)    There shall not be any recourse to, nor liability of, the Lender on account of any of the following:       (A)    Any delay in the Lender's making of , and/or any decline by the Lender to make, any loan or advance requested under the Revolving Credit.       (B)    Any delay in the proceeds of any such loan or advance constituting collected funds.       (C)    any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Lender in accordance with wire instructions provided to the Lender by the Borrower.       (iii)    The Lender may rely on any request for a loan or advance or financial accommodation which the Lender, in good faith, believes to have been made by a person duly authorized to act on behalf of the Borrower and may decline to make any such requested loan or advance or to provide any such financial accommodation pending the Lender's being furnished with such documentation concerning that person's authority to act as may be satisfactory to the Lender.       (c)    A request by the Borrower for any financial accommodation under the Revolving Credit or of the issuance of an L/C Acceptance, foreign exchange contract, or any other accommodations shall be irrevocable and shall constitute certification by the Borrower that as of the date of such request, each of the following is true and correct: (i)    There has been no material adverse change in the Borrower's financial condition from the most recent financial information furnished the Lender pursuant to this Agreement. (i)    The Borrower is in compliance with, and has not breached any of, its covenants contained in this Agreement. (ii)    Each representation which is made herein or in any of the Loan Documents is then true and complete as of and as if made on the date of such request.       (d)    The Borrower shall immediately become indebted to the Lender for the amount of each loan under or pursuant to this Agreement when such loan is deemed to have been made pursuant to Section 2-4(b)(i).       (e)(i)    The Borrower may request that the Lender issue L/C's and Acceptances for the account of the Borrower. Each such request shall be in such manner as may from time to time be acceptable to the Lender, and which may include, without limitation, (A) telephone notice to such person as may be designated by the Lender or (B) written notice. (ii)    The Lender, in the Lender's discretion in each instance, may issue any L/C and Acceptances so requested by the Borrower, provided that the aggregate Stated Amount, following the requested issuance thereof, would not exceed the lesser of Availability or Five Million Dollars ($5,000,000.00) and provided that the L/C and Acceptance (if so issued) is in form satisfactory to the Lender . (iii)    The Borrower shall execute such documentation to apply for and support the issuance of an L/C and Acceptance as may be required by the Lender       (f)    The Lender, without the request of the Borrower, may advance under the Revolving Credit any amount which the Borrower is obligated to pay to the Lender or for which the Borrower or the Lender becomes obligated on account of, or in respect to, any L/C and Acceptances. Such advance shall be made and even if such advance would result in Availability's being exceeded. Such action on the part of the Lender shall not constitute a waiver of the Lender's rights under Section 2-7(b), below.       2-5.     The Loan Account.       (a)    An account (the "Loan Account") shall be opened on the books of the Lender, in which Loan Account a record may be kept of all loans made by the Lender to the Borrower under or pursuant to this Agreement and of all payments thereon.       (b)    The Lender may also keep a record (either in the Loan Account or elsewhere, as the Lender may from time to time elect) of all interest, fees, service charges, costs, expenses, and other debits owed the Lender on account of the Liabilities and of all credits against such amounts so owed.       (c)    All credits against the Liabilities shall be conditional upon final payment to the Lender of the items giving rise to such credits. The amount of any item credited against the Liabilities which is charged back against the Lender for any reason or is not so paid shall be a Liability and shall be added to the Loan Account, whether or not the item so charged back or not so paid is returned.       (d)    Except as otherwise provided herein, all fees, service charges, costs, and expenses for which the Borrower is obligated hereunder are payable on demand. In the determination of Availability, the Lender may deem fees, service charges, accrued interest, and other payments as having been advanced under the Revolving Credit.       (e)    The Lender, without the request of the Borrower, may advance under the Revolving Credit any interest, fee, service charge, or other payment to which the Lender is entitled from the Borrower pursuant hereto and may charge the same to the Loan Account notwithstanding that such amount so advanced may result in Availability's being exceeded. Such action on the part of the Lender shall not constitute a waiver of the Lender's rights under Section 2-7(b), below. Any amount which is added to the principal balance of the Loan Account as provided in this Subsection shall bear interest at the interest rate applicable from time to time to the unpaid principal balance of the Loan Account.       (f)    Any statement rendered by the Lender to the Borrower concerning the Liabilities shall be considered correct and accepted by the Borrower and shall be conclusively binding upon the Borrower unless the Borrower provides the Lender with written objection thereto within ninety (90) days from the receipt of such statement, which written objection shall indicate, with particularity, the reason for such objection. The Loan Account and the Lender's books and records concerning the loan arrangement contemplated herein and the Liabilities shall be prima facie evidence and proof of the items described therein.       2-6.      The Revolving Credit Note. The obligation to repay loans and advances under the Revolving Credit, with interest as provided herein, shall be evidenced by a note (the " Revolving Credit Note") in the form of EXHIBIT 2-6, annexed hereto, executed by the Borrower. Neither the original nor a copy of the Revolving Credit Note shall be required, however, to establish or prove any Liability. In the event that the Revolving Credit Note is ever lost, mutilated, or destroyed, the Borrower shall execute a replacement thereof and deliver such replacement to the Lender.       2-7.    Payment of Loan Account.       (a)    The Borrower may repay all or any portion of the principal balance of the Loan Account from time to time until the sooner of termination of the Revolving Credit (as to which, see Article 13, below) or upon written demand.       (b)    The Borrower, without notice or demand from the Lender, shall pay the Lender that amount, from time to time, which is necessary so that the principal balance of the Loan Account does not exceed the Borrowing Base.       (c)    The Borrower shall repay the then entire unpaid balance of the Loan Account upon the Lender's WRITTEN DEMAND.       2-8.    Interest.       (a)    Revolving Credit Loans shall initially bear interest at the Base Margin Rate and thereafter shall bear interest at the Base Margin Rate or the Libor Rate, as specified from time to time by the Borrower in the Renewal/Conversion Notice with respect to the subject Revolving Credit Loan or as otherwise provided in this Agreement.       (b)    The Borrower shall pay interest on each Revolving Credit Loan in arrears on the applicable Interest Payment Date for that Loan.       (c)    Following written demand, the notification in writing of the continuance of any Event of Default, or the entry of an order for relief under the Bankruptcy Code with respect to the Borrower (and whether or not the Lender exercises the Lender's rights on account thereof), all loans and advances made under the Revolving Credit shall bear interest at a rate which is the aggregate of that provided for in Subsection (2-8(a)), above, plus two (2%) percent per annum.       2-9.    Duration of Interest Periods.       (a)    Subject to the limitations described herein, the Borrower shall have the option to elect a subsequent Interest Period to be applicable to a Revolving Credit Loan by giving notice of such election (a "Renewal / Conversion Notice") in the form of EXHIBIT 2-9(a), annexed hereto received no later than 10:00 a.m. Boston time One Business Day before the end of the then applicable Interest Period if such Loan is to be converted to a Base Margin Loan and Two Business Days before (and not counting) the end of the then applicable Interest Period if such Loan is to be continued as, or converted to, a Libor Loan.       (b)    If the Lender does not receive a notice of election of, or conversion to, an Interest Period for a Libor Loan pursuant to subsection (a) within the applicable time limits specified therein, the Borrower shall be deemed to have elected to convert such Loan in whole into a Base Margin Loan on the last day of the then current Interest Period with respect thereto.       (c)    The Borrower shall not select, renew, or convert any Revolving Credit Loan such that there are more than ten (10) interest rates applicable to the Revolving Credit Loans at any one time.       (d)    Libor Loans shall each be in an amount of not less than One Hundred Thousand Dollars ($100,000.00) and Fifty Thousand Dollars ($50,000.00) increments in excess of such minimum       2-10.    Changed Circumstances. In the event that:       (a)    on any day on which the rate for a Libor Loan would otherwise be set, the Lender shall have determined in good faith (which determination shall be final and conclusive) that adequate and fair means do not exist for ascertaining either such rate; or       (b)    at any time the Lender shall have determined in good faith (which determination shall be final and conclusive) that:       (i)    the continuation of or conversion of any Revolving Credit Loan to a Libor Loan has been made impracticable or unlawful by (A) the occurrence of a contingency that materially and adversely affects the applicable market or (B) compliance by the Lender in good faith with any applicable law or governmental regulation, guideline or order or interpretation or change thereof by any governmental authority charged with the interpretation or administration thereof or with any request or directive of any such governmental authority (whether or not having the force of law); or       (ii)    the indices on which the interest rates for Libor Loan shall no longer represent the effective cost to the Lender for U.S. dollar deposits in the interbank market for deposits in which it regularly participates; then, and in any such event, the Lender shall forthwith so notify the Borrower thereof in writing. Until the Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the obligation of the Lender to make Libor Loans of the type affected by such changed circumstances or to permit the Borrower to select the affected interest rate as otherwise applicable to any Revolving Credit Loans shall be suspended. If at the time the Lender so notifies the Borrower in writing, the Borrower has previously given the Lender a Renewal/Conversion Notice with respect to one or more Libor Loans, but such Revolving Credit Loans have not yet gone into effect, such notification shall be deemed to be void and the Borrower may borrow Revolving Credit Loans which are Base Margin Loans by giving a substitute Renewal/Conversion Notice. Upon the expiration of the Interest Period for any Libor Loan which is outstanding on the date of such notification, the amount of such Libor Loan shall thereafter constitute a Base Margin Loan.       2-11.    Payments and Prepayments.       (a)    Base Margin Loans may be prepaid at any time and from time to time without premium or penalty       (b)    In the event of any prepayment of any Libor Loan, other than at the end of the Interest Rate Period applicable to the subject loan, the Borrower shall pay, a premium in respect of such repayment, which premium shall be determined as follows:   (Libor Rate - TBillRate) x PP x D                      360 Where :   Libor Rate = The Libor Rate of interest on that Libor Loan being prepaid. TbillRate = The effective per annum rate at which a readily marketable bond or other obligation of, or entitled to the full faith and credit of, the United States (selected by the Lender in the Lender's reasonable discretion) maturing on or near the end of the Interest Period for the subject Libor Loan and in approximately the amount of the Libor Loan being prepaid could be purchased on or about the date of the subject prepayment. PP = The amount of principal being prepaid. D = The number of days from the date on which the subject prepayment is made until the expiry of the Interest Period for the Libor Loan being prepaid. x Indicates multiplication.       (c)    In the event that the TBill Rate is greater than the Libor Rate, there shall neither be any premium payable by the Borrower in respect of such repayment nor shall the Borrower be entitled to any rebate or credit.       (d)    The Borrower shall prepay the Revolving Credit Loans such that the outstanding unpaid principal balance thereof does not at any time exceed Availability. Such prepayments shall be made first of Base Margin Loans and only then of Libor Loans.       2-12.    Commitment Fees. The Lender shall charge no commitment fee to the Borrower in connection with the establishment of the Revolving Credit.       2-13.    Fees For L/C's.       (a)    The Borrower shall pay to the Lender a fee, on account of L/C's, upon issuance and on the Termination Date, based upon the Lender's then current fee schedule for like L/C's       (b)    In addition to the fee to be paid as provided in Subsection (a), above, the Borrower shall pay to the Lender, on demand, all issuance, processing, negotiation, amendment, and administrative fees and other amounts on account of, or in respect to, each L/C.       2-14.    Establishment of Letter of Credit and Banker's Acceptance.       (a)    Upon the written, telephonic, or electronic request of the Borrower, the Lender agrees to cause the issuance of L/C's and/or Acceptances on behalf of a Borrower as provided herein. The Borrower may request issuance of L/C's and/or Acceptances in such manner as may from time to time be reasonably acceptable to the Lender. The Borrower shall execute and deliver to the Lender such further documents and instruments in connection with any L/C or Acceptance, as the Lender, in accordance with the Lender's then customary practices with respect to similar facilities, may reasonably request including, without limitation, the Lender's standard letter of credit agreements (the "L/C Agreement"). In the event of any inconsistency between the terms of the L/C Agreement and this Agreement the terms and conditions of the L/C Agreement shall control.       (b)    The maximum aggregate amount of L/C's and Acceptances Outstanding at any one time shall not exceed the lesser of: (i) Five Million Dollars ($5,000,000.00) or (ii) the difference between Borrowing Base and the then unpaid principal balance of all Revolving Credit Loans.       (c)    No L/C or Acceptance shall have a maturity date which is later than Three Hundred Sixty Five (365) days after the date of such L/C's or Acceptance's issuance.       (d)    Upon the making of any request by or on behalf of the Borrower for issuance of an L/C or an Acceptance, the Borrower shall be deemed to have certified and represented, in addition to any other representation made herein or in any of the Loan Documents, that as of the date of such request, the conditions of Section 2-14(c) have been satisfied.       2-15.    Banker's Acceptance Commissions. The Borrower shall pay to the Lender a commission equal to the Lender's standard acceptance rate for each Acceptance caused to be made by the Lender, which commission shall be payable at the issuance of the subject Acceptance and shall pay to the Lender such additional fees as may be required by the Lender based upon the Lender's then current fee schedule for like Acceptances.       2-16.    Effect of Honor of L/C's and Acceptance. The Borrower shall reimburse the Lender for the amount of any honoring of any L/C or Acceptance. Any such honoring which is not so reimbursed on the Business Day when so honored shall constitute a Revolving Credit Loan.       2-17.    Additional Provisions Relating to L/C's and Acceptances.       (a)    The obligations of the Borrower with respect to L/C's and Acceptances shall be absolute and unconditional. The obligations of the Borrower with respect to L/C's and Acceptances shall rank pari passu with the obligations of the Borrower to repay all other Liabilities. The Lender's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising, whether by statute or rule of law or contract.       (b)    The Borrower will       (i)    promptly examine the copy of any L/C and Acceptance (and any amendments thereof) sent to it by the Lender;       (ii)    promptly examine all instruments and documents delivered to it from time to time by the Lender; and       (iii)    promptly provide the Lender with written notice of any irregularity or claim of non-compliance with the instructions of such person or entity. The Borrower is conclusively deemed to have waived any such claim against the Lender and its correspondents unless such notice is so promptly given.       (c)    The Borrower will       (i)    procure promptly any necessary documentation, permits, or licenses for the import, export or shipping of the property in connection with which any L/C and/or Acceptance is issued;       (ii)    comply with all foreign and domestic governmental requirements relating to the shipment or financing of such property; and       (iii)    furnish such evidence that the above requirements have been fulfilled as the Lender reasonably may require.       (d)    The Borrower will indemnify the Lender for and hold harmless against any and all claims, loss, liability, or damage, including reasonable attorneys' reasonable fees, howsoever arising from or in connection with the surrender or endorsement of any bill of lading, warehouse receipt or documents of title at any time held by the Lender, or any of its correspondents in connection with any L/C or Acceptance, other than arising from the Lender's gross negligence.       (e)    As further security for the payment or performance of any and all other obligations and liabilities hereunder, certain or contingent, and also for the payment or performance of any and all other obligations and liabilities, certain or contingent, due or to become due, now existing or hereafter arising, which are now, or may at any time or times hereafter be owing by the Borrower to the Lender, the Borrower hereby       (i)    recognizes and admits the Lender's security interest in, and, after the continuance of an Event of Default or demand, unqualified right to the possession and disposal of, any and all shipping documents, warehouse receipts, policies or certificates of insurance, and other documents accompanying or relative to any L/C or Acceptance (whether or not such documents, goods, or other property have been released to or upon the order of the Borrower under a security agreement or trust or bailee receipt) and in and to the proceeds of each and all of the foregoing; and       (ii)    if any third party shall have joined in the application for the L/C and/or Acceptances, assigns and transfers to the Lender all right, title and interest of the Borrower in and to all property and interests which the Borrower may now or hereafter obtain from such third party arising in connection with the transaction to which the Acceptances relates, to the extent that same can be lawfully assigned.       (f)    Following the notification in writing of the continuance of any Event of Default or written demand, the Lender, with power of substitution and revocation, may:       (i)    sign, in the name of the Lender, and/or the name of any Borrower, any document called for from any Borrower and/or endorse, in the name of any Borrower, any and all notes, checks, drafts, documents of title, Documents of Title, or other instruments or documents in which the Lender or the Bank may at any time have any interest in connection with any L/C or Acceptance; and       (ii)    perform any obligation or agreement in connection with any L/C or Acceptance which the Lender deems necessary or desirable to protect the Lender's right, powers and remedies under this Agreement.       (g)    None of the Lender, the Lender's correspondents or any advising, negotiating, or paying bank with respect to any L/C or Acceptance, shall be responsible in any way for:       (i)    performance by any beneficiary under any L/C or payee under any Acceptance of that beneficiary's or payee's obligations to the Borrower; or       (ii)    the form, sufficiency, correctness, genuineness, authority of any person signing; falsification; or the legal effect of; any documents called for under any L/C or Acceptance if (with respect to the foregoing) such documents on their face appear to be in order.       (h)    The Lender may honor, as complying with the terms of any L/C or Acceptance and of any drawing thereunder, any drafts or other documents otherwise in order, but signed or issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under such L/C or Acceptance to draw or issue such drafts or other documents.       (i)    Unless otherwise agreed to, in the particular instance, the Borrower hereby authorizes the Lender in good faith to (i) select an advising bank, if any; (ii) select a paying bank, if any; and (iii) select a negotiating bank.       (j)    All directions, correspondence, and funds transfers relating to any L/C or Acceptance are at the risk of the Borrower. The Lender shall have discharged its obligations under any L/C and/or Acceptance which, or the drawing under which, includes payment instructions, by the initiation of the method of payment called for in, and in accordance with, such instructions (or by any other commercially reasonable and comparable method). The Lender does not assume any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph or cable, or for any inaccuracy of translation.       (k)    The Lender's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising, whether by statute or rule of law or contract.       (l)    Except to the extent otherwise expressly provided hereunder or agreed to in writing by the Lender, and the Borrower, the L/C will be governed by the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce, Publication No. 500, and any subsequent revisions thereof.       (m)    If any change in any law, executive order or regulation, or any directive of any administrative or governmental authority (whether or not having the force of law), or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof, shall either:       (i)    impose, modify or deem applicable any reserve, special deposit or similar requirements against L/C's or Acceptances heretofore or hereafter caused to be issued by the Lender or with respect to which the Lender has an obligation to lend to fund drawings thereunder; or       (ii)    impose on any Lender any other condition or requirements relating to any such L/C's or Acceptances; and the result of any event referred to in clause (i) or (ii), above, shall be to increase the cost to the Lender of issuing or maintaining any L/C or Acceptance, then, upon demand by the Lender and delivery by the Lender to the Borrower of a certificate of an officer of the Lender clearly describing in writing such change in law, executive order, regulation, directive, or interpretation thereof, its effect on the Lender, and the basis for determining such increased costs and their allocation, the Borrower within five (5) days after receipt of such notice shall pay to the Lender, from time to time as specified by the Lender, such amounts as shall be sufficient to compensate the Lender for such increased cost. The Lender's determination of costs incurred under clause (i) or (ii) above, shall be conclusive and binding on the Borrower in the absence of manifest error.       (n)    The obligations of the Borrower under this Agreement with respect to L/C's and Acceptances are absolute, unconditional, and irrevocable and shall be performed strictly in accordance with the terms hereof under all circumstances, whatsoever including, without limitation, the following:       (i)    Any lack of validity or enforceability or restriction, restraint, or stay in the enforcement of this Agreement, any L/C or Acceptance, or any other agreement or instrument relating thereto.       (ii)    Any amendment or waiver of, or consent to the departure from, all or any of the above.       (iii)    The existence of any claim, set-off, defense, or other right which the Borrower may have at any time against the beneficiary of the L/C or payee of any Acceptance.       (iv)    Any honoring of a drawing under any L/C or Acceptance, which drawing was nonconforming on account of minor nonsubstantive variances from the requirements of the subject L/C.       2-18.    Computation of Interest and Fees. Interest and all fees payable hereunder shall be computed daily on the basis of a year of 360 days and paid for the actual number of days for which due. If the due date for any payment of principal is extended by operation of law, interest shall be payable for such extended time. If any payment required by this Agreement becomes due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension shall be included in computing interest in connection with such payment.       2-19.    Overdue Payments. Overdue amounts payable hereunder shall bear simple interest from and including the due date thereof until paid, payable on written demand, at a rate equal to the Base Margin Rate plus 2% per annum. 2-20.    Automatic Payment. Without limiting the Borrower's payment requirements hereunder, the Borrower authorizes the Lender to automatically debit the Borrower's demand deposit account with the Lender on the Interest Payment Date or such other dates when due for all interest, fees, costs, commissions, service charges and expenses due to the Lender.       2-21.    Effect of Termination. Upon the termination of Revolving Credit for any reason, the Borrower shall pay the Lender, in immediately available funds, all then Liabilities including, without limitation: the entire balance of the Loan Account; any accrued and unpaid fees; and all unreimbursed costs and expenses of the Lender for which the Borrower is responsible, and shall make such arrangements concerning any L/C's or Acceptances then outstanding as are reasonably satisfactory to the Lender. Until such payment and arrangements are made and effected, all provisions of this Agreement, other than those contained in Article 2 or which otherwise may place an obligation on the Lender to make any loans or advances or to provide financial accommodations under the Revolving Credit or to issue L/Cs or Acceptances for the account of the Borrower shall remain in full force and effect until all Liabilities shall have been paid in full. The release by the Lender of the security interests granted the Lender by the Borrower hereunder may be upon such conditions and indemnifications as the Lender may require. ARTICLE 3-GRANT OF SECURITY INTEREST       3-1.    Grant of Security Interest. To secure the Borrower's prompt, punctual, and faithful performance of all and each of the Borrower's Liabilities, the Borrower hereby grants to the Lender a continuing security interest in and to, and assigns to the Lender, the following, and each item thereof, whether now owned or now due, or in which the Borrower has an interest, or hereafter acquired, arising, or to become due, or in which the Borrower obtains an interest, and all products, Proceeds, substitutions, and accessions of or to any of the following (all of which, together with any other property in which the Lender may in the future be granted a security interest, is referred to herein as the "Collateral"): (a) All Accounts and Accounts Receivable. (b) All Inventory. (c) All General Intangibles. (d) All Equipment other than the Excluded Equipment. (e) All Goods. (f) All Fixtures. (g) All Chattel Paper. (h) All books, records, and information relating to the Collateral and/or to the operation of the Borrower's business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded, and maintained. (i) All Investment Property, Instruments, Documents, Deposit Accounts, policies and certificates of insurance, deposits, impressed accounts, compensating balances, money, cash, or other property. (j) All insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing or otherwise. (k) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing including the right of stoppage in transit.       3-2.    Extent and Duration of Security Interest. The within grant of a security interest is in addition to, and supplemental of, any security interest previously granted by the Borrower to the Lender and shall continue in full force and effect applicable to all Liabilities until all Liabilities have been paid and/or satisfied in full. ARTICLE 4 - CONDITIONS PRECEDENT .       Precedent to the effectiveness of this Agreement, the establishment of the financing arrangements contemplated hereby, and the making of the first loan under the Revolving Credit, the documents respectively described in Sections 4-1 through and including 4-5, each in form and substance satisfactory to the Lender shall have been delivered to the Lender, and the conditions respectively described in Sections 4-6 through and including 4-8, shall have been satisfied:       4-1.    Corporate Due Diligence.       (a)    A Certificate of corporate good standing issued by the Secretary of State of Delaware.       (b)    Certificates of due qualification, in good standing, issued by the Secretary(ies) of State of each State in which the nature of the Borrower's business conducted or assets owned could require such qualification.       (c)    A Certificate of the Borrower's Clerk/Secretary of the due adoption, continued effectiveness, and setting forth the texts of, each corporate resolution adopted in connection with the establishment of the loan arrangement contemplated by the Loan Documents and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents.       4-2.    Opinion. An opinion of counsel to the Borrower in form and substance satisfactory to the Lender.       4-3.    Landlord's Waivers. Waivers (each in form reasonably satisfactory to the Lender) by each of the Borrower's landlords.       4-4.    Additional Documents. Such additional instruments and documents as the Lender or its counsel reasonably may require or request.       4-5.    Representations and Warranties. Each of the representations made by or on behalf of the Borrower in this Agreement or in any of the other Loan Documents or in any other report, statement, document, or paper provided by any or on behalf of the Borrower shall be true and complete as of the date as of which such representation or warranty was made.       4-6.    No Event of Default. No event shall have occurred, or failed to occur, which occurrence or which failure constitutes, or which, solely with the passage of time or the giving of notice (or both) would constitute, an Event of Default.       4-7.    No Adverse Change. No event shall have occurred or failed to occur, which occurrence or failure is or could have a materially adverse effect upon the Borrower's financial condition, operating results, or cash flows from the Borrower's financial condition at _______________________. ARTICLE 5 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS .       To induce the Lender to establish the loan arrangement contemplated herein and to make loans and advances and to provide financial accommodations under the Revolving Credit (each of which loans shall be deemed to have been made in reliance thereupon and each of which may be made by the Lender in the Lender's discretion), the Borrower, in addition to all other representations, warranties, and covenants made by the Borrower in any other Loan Document, makes those representations, warranties, and covenants included in this Agreement.       5-1.    Payment and Performance of Liabilities. The Borrower shall pay each Liability when due (or when demanded in writing if payable on demand) and shall promptly, punctually, and faithfully perform each other Liability.       5-2.    Due Organization - Corporate Authorization - No Conflicts.       (a)    The Borrower presently is and shall hereafter remain in good standing as a Delaware corporation and is and shall hereafter remain duly qualified and in good standing in every other State in which, by reason of the nature or location of the Borrower's assets or operation of the Borrower's business, such qualification may be necessary unless failure to do so could not reasonably be expected to have a material adverse effect upon the Borrower.       (b)    Each Related Entity is listed on EXHIBIT 5-2, annexed hereto. Each Related Entity is and shall hereafter remain in good standing in the State in which incorporated and is and shall hereafter remain duly qualified in which other State in which, by reason of that entity's assets or the operation of such entity's business, such qualification may be necessary. The Borrower shall provide the Lender with prompt written notice of any entity's ceasing to be a Related Entity and prior written notice of any entity's becoming a Related Entity.       (c)    The Borrower has all requisite corporate power and authority to execute and deliver to the Lender all and singular the Loan Documents to which the Borrower is a party and has and will hereafter retain all requisite corporate power to perform all and singular the Liabilities.       (d)    The execution and delivery by the Borrower of each Loan Document to which it is a party; the Borrower's consummation of the transactions contemplated by such Loan Documents (including, without limitation, the creation of security and mortgage interests by the Borrower as contemplated hereby); and the Borrower's performance under those of the Loan Documents to which it is a party; the borrowings hereunder; and the use of the proceeds thereof:       (i)    Have been duly authorized by all necessary corporate action.       (ii)    Do not, and will not, contravene in any material respect, to the best of the Borrower's knowledge, any provision of any Requirement of Law or obligation of the Borrower.      (iii)    Will not result in the creation or imposition of, or the obligation to create or impose, any Encumbrance upon any assets of the Borrower pursuant to any Requirement of Law or obligation, except pursuant to the Loan Documents.       (e)    The Loan Documents have been duly executed and delivered by Borrower and are the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.       5-3.     Maintain Accounts. To permit the Lender to monitor the Borrower's financial performance and condition, the Borrower shall maintain the Borrower's principal operating account with the Lender until all Liabilities have been paid in full and the Revolving Credit has been terminated.       5-4.    Trade Names.       (a)    EXHIBIT 5-4, annexed hereto, is a listing of:       (i)    All names under which the Borrower ever conducted its business.       (ii)    All entities and/or persons with whom the Borrower ever consolidated or merged, or from whom the Borrower ever acquired in a single transaction or in a series of related transactions substantially all of such entity's or person's assets.       (b)    Except (i) upon not less than twenty-one (21) days prior written notice given the Lender, and (ii) in compliance with all other provisions of this Agreement, the Borrower will not undertake or commit to undertake any action such that the results of that action, if undertaken prior to the date of this Agreement, would have been reflected on EXHIBIT 5-4.       5-5.    Infrastructure.       (a)    The Borrower has and will maintain a sufficient infrastructure to conduct its business as presently conducted and as contemplated to be conducted as described to the Lender.       (b)    The Borrower owns and possesses, or has the right to use (and will hereafter own, possess, or have such right to use) all patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, and other intellectual or proprietary property of any third Person necessary for the Borrower's conduct of the Borrower's business.       (c)    The conduct by the Borrower of the Borrower's business does not presently infringe (nor will the Borrower conduct its business in the future so as to infringe) the patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or other intellectual or proprietary property of any third Person.       5-6.    Locations. The Collateral, and the books, records, and papers of Borrower pertaining thereto, are kept and maintained solely at the chief executive offices of the Borrower stated in the Preamble of this Agreement, and at those locations which are listed on EXHIBIT 5-6, annexed hereto, which EXHIBIT includes all service bureaus with which any such records are maintained and the names and addresses of each of the Borrower's landlords. Except (i) to accomplish sales of Inventory in the ordinary course of business (ii) to utilize such of the Collateral as is removed from such locations in the ordinary course of business (such as motor vehicles) or (iii) to dispose of obsolete equipment or inventory, the Borrower shall not remove any Collateral from said chief executive offices or those locations listed on EXHIBIT 5-6 without the Lender's prior written consent.       5-7.    Title to Assets. The Borrower is, and shall hereafter remain, the owner of the Collateral free and clear of all Encumbrances with the exceptions of the following:       (a)    The security interest created herein.       (b)    Those Encumbrances (if any) listed on EXHIBIT 5-7, annexed hereto.       (c)    Capitalized leases in an amount not to exceed $250,000.00.       5-8.    Indebtedness. The Borrower does not and shall not hereafter have any Indebtedness with the exceptions of:       (a)    Any Indebtedness to the Lender.       (b)    The Indebtedness (if any) listed on EXHIBIT 5-8, annexed hereto.       (c)    Ordinary trade indebtedness incurred in the normal course of the Borrower's business.       (d)    Such Indebtedness as may be approved by the Lender in writing.       (e)    An amount not to exceed $100,000.00 in any single year.       5-9.    Insurance Policies.       (a)    EXHIBIT 5-9, annexed hereto, is a schedule of all insurance policies owned by the Borrower or under which the Borrower is the named insured. Each of such policies is in full force and effect. Neither the issuer of any such policy nor the Borrower is in default or violation of any such policy.       (b)    The Borrower shall have and maintain at all times insurance covering such risks, in such amounts, containing such terms, in such form, for such periods, and written by such companies as may be satisfactory to the Lender. All insurance carried by the Borrower shall provide for a minimum of twenty (20) days' written notice of cancellation to the Lender and all such insurance which covers the Collateral shall include an endorsement in favor of the Lender, which endorsement shall provide that the insurance, to the extent of the Lender's interest therein, shall not be impaired or invalidated, in whole or in part, by reason of any act or neglect of the Borrower or by the failure of the Borrower to comply with any warranty or condition of the policy. In the event of the failure by the Borrower to maintain insurance as required herein, the Lender, at its option, may obtain such insurance, provided, however, the Lender's obtaining of such insurance shall not constitute a cure or waiver of any Event of Default occasioned by the Borrower's failure to have maintained such insurance. The Borrower shall furnish to the Lender certificates or other evidence satisfactory to the Lender regarding compliance by the Borrower with the foregoing insurance provisions.       (c)    The Borrower shall advise the Lender of each claim in excess of $50,000.00 made by the Borrower under any policy of insurance which covers the Collateral and will permit the Lender, at the Lender's option in each instance, to the exclusion of the Borrower, to conduct the adjustment of each such claim. During the continuance of an Event of Default, the Borrower hereby appoints the Lender as the Borrower's attorney in fact to obtain, adjust, settle, and cancel any insurance described in this section and to endorse in favor of the Lender any and all drafts and other instruments with respect to such insurance. The within appointment, being coupled with an interest, is irrevocable until this Agreement is terminated by a written instrument executed by a duly authorized officer of the Lender. The Lender shall not be liable on account of any exercise pursuant to said power except for any exercise in actual willful misconduct and bad faith. The Lender may apply any proceeds of such insurance against the Liabilities, whether or not such have matured, in such order of application as the Lender may determine.       5-10.    Licenses. EXHIBIT 5-10, annexed hereto, is a schedule of all material license, distributor, franchise, and similar agreements issued to, or to which the Borrower is a party. Each of such agreements is in full force and effect. The Borrower is not in default or material violation of any such agreement and the Borrower has not received any notice or threat of cancellation of any such agreement.       5-11.    Leases. EXHIBIT 5-11, annexed hereto, is a schedule of all presently effective Leases and Capital Leases. Each of such Leases and Capital Leases is in full force and effect. The Borrower is not in default or violation of any such Lease or Capital Lease and the Borrower has not received any notice or threat of cancellation of any such Lease or Capital Lease. The Borrower hereby authorizes the Lender at any time and from time to time to contact any of the Borrower's landlords in order to confirm the Borrower's continued compliance with the terms and conditions of the Lease(s) between the Borrower and that landlord.       5-12.    Requirements of Law. To the best of the Borrower's knowledge, the Borrower is in compliance with, and shall hereafter comply with and use its assets in compliance with, all Requirements of Law. The Borrower has not received any notice of any violation of any Requirement of Law (whether or not such violation is material), which violation has not been cured or otherwise remedied.       5-13.    Maintain Properties. The Borrower shall:       (a)    Keep the Collateral in good order and repair (ordinary reasonable wear and tear and insured casualty excepted).       (b)    Not suffer or cause the waste or destruction of any material part of the Collateral.       (c)    Not use any of the Collateral in violation of any policy of insurance thereon.       (d)    Not sell, lease, or otherwise dispose of any of the Collateral, other than the following:       (i)    The sale of Inventory in compliance with this Agreement.       (ii)    The disposal of Equipment which is obsolete, worn out, or damaged beyond repair, which Equipment is replaced to the extent necessary to preserve or improve the operating efficiency of the Borrower.       (iii)    The turning over to the Lender of all Receipts as provided herein.       5-14.    Pay Taxes       (a)    The Borrower shall promptly pay and discharge all taxes, assessments and governmental charges or levies imposed upon it, its income or profits, or any properties belonging to it, prior to the date on which penalties or interest would attach thereto provided, however, that the Borrower shall not be required to pay and discharge any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings and an adequate reserve for the payment thereof is established on the books of the Borrower in accordance with generally accepted accounting principles. To the best of Borrower's knowledge, no agreement is extant which waives or extends any statute of limitations applicable to the right of any taxing authority to assert a deficiency or make any other claim for or in respect to any such tax, assessment, charge or claim. To the best of the Borrower's knowledge, no issue has been raised in any such examination which, by application of similar principles, reasonably could be expected to result in the assertion of a deficiency for any fiscal year open for examination, assessment, or claim by any taxing authority.       (b)    Except as disclosed on said EXHIBIT 5-14, there are no examinations of or with respect to the Borrower presently being conducted by the Internal Revenue Service or any other taxing authority.       (c)    The Borrower has, and hereafter shall: pay, as they become due and payable, all taxes and unemployment contributions and other charges of any kind or nature levied, assessed or claimed against the Borrower or the Collateral by any person or entity whose claim could result in an Encumbrance upon any asset of the Borrower or by any governmental authority; properly exercise any trust responsibilities imposed upon the Borrower by reason of withholding from employees' pay or by reason of the Borrower's receipt of sales tax or other funds for the account of any third party; timely make all contributions and other payments as may be required pursuant to any Employee Benefit Plan now or hereafter established by the Borrower; and timely file all tax and other returns and other reports with each governmental authority to whom the Borrower is obligated to so file.       (d)    Upon written demand or notification of the continuance of an Event of Default, at its option, the Lender may, but shall not be obligated to, pay any taxes, unemployment contributions, and any and all other amounts which the Lender, in the Lender's reasonable discretion, deems necessary or desirable to protect, maintain, preserve, collect, or realized upon any asset of the Borrower or upon any of the Collateral (provided, however, the Lender's making of any such payment shall not constitute a cure or waiver of any Event of Default occasioned by the Borrower's failure to have made such payment).       5-15.    No Margin Stock. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulations U.T. and X. of the Board of Governors of the Federal Reserve System of the United States). No part of the proceeds of any borrowing from the Lender will be used at any time to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.       5-16.    ERISA. To the best of the Borrower's knowledge, neither the Borrower nor any ERISA Affiliate ever has or hereafter shall:       (a)    Violate or fail to be in full compliance with the Borrower's Employee Benefit Plan.       (b)    Fail timely to file all reports and filings required by ERISA to be filed by the Borrower.       (c)    Engage in any "prohibited transactions" or "reportable events" (respectively as described in ERISA).       (d)    Engage in, or commit, any act such that a tax or penalty could be imposed upon the Borrower on account thereof pursuant to ERISA.       (e)    Accumulate any material funding deficiency within the meaning of ERISA.       (f)    Terminate any Employee Benefit Plan such that a lien could be asserted against any assets of the Borrower on account thereof pursuant to ERISA.       (g)    Be a member of, contribute to, or have any obligation under any Employee Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.       5-17.    Hazardous Materials.       (a)    To the best of the Borrower's knowledge, the Borrower has never: (i) been legally responsible for any release or threat of release of any Hazardous Material or (ii) received notification of any release or threat of release of any Hazardous Material from any site or vessel occupied or operated by the Borrower and/or of the incurrence of any expense or loss in connection with the assessment, containment, or removal of any release or threat of release of any Hazardous Material from any such site or vessel.       (b)    The Borrower shall: (i) dispose of any Hazardous Material only in compliance with all Environmental Laws and (ii) not store on any site or vessel occupied or operated by the Borrower and not transport or arrange for the transport of any Hazardous Material, except if such storage or transport is in the ordinary course of the Borrower's business and is in compliance with all Environmental Laws.       (c)    The Borrower shall provide the Lender with written notice upon the Borrower's obtaining knowledge of any incurrence of any expense or loss by any governmental authority or other Person in connection with the assessment, containment, or removal of any Hazardous Material, for which expense or loss the Borrower may be liable.       5-18.    Litigation. Except as set forth on Exhibit 5-18, there is not presently pending or threatened by or against the Borrower any suit, action, proceeding, or investigation which, if determined adversely to the Borrower, would have a material adverse effect upon the Borrower's financial condition or ability to conduct its business as such business is presently conducted or is contemplated to be conducted in the foreseeable future.       5-19.    Dividends or Investments. The Borrower shall not:       (a)    Pay any cash dividend or make any other distribution in respect of any class of the Borrower's capital stock.       (b)    Invest in or purchase any stock or securities or rights to purchase any such stock or securities, of any corporation or other entity, without providing twenty-one (21) days prior written notice to the Lender.       (c)    Merge or consolidate or be merged or consolidated with or into any other corporation or other entity.       (d)    Consolidate any of the Borrower's operations with those of any other corporation or other entity.       (e)    Organize or create any Related Entity without the prior written consent of the Lender, which consent shall not be unreasonably withheld.       The Borrower may own, redeem, retire, purchase or acquire any of the Borrower's capital stock provided no such redemption, retirement, purchase or acquisition shall be made during the existence of an Event of Default and provided further that the occurrence of such redemption, retirement, purchase or acquisition shall not constitute an Event of Default.       5-20.    Loans. The Borrower shall not make any loans or advances to, nor acquire the Indebtedness of, any Person, provided, however, the foregoing does not prohibit any of the following:       (a)    Advance payments made to the Borrower's suppliers in the ordinary course.       (b)    Advances to the Borrower's officers, employees, and salespersons with respect to reasonable expenses to be incurred by such officers, employees, and salespersons for the benefit of the Borrower, which expenses are properly substantiated by the person seeking such advance and properly reimbursable by the Borrower.       (c)    Loans or advances set forth on EXHIBIT 5-20, annexed hereto.       5-21.    Protection of Assets. The Lender, at the Lender's reasonable discretion, and from time to time, may discharge any tax or Encumbrance on any of the Collateral, or take any other action that the Lender may deem necessary or desirable to repair, insure, maintain, preserve, collect, or realize upon any of the Collateral. The Lender shall not have any obligation to undertake any of the foregoing and shall have no liability on account of any action so undertaken except where there is a specific finding in a judicial proceeding (in which the Lender has had an opportunity to be heard), from which finding no further appeal is available, that Lender had acted in actual bad faith or in a grossly negligent manner. The Borrower shall pay to the Lender, on demand, or the Lender, in its discretion, may add to the Loan Account, all amounts paid or incurred by the Lender pursuant to this section. The obligation of the Borrower to pay such amounts is a Liability.       5-22.    Line of Business. Without the consent of the Lender, the Borrower shall not engage in any business other than the business in which it is currently engaged or a business reasonably related thereto.       5-23.    Affiliate Transactions. The Borrower shall not make any payment, nor give any value to any Related Entity except for goods and services actually purchased by the Borrower from, or sold by the Borrower to, such Related Entity for a price which shall       (a)    be competitive and fully deductible as an "ordinary and necessary business expense" and/or fully depreciable under the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended; and       (b)    not differ from that which would have been charged in an arms length transaction. 5-24.    Additional Assurances.       (a)    The Borrower is not the owner of, nor has it any interest in, any personal property which, immediately upon the satisfaction of the conditions precedent to the effectiveness of the loan arrangement contemplated hereby (Article 4), will be not be subject to a perfected security interest in favor of the Lender (subject only to those Encumbrances (if any) described on EXHIBIT 5-7, annexed hereto and leases) to secure the Liabilities and will not hereafter acquire any asset or any interest in property which is not, immediately upon such acquisition, subject to such a perfected security interest in favor of the Lender to secure the Liabilities (subject only to Encumbrances (if any) permitted pursuant to Section 5-7, above and leases).       (b)    The Borrower shall execute and deliver to the Lender such instruments, documents, and papers, and shall do all such things from time to time hereafter as the Lender may request to carry into effect the provisions and intent of this Agreement; to protect and perfect the Lender's security interest in the Collateral; and to comply with all applicable statutes and laws; and facilitate the collection of the Receivables Collateral. The Borrower shall execute all such instruments as may be required by the Lender with respect to the recordation and/or perfection of the security interests created herein. A carbon, photographic, or other reproduction of this Agreement or of any financing statement or other instrument executed pursuant to this Section shall be sufficient for filing to perfect the security interests granted herein.       5-25.    Adequacy of Disclosure.       (a)    To the best of the Borrower's knowledge, all financial statements furnished to the Lender by the Borrower have been prepared in accordance with GAAP consistently applied and present fairly the condition of the Borrower at the date(s) thereof and the results of operations and cash flows for the period(s) covered. To the best of the Borrower's knowledge, there has been no change in the financial condition, results of operations, or cash flows of the Borrower since the date(s) of such financial statements, other than changes in the ordinary course of business, which changes have not been materially adverse, either singularly or in the aggregate.       (b)    To the best of the Borrower's knowledge, the Borrower does not have any contingent obligations or obligation under any Lease or Capital Lease which is not noted in the Borrower's financial statements furnished to the Lender prior to the execution of this Agreement.       (c)    To the best of the Borrower's knowledge, no document, instrument, agreement, or paper given to the Lender by or on behalf of the Borrower or any guarantor of the Liabilities in connection with the Lender's execution of the within Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements therein not misleading. To the best of Borrower's knowledge, there is no fact known to the Borrower which has, or which, in the foreseeable future could have, a material adverse effect on the financial condition of the Borrower or any such guarantor which has not been disclosed in writing to the Lender.       5-26.    Other Covenants. The Borrower shall not indirectly do or cause to be done any act which, if done directly by the Borrower, would breach any covenant contained in this Agreement. ARTICLE 6 - USE AND COLLECTION OF COLLATERAL .       6-1.     Adjustments and Allowances. The Borrower may grant such allowances or other adjustments to the Borrower's Account Debtors (exclusive of extending the time for payment of any Account or Account Receivable in excess of $50,000.00, which shall not be done without first obtaining the Lender's written consent in each instance) as the Borrower may reasonably deem to accord with sound business practice, provided, however (a) the Borrower shall furnish the Lender with those reports described in Section 9-4 below, with respect to any such adjustments or allowances and (b) the authority granted the Borrower pursuant to this Section may be limited or terminated by the Lender at any time in the Lender's discretion.       6-2.    Validity of Accounts.       (a)    The amount of each Account shown on the books, records, and invoices of the Borrower represented as owing by each Account Debtor is and will be the correct amount actually owing by such Account Debtor and shall have been fully earned by performance by the Borrower.       (b)    During the continuance of an Event of Default, the Lender, from time to time (at the expense of the Borrower in each instance), may verify the validity, amount, and all other matters with respect to the Receivables Collateral directly with Account Debtors (including without limitation, by forwarding balance verification requests to the Borrower's Account Debtors), and with the Borrower's accountants, collection agents, and computer service bureaus (each of which is hereby authorized and directed to cooperate in full with the Lender and to provide the Lender with such information and materials as the Lender may request.       (c)    The Borrower has no knowledge of any impairment of the validity or collectibility of any of the Accounts and shall notify the Lender of any such fact immediately after Borrower becomes aware of any such impairment.       (d)    The Borrower shall not post any bond to secure the Borrower's performance under any agreement to which the Borrower is a party nor cause any surety, guarantor, or other third party obligee to become liable to perform any obligation of the Borrower (other than to the Lender) in the event of the Borrower's failure so to perform.       6-3.    Notification to Account Debtors. The Lender shall have the right after providing written notification of the continuance of an Event of Default to the Borrower or written demand to notify any of the Borrower's Account Debtors to make payment directly to the Lender and to collect all amounts due on account of the Collateral.       6-4    Use of Inventory Collateral.       (a)    The Borrower shall not engage in any sale of the Inventory other than for fair consideration in the conduct of the Borrower's business in the ordinary course and shall not engage in sales or other dispositions to creditors; sales or other dispositions in bulk; and any use of any of the Inventory in breach of any provision of this Agreement.       (b)    No sale of Inventory shall be on consignment, approval, or under any other circumstances such that, such Inventory may be returned to the Borrower without the consent of the Lender.       6-5.    Returned Inventory.       (a)    The Borrower will provide the Lender with written notice promptly upon the occurrence of any event described in Subsection 6-5(b), below, and shall hold any Inventory which is subject to such event for such disposition as the Lender may direct. If the Lender does not issue specific instructions to the Borrower concerning such Inventory within Five (5) days of the giving of such written notice, the Borrower may dispose thereof in such manner as the Borrower reasonably may deem to accord with sound business practice (subject to any requirements of applicable law and subject to the Lender's security interest in any Collateral that may arise from the resale or other disposition thereof by the Borrower), provided, however, in the event any such Inventory consists of perishable items, the Borrower may dispose of such perishables in accordance with the provisions of this Section without awaiting instructions from the Lender in respect thereto.       (b)    Subsection (a) of this Section relates to any of the following Inventory with an aggregate value in excess of $250,000.00:           (i)    Any which is returned by any Account Debtor to the Borrower (whether or not such return has been agreed to by the Borrower) and is not in turn returned by the Borrower to such Account Debtor.           (ii)    Any which is repossessed by the Borrower           (iii)    Any which is downgraded in quality or has its marketability otherwise affected.           (iv)    Any which is detained from, or refused entry into, or required to be removed from the United States by the appropriate governmental authorities.       6-6.    Inventory Quality. All Inventory now owned or hereafter acquired by the Borrower is and will be of good and merchantable quality and free from defects (other than defects within customary trade tolerances). No tangible personal property of the Borrower is or will be stored or entrusted with a bailee or other third party. ARTICLE 7 - RECEIVABLES .       7-1.    Proceeds and Collection of Accounts.       (a)    It is recognized and intended that all Receipts constitute Collateral and proceeds of Collateral. A portion of the Receivables Collateral consists of Receipts.       (b)    Upon the earlier to occur of (i) written demand, or (ii) written notification of the continuation of an Event of Default, at the option of the Lender, the Borrower shall cause each of the Borrower's Account Debtors to forward all Receipts proceeds of the Receivables Collateral directly to a lock box, blocked account, or similar recipient (the "Concentration Account") designated by the Lender and over which the Lender has sole access and control and the Borrower shall execute such additional documentation as the Lender may reasonably require in connection therewith.       (c)    All Receipts and collections of the Receivables Collateral which, notwithstanding the provisions of Subsection 7-1(b) are received by the Borrower or come under the control of the Borrower shall be held in trust by the Borrower for the Lender; shall not be commingled with any of the Borrower's other funds; and shall be deposited and/or transferred only to the Concentration Account, or as otherwise instructed by the Lender.       7-2.    Proceeds and Collection of Accounts Held in Trust.       In the event that, notwithstanding the provisions of this Article, the Borrower receives or otherwise has dominion and control of any Receipts, or any proceeds or collections of any Collateral, such Receipts, proceeds, and collections shall be held in trust by the Borrower for the Lender and shall not be commingled with any of the Borrower's other funds or deposited in any account of the Borrower other than as instructed by the Lender.       7-3.    Payment of Liabilities.       (a)    On each Business Day, the Lender shall apply, towards the unpaid principal balance of the Loan Account, the aggregate of Receipts and Receivables Collateral received by the Lender provided, however, for purposes of the calculation of interest on the unpaid principal balance of the Loan Account, such payment shall be deemed to have been made two (2) Business Days after such application other than payments made in cash or by wire transfer, which payments shall be deemed to be made on the date received by the Lender.       (b)    The following rules shall apply to payments under and pursuant to this Agreement:           (i)    Funds shall be deemed to have been received by the Lender on the Business Day on which received, provided that notice of such receipt is available to the Agent by 2:00PM on that Business Day.           (ii)    If notice of receipt is not available to the Lender until after 2:00PM on a Business Day, such deposit or payment shall be deemed to have been made at 9:00AM on the then next Business Day.           (iii)    All deposits to the Concentration Account and other payments to the Lender are subject to clearance and collection. ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT .       8-1.    Appointment as Attorney-In-Fact. The Borrower hereby irrevocably constitutes and appoints the Lender as the Borrower's true and lawful attorney, exercisable after the earlier to occur of (i) written demand, (ii) written notification of the continuation of an Event of Default, with full power of substitution, to convert the Collateral into cash at the sole risk, cost, and expense of the Borrower, but for the sole benefit of the Lender. The rights and powers granted the Lender by the within appointment include but are not limited to the right and power to:       (a)    Prosecute, defend, compromise, or release any action relating to the Collateral.       (b)    Sign change of address forms to change the address to which the Borrower's mail is to be sent to such address as the Lender shall designate; receive and open the Borrower's mail; remove any Receivables Collateral and Proceeds of Collateral therefrom and turn over the balance of such mail either to the Borrower or to any trustee in bankruptcy, receiver, assignee for the benefit of creditors of the Borrower, or other legal representative of the Borrower whom the Lender determines to be the appropriate person to whom to so turn over such mail.       (c)    Endorse the name of the Borrower in favor of the Lender upon any and all checks, drafts, notes, acceptances, or other items or instruments; sign and endorse the name of the Borrower on, and receive as secured party, any of the Collateral, any invoices, schedules of Collateral, freight or express receipts, or bills of lading, storage receipts, warehouse receipts, or other documents of title respectively relating to the Collateral.       (d)    Sign the name of the Borrower on any notice to the Borrower's Account Debtors or verification of the Receivables Collateral; sign the Borrower's name on any Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims of mechanic's liens, or assignments or releases of mechanic's liens securing the Accounts.       (e)    Take all such action as may be necessary to obtain the payment of any letter of credit and/or banker's acceptance of which the Borrower is a beneficiary.       (f)    Repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any customer of the Borrower.       (g)    Use, license or transfer any or all General Intangibles of the Borrower.       (h)    Sign and file or record any financing or other statements in order to perfect or protect the Lender's security interest in the Collateral.       8-2.    No Obligation to Act. The Lender shall not be obligated to do any of the acts or to exercise any of the powers authorized by Section 8-1 herein, but if the Lender elects to do any such act or to exercise any of such powers, it shall not be accountable for more than it actually receives as a result of such exercise of power, and shall not be responsible to the Borrower for any act or omission to act except for any act or omission to act as to which there is a final determination made in a judicial proceeding (in which proceeding the Lender has had an opportunity to be heard) which determination includes a specific finding that the subject act or omission to act had been grossly negligent or in actual bad faith. ARTICLE 9 -REPORTING REQUIREMENTS/ FINANCIAL COVENANTS .       9-1.    Maintain Records. The Borrower shall at all times       (a)    Keep proper books of account, in which full, true, and accurate entries shall be made of all of the Borrower's transactions, all in accordance with GAAP applied consistently with prior periods to fairly reflect the financial condition of the Borrower at the close of, and its results of operations for, the periods in question.       (b)    Keep accurate current records of the Collateral including, without limitation, accurate current stock, cost, and sales records of its Inventory, accurately and sufficiently itemizing and describing the kinds, types, and quantities of Inventory and the cost and selling prices thereof.       (c)    Retain independent certified public accountants who are reasonably satisfactory to the Lender and instruct such accountants to fully cooperate with, and be available to, the Lender to discuss the Borrower's financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants, as may be raised by the Lender.       (d)    Not change the Borrower's fiscal year.       (e)    Not change the Borrower's taxpayer identification number.       9-2.    Access to Records. (a)    The Borrower shall accord the Lender and the Lender's representatives with reasonable access from time to time as the Lender and such representatives may require to all properties owned by or over which the Borrower has control. The Lender, and the Lender's representatives, shall have the right, and the Borrower will permit the Lender and such representatives from time to time as the Lender and such representatives may reasonably request, to examine, inspect, copy, and make extracts from any and all of the Borrower's books, records, electronically stored data, papers, and files. The Borrower shall make all of the Borrower's copying facilities available to the Lender.       (b)    The Borrower hereby authorizes the Lender and the Lender's representatives to:       (i)    Inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw off, and otherwise use any and all computer or electronically stored information or data which relates to the Borrower, which information or data is in the possession of the Borrower or any service bureau, contractor, accountant, or other person, and directs any such service bureau, contractor, accountant, or other person fully to cooperate with the Lender and the Lender's representatives with respect thereto.       (ii)    Verify at any time the Collateral or any portion thereof, including verification with Account Debtors, and/or with the Borrower's computer billing companies, collection agencies, and accountants and to sign the name of the Borrower on any notice to the Borrower's Account Debtors or verification of the Collateral.       9-3.    Immediate Notice to Lender.       (a)    The Borrower shall provide the Lender with written notice immediately upon the occurrence of any of the following events which written notice shall be with reasonable particularity as to the facts and circumstances in respect of which such notice is being given:           (i)    The completion of any physical count of the Borrower's Inventory (together with a copy of the certified results thereof).           (ii)    Any ceasing of the Borrower's making of payments, in the ordinary course, to any of its creditors (including the ceasing of the making of such payments on account of a dispute with the subject creditor).           (iii)    Any failure by the Borrower to pay rent at any of the Borrower's locations, which failure continues for more than Fifteen (15) days following the day on which such rent first came due.           (iv)    Any material change in the business, operations, or financial affairs of the Borrower.           (v)    The continuation of any Event of Default.           (vi)    Any intention on the part of the Borrower to discharge the Borrower's present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity (as to which, see Subsection 9-1(c)).           (vii)    Any litigation which, if determined adversely to the Borrower, might have a material adverse effect on the financial condition of the Borrower.       (b)    So long as any Liabilities remain outstanding , the Borrower shall:           (viii)    Provide the Lender, when so distributed, with copies of any materials distributed to the shareholders of the Borrower (qua such shareholders).           (ix)    Provide the Lender, when received by the Borrower, with a copy of any material management letter or similar communications from any accountant of the Borrower.       9-4.    Borrowing Base Certificate. At such intervals as the Lender may from time to time specify (monthly, unless notice to the contrary is so given), the Borrower shall provide the Lender with a borrowing base certificate (the "Borrowing Base Certificate") (in such form as the Lender may specify from time to time), which Certificate shall include a Schedule of all Receivables Collateral and Inventory which has come into existence since the date of such Schedule then most recently provided to the Lender.       9-5.    Monthly Reports. Monthly, within Thirty (30) days following the end of the previous month, the Borrower shall provide the Lender with the following:       (a)    An aging of the Borrower's accounts receivable as of the end of the subject month.       (b)    A reconciliation of the above described aging to Availability and to the general ledger as of the end of the subject month.       (c)    A Certificate (in such form as may be reasonably satisfactory to the Lender from time to time and signed by an officer of the Borrower concerning the Borrower's Inventory as of the end of the subject month.      (d)    An internally prepared financial statement of the Borrower's financial condition at, and the results of its operations for, the period ending with the end of the subject month, which financial statement shall include, at a minimum, a balance sheet, income statement, cash flow and comparison for the corresponding month of the then immediately previous year, as well as to any financial projections furnished to the Lender.       (e)    Any report filed during the subject month with any insurance company with whom a reporting form of policy is carried.       9-6.    Quarterly Reports. Quarterly, within Forty Five (45) days following the end of each of the Borrower's fiscal quarters, the Borrower shall provide the Lender with an unaudited financial statement of the Borrower for the period from the beginning of the Borrower's then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include, at a minimum, a balance sheet, income statement, statement of changes in shareholders' equity, and cash flows and comparisons for the corresponding quarter of the then immediately previous year.       9-7.    Annual Reports.       (a)    Annually, within one hundred twenty (120) days following the end of the Borrower's fiscal year, the Borrower shall furnish the Lender with an original signed counterpart of the Borrower's annual financial statement, which statement shall have been prepared by, and bearing the unqualified opinion of, the Borrower's independent certified public accountants (i.e. said statement shall be "certified" by such accountants). Such annual statement shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, income statement, statement of changes in shareholders' equity, and cash flows.       (b)    Each annual statement shall be accompanied by such accountant's Certificate indicating that, in the preparation of such annual statement, such accountants did not conclude that any Event of Default had occurred during the subject fiscal year (or if one or more had occurred, the facts and circumstances thereof).       9-8.    Officers' Certificates. The Borrower shall cause an officer of the Borrower to provide such Person's Certificate with those monthly, quarterly, and annual statements to be furnished pursuant to this Agreement, which Certificate shall:       (a)    Indicate that the subject statement was prepared in accordance with GAAP consistently applied, and presents fairly the financial condition of the Borrower at the close of, and the results of the Borrower's operations and cash flows for, the period(s) covered, with the exception of the Certificate which accompanies such annual statement to usual year end adjustments.       (b)    Indicate either that (i) no Event of Default has occurred or (ii) if such an event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by the Borrower to be taken on account thereof.       9-9.    Additional Financial Information. In addition to the foregoing, the Borrower promptly shall provide the Lender (and any guarantor of the Liabilities), with such other material additional information concerning the Borrower, the Collateral, the operation of the Borrower's business, and the Borrower's financial condition, including original counterparts of financial reports and statements, as the Lender may from time to time reasonably request from the Borrower.       9-10.    Audits and Appraisals.       (a)    The Lender may from time to time conduct commercial finance audits of the Borrower's books and records (in each event, at the Borrower's expense).       (b)    The Lender, at the expense of the Borrower, may participate in and/or observe each physical count and/or inventory of so much of the Collateral as consists of Inventory which is undertaken on behalf of the Borrower, and, after written demand or written notification of the continuation of any Event of Default, the Lender may conduct or obtain (in all events at Borrower's expense) physical counts, inventories and/or appraisals of the Collateral. ARTICLE 10 - EVENTS OF DEFAULT .       The continuation of any event described in this Article 10 respectively shall constitute an "Event of Default" herein.       Nothing contained in this Article 10, or elsewhere in this Agreement, shall affect the demand nature of such of the Liabilities as are, by their terms, demand obligations, including, without limitation, loans and advances under the Revolving Credit. The occurrence of an Event of Default shall not be a prerequisite for the Lender's making demand or requiring payment of such Liabilities.       Upon written notification of the continuation any Event of Default described in Section 10-8, any and all Liabilities shall become due and payable without any further act on the part of the Lender. Upon the occurrence of any other Event of Default, any and all Liabilities of the Borrower to the Lender shall become immediately due and payable, at the option of the Lender. The written notification of the continuation of any Event of Default shall also constitute a default under all other agreements between the Lender and the Borrower and instruments and papers given the Lender by the Borrower related to this Agreement, whether such agreements, instruments, or papers now exist or hereafter arise.       10-1.    Failure to Pay Revolving Credit. The failure by the Borrower to pay any regularly scheduled payment within three (3) days of when due or the failure to pay upon demand any amount due under the Revolving Credit.       10-2.    Failure to Make Other Payments. The failure by the Borrower to pay upon demand (or within three (3) days of when due, if not payable on demand) any other Liabilities.       10-3.    Failure to Perform Liability. Except as provided under Section 10.1, the failure by the Borrower to promptly, punctually and faithfully perform, discharge, or comply with any Liability.       10-4.    Misrepresentation. The determination by the Lender that any material representation or warranty heretofore, now, or hereafter made by the Borrower to the Lender, in any document, instrument, agreement, or paper was not true or accurate when given.       10-5.    Acceleration of Other Debt. The occurrence of any event such that any indebtedness in excess of $100,000.00 of the Borrower to any creditor, other than the Lender, could be accelerated.       10-6.    Default Under Other Agreements. The occurrence of any event of default under any agreement between the Lender and the Borrower or instrument or paper given the Lender by the Borrower, whether such agreement, instrument, or paper now exists or hereafter arises (notwithstanding that the Lender may not have exercised its rights upon default under any such other agreement, instrument or paper).       10-7.    Business Failure. Any act by or relating to the Borrower, or its property or assets, which act constitutes the Borrower's application for, consent to, or sufferance of the appointment of a receiver, trustee, or other person, pursuant to court action or otherwise, over any of the Borrower's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of the Borrower, or the occurrence of any other voluntary liquidation or extension of debt agreement for the Borrower; the offering by or entering into by the Borrower of any composition, extension, or any other arrangement seeking relief from or extension of the debts of the Borrower; or the initiation of any judicial or non-judicial proceeding or agreement by the Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors; and/or the initiation by or on behalf of the Borrower of the liquidation or winding up of all or any part of the Borrower's business or operations.       10-8.    Bankruptcy The failure by the Borrower to generally pay the debts of the Borrower as they mature; adjudication of bankruptcy or insolvency relative to the Borrower; the entry of an order for relief or similar order with respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or petition by the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the filing of any complaint, application, or petition seeking the entry of an order for relief under the Bankruptcy Code with respect to the Borrower or the adjudication of insolvency with respect to the Borrower, or the appointment of a receiver over any of the assets of the Borrower.       10-9.    Judgment The entry of any judgment in excess of $50,000 against the Borrower, which judgment is not satisfied or appealed from (with execution or similar process stayed) within thirty (30) days of its entry.       10-10.    Restraint of Business. The entry of any court order which enjoins, restrains or in any way prevents the Borrower from conducting all or any part of its business affairs in the ordinary course and has a material adverse affect on the financial condition of the Borrower.       10-11.    Trustee Process. The service of any process upon the Lender and/or the Bank seeking to attach by trustee process any funds in excess of $25,000.00 of the Borrower on deposit with the Lender.       10-12.    Change in Control. Any Change In Control, without the prior written consent of the Lender.       10-13.    Executive Management. The death, disability, or failure of John Westerbeke, Jr. at any time to exercise that authority and discharge those management responsibilities with respect to the Borrower as are exercised and discharged by such Person at the execution of this Agreement       10-14.    Casualty Loss. The occurrence of any uninsured loss, theft, damage, or destruction of any of the Collateral in excess of $50,000.00.       10-15.    Material Agreement. The default or termination under any material license, distributor, franchise or similar agreement used or useful in the operation of the Borrower's business.       10-16.    Termination of Existence. The death, termination of existence, dissolution, winding up, or liquidation of the Borrower.       10-17.    Default by Parent, Subsidiary or Affiliate. The occurrence of any of the foregoing Events of Default with respect to any parent, subsidiary, or affiliate of the Borrower, as if such parent, subsidiary, or affiliate were the "Borrower" described therein.       10-18.    Challenge to Loan Documents.       (a)    Any challenge by or on behalf of the Borrower or any guarantor of the Liabilities to the validity of any Loan Document or the applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Document's terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto.       (b)    Any determination by any court or any other judicial or government authority that any Loan Document is not enforceable strictly in accordance with the subject Loan Document's terms or which voids, avoids, limits, or otherwise adversely affects any security interest created by any Loan Document or any payment made pursuant thereto. ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT       In addition to all of the rights, remedies, powers, privileges, and discretions which the Lender is provided prior to written demand or the continuation of an Event of Default, the Lender shall have the following rights and remedies upon written demand or the written notification of a continuation of any Event of Default and at any time thereafter.       11-1.    Rights of Enforcement. The Lender shall have all of the rights and remedies of a secured party upon default under the UCC, in addition to which the Lender shall have all and each of the following rights and remedies:       (a)    To collect the Receivables Collateral with or without the taking of possession of any of the Collateral.       (b)    To apply the Receivables Collateral or the proceeds of the Collateral towards (but not necessarily in complete satisfaction of) the Liabilities.       (c)    To take possession of all or any portion of the Collateral.       (d)    To sell, lease, or otherwise dispose of any or all of the Collateral, in its then condition or following such preparation or processing as the Lender deems advisable and with or without the taking of possession of any of the Collateral.       (e)    To exercise all or any of the rights, remedies, powers, privileges, and discretions under all or any of the Loan Documents.       11-2.    Sale of Collateral.       (a)    Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Lender deems reasonable, having due regard to compliance with any statute or regulation which might affect, limit, or apply to the Lender's disposition of the Collateral.      (b)    Unless he Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Lender shall provide the Borrower with such notice as may be practicable under the circumstances), the Lender shall give the Borrower at least seven (7) days prior written notice of the date, time, and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. The Borrower agrees that such written notice shall satisfy all requirements for notice to the Borrower which are imposed under the UCC or other applicable law with respect to the Lender's exercise of the Lender's rights and remedies upon default.       (c)    The Lender may purchase the Collateral, or any portion of it at any public sale held under this Article.       (d)    The Lender shall apply the proceeds of any exercise of the Lender's Rights and Remedies under this Article 11 towards the Liabilities in such manner, and with such frequency, as the Lender determines.       11-3.    Occupation of Business Location. In connection with the Lender's exercise of the Lender's rights under this Article, the Lender may enter upon, occupy, and use any premises owned or occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Lender. The Lender shall not be required to remove any of the Collateral from any such premises upon the Lender's taking possession thereof, and may render any Collateral unusable to the Borrower. In no event shall the Lender be liable to the Borrower for use or occupancy by the Lender of any premises pursuant to this Article, nor for any charge (such as wages for the Borrower's employees and utilities) incurred in connection with the Lender's exercise of the Lender's Rights and Remedies.       11-4.    Grant of Nonexclusive License. The Borrower hereby grants to the Lender an unassignable royalty free nonexclusive irrevocable license to use, apply, and affix any trademark, tradename, logo, or the like in which the Borrower now or hereafter has rights, such license being with respect to the Lender's exercise of the rights hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or sale or other disposition of Inventory.       11-5.    Assembly of Collateral. The Lender may reasonably require the Borrower to assemble the Collateral and make it available to the Lender at the Borrower's sole risk and expense at a place or places which are reasonably convenient to both the Lender and Borrower.       11-6.    Rights and Remedies. The rights, remedies, powers, privileges, and discretions of the Lender hereunder (herein, the "Lender's Rights and Remedies") shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Lender in exercising or enforcing any of the Lender's Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Lender of any Event of Default or of any default under any other agreement shall operate as a waiver of any other default hereunder or under any other agreement. No single or partial exercise of any of the Lender's Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Lender and any person, at any time, shall preclude the other or further exercise of the Lender's Rights and Remedies. No waiver by the Lender of any of the Lender's Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. All of the Lender's Rights and Remedies and all of the Lender's rights, remedies, powers, privileges, and discretions under any other agreement or transaction are cumulative, and not alternative or exclusive, and may be exercised by the Lender at such time or times and in such order of preference as the Lender in its sole discretion may determine. The Lender's Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Liabilities. ARTICLE 12 - NOTICES .       12-1.    Notice Addresses. All notices, demands, and other communications made in respect of this Agreement (other than a request for a loan or advance or other financial accommodation under the Revolving Credit) shall be made to the following addresses, each of which may be changed upon seven (7) days written notice to all others given by certified mail, return receipt requested: If to the Lender: Brown Brothers Harriman & Co. 40 Water Street Boston, Massachusetts 02109 Attention: Fax: Suzanne Dwyer Vice President 617 772-1138 With a copy to: Riemer & Braunstein LLP Three Center Plaza Boston, Massachusetts 02108 Attention: Fax: Charles W. Stavros, Esquire 617 880-3456 If to the Borrower: Westerbeke Corporation Avon Industrial Park Avon, Massachusetts Attention: Fax: Gregory Haidemenos 508 559-9323 With a copy to: Goodwin, Procter & Hoar LLP Exchange Place Boston, Massachusetts 02109 Attention: Fax: David F. Dietz, P.C 617 523-1231       12-2.    Notice Given.       (a) Notices shall be deemed given at the sooner of when actually received or (i) if by mail: Three (3) days following deposit in the United States mail, postage prepaid; (ii) By overnight express delivery: the Business Day following the day when sent; (iii) By hand: If delivered on a Business Day after 9:00 AM and no later than Three (3) hours prior to the close of customary business hours of the recipient, when delivered (otherwise, at the opening of the then next Business Day); and (iv) By Facsimile transmission: If sent on a Business Day after 9:00 AM and no later than Three (3) hours prior to the close of customary business hours of the recipient, one (1) hour after being sent (otherwise, at the opening of the then next Business Day).       (b)    Rejection or refusal to accept delivery and inability to deliver because of a changed address or Facsimile Number for which no due notice was given shall each be deemed receipt of the notice sent. ARTICLE 13 - TERM OF AGREEMENT .       13-1.    Termination Of Revolving Credit and Agreement. The Revolving Credit shall be terminated ("Termination Date") upon the sooner of       (a)    the entry of any order for relief with respect to the Borrower under the Bankruptcy Code; or       (b)    at the Lender's option, the Lender's WRITTEN DEMAND. This Agreement shall continue in full force and effect applicable to all Liabilities until all Liabilities have been paid and/or satisfied in full and this Agreement is specifically terminated in writing by a duly authorized officer of the Lender. ARTICLE 14 - GENERAL .       14-1.    Protection of Collateral. The Lender shall have no duty as to the collection or protection of the Collateral beyond the safe custody of such of the Collateral as may come into the possession of the Lender and shall have no duty as to the preservation of rights against prior parties or any other rights pertaining thereto.       14-2.    Successors and Assigns. This Agreement shall be binding upon the Borrower and the Borrower's representatives, successors, and assigns and shall enure to the benefit of the Lender and the Lender's successors and assigns provided, however, no trustee or other fiduciary appointed with respect to the Borrower shall have any rights hereunder. In the event that the Lender assigns or transfers its rights under this Agreement, the assignee shall thereupon succeed to and become vested with all rights, powers, privileges, and duties of the Lender hereunder and the Lender shall thereupon be discharged and relieved from its duties and obligations hereunder.       14-3.    Severability. Any determination that any provision of this Agreement or any application thereof is invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Agreement.       14-4.    Amendments. Course of Dealing.       (a)    This Agreement and the other Loan Documents incorporate all discussions and negotiations between the Borrower and the Lender, either express or implied, concerning the matters included herein and in such other instruments, any custom, usage, or course of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or course of dealings shall limit, modify, or otherwise affect the provisions thereof. No failure by the Lender to give notice to the Borrower of the Borrower's having failed to observe and comply with any warranty or covenant included in any Loan Document shall constitute a waiver of such warranty or covenant or the amendment of the subject Loan Document. No change made by the Lender in the manner by which Availability is determined (any of which changes may be made by the Lender in its discretion) shall obligate the Lender to continue to determine Availability in that manner.       (b)    The Borrower may undertake any action otherwise prohibited hereby, and may omit to take any action otherwise required hereby, upon and with the express prior written consent of the Lender. No consent, modification, amendment, or waiver of any provision of any Loan Document shall be effective unless executed in writing by or on behalf of the party to be charged with such modification, amendment, or waiver (and if such party is the Lender, then by a duly authorized officer thereof). Any modification, amendment, or waiver provided by the Lender shall be in reliance upon all representations and warranties theretofore made to the Lender by or on behalf of the Borrower (and any guarantor, endorser, or surety of the Liabilities) and consequently may be rescinded by the Lender in the event that any of such representations or warranties was not true and complete in all material respects when given.       14-5.    Power of Attorney. During the continuance of an Event of Default and in connection with all powers of attorney included in this Agreement, the Borrower hereby grants unto the Lender full power to do any and all things necessary or appropriate in connection with the exercise of such powers as fully and effectually as the Borrower might or could do, hereby ratifying all that said attorney shall do or cause to be done by virtue of this Agreement. No power of attorney set forth in this Agreement shall be affected by any disability or incapacity suffered by the Borrower and each shall survive the same. All powers conferred upon the Lender by this Agreement, being coupled with an interest, shall be irrevocable until this Agreement is terminated by a written instrument executed by a duly authorized officer of the Lender.       14-6.    Application of Proceeds. The proceeds of any collection, sale, or disposition of the Collateral received by the Lender, or of any other payments received hereunder, shall be applied toward the Liabilities in such order and manner as the Lender determines in its sole discretion. The Borrower shall remain liable to the Lender for any deficiency remaining following such application.       14-7.    Lender's Costs and Expenses. The Borrower shall pay promptly on written demand all Costs of Collection and all reasonable expenses of the Lender in connection with the preparation, execution, and delivery of this Agreement and of any other Loan Documents, whether now existing or hereafter arising, and all other reasonable expenses which may be incurred by the Lender in preparing or amending this Agreement and all other agreements, instruments, and documents related thereto, or otherwise incurred with respect to the Liabilities. The Borrower specifically authorizes the Lender to pay all such fees and expenses and in the Lender's discretion, to add such fees and expenses to the Loan Account.       14-8.    Copies and Facsimiles. This Agreement and all documents which relate thereto, which have been or may be hereinafter furnished the Lender may be reproduced by the Lender by any photographic, microfilm, xerographic, digital imaging, or other process, and the Lender may destroy any document so reproduced. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Any facsimile which bears proof of transmission shall be binding on the party which or on whose behalf such transmission was initiated and likewise shall be so admissible in evidence as if the original of such facsimile had been delivered to the party which or on whose behalf such transmission was received.       14-9.    Massachusetts Law. This Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the laws of The Commonwealth of Massachusetts.       14-10.    Consent to Jurisdiction.       (a)    The Borrower and the Lender agree that any legal action, proceeding, case, or controversy against the Borrower or the Lender (as the case may be) with respect to any Loan Document may be brought in the Superior Court of Suffolk County Massachusetts or in the United States District Court, District of Massachusetts, sitting in Boston, Massachusetts, as the parties hereto may elect in their sole discretion. By execution and delivery of this Agreement, the Borrower and the Lender , for themselves, accept, submit, and consent generally and unconditionally, to the jurisdiction of the aforesaid courts.       (b)    The Borrower and the Lender WAIVE personal service of any and all process upon it, and irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by certified mail, postage prepaid, to the Borrower or the Lender (as the case may be) at their addresses for notices as specified herein, such service to become effective five (5) Business Days after such mailing.       (c)    The Borrower and the Lender WAIVE, at the option of the opposing party, any objection based on forum non conveniens and any objection to venue of any action or proceeding instituted under any of the Loan Documents and consent to the granting of such legal or equitable remedy as is deemed appropriate by the Court.       (d)    The Borrower and the Lender agree that any action commenced by the Borrower or the Lender asserting any claim or counterclaim arising under or in connection with this Agreement or any other Loan Document shall be brought in the Superior Court of Suffolk County Massachusetts or in the United States District Court, District of Massachusetts, sitting in Boston, Massachusetts, and that such Courts shall have exclusive jurisdiction with respect to any such action.       14-11.    Indemnification. The Borrower shall indemnify, defend, and hold the Lender and any employee, officer, or agent of the Lender (each, an "Indemnified Person") harmless of and from any claim brought or threatened against any Indemnified Person by the Borrower, any guarantor or endorser of the Liabilities, or any other Person (as well as from attorneys' reasonable fees and expenses in connection therewith) on account of this Agreement or any other guarantor or endorser of the Liabilities (each of which may be defended, compromised, settled, or pursued by the Indemnified Person with counsel of the Lender's selection, but at the expense of the Borrower) other than any claim as to which a final determination is made in a judicial proceeding (in which the Lender and any other Indemnified Person has had an opportunity to be heard), which determination includes a specific finding that the Indemnified Person seeking indemnification had acted in a grossly negligent manner or in actual bad faith. The indemnification set forth herein shall survive payment of the Liabilities and/or any termination, release, or discharge executed by the Lender in favor of the Borrower.       14-12.    Syndication. The Lender may sell or assign all or a portion of the Lender's rights hereunder to one or more banks or other entities either through participations or syndications.       14-13.    Rules of Construction. The following rules of construction shall be applied in the interpretation, construction, and enforcement of this Agreement and of the other Loan Documents       (a)    Words in the singular include the plural and words in the plural include the singular.       (b)    Headings (indicated by being underlined) and the Table of Contents are solely for convenience of reference and do not constitute a part of the instrument in which included and do not affect such instrument's meaning, construction, or effect.       (c)    The words "includes" and "including" are not limiting.       (d)    Text which follows the words "including, without limitation" (or similar words) is illustrative and not limitational.       (e)    Text which is underlined, shown in italics, shown in bold, shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be conspicuous.       (f)    The words "may not" are prohibitive and not permissive.       (g)    The word "or" is not exclusive.       (h)    Terms which are defined in one section of an instrument are used with such definition throughout the instrument in which so defined.       (i)    The symbol "$" refers to United States Dollars.       (j)    References to "herein", "hereof", and "within" are to this entire Loan Agreement and not merely the provision in which such reference is included.       (k)    Except as otherwise specifically provided, all references to time are to Boston time.       (l)    In the determination of any notice, grace, or other period of time prescribed or allowed hereunder, unless otherwise provided (A) the day of the act, event, or default from which the designated period of time begins to run shall not be included and the last day of the period so computed shall be included unless such last day is not a Business Day, in which event the last day of the relevant period shall be the then next Business Day and (B) the period so computed shall end at 5:00 PM on the relevant Business Day.       (m)    The Loan Documents shall be construed and interpreted in a harmonious manner and in keeping with the intentions set forth in Section 14-14 hereof, provided, however, in the event of any inconsistency between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall govern and control.       14-14.    Intent. It is intended that       (a)    This Agreement take effect as a sealed instrument.       (b)    The scope of the security interests created by this Agreement be broadly construed in favor of the Lender.       (c)    The security interests created by this Agreement secure all Liabilities, whether now existing or hereafter arising.       (d)    All reasonable costs and expenses incurred by the Lender in connection with the Lender's relationship(s) with the Borrower shall be borne by the Borrower.       14-15.    Right of Set-Off. Any and all deposits or other sums at any time credited by or due to the undersigned from the Lender or from any participant with the Lender in the Liabilities (a "Participant") and any cash, securities, instruments or other property of the undersigned in the possession of the Lender or any Participant, whether for safekeeping or otherwise (regardless of the reason the Lender or the Participant had received the same) shall at all times constitute security for all Liabilities and for any and all obligations of the undersigned to the Lender and any Participant, and may be applied or set off against the Liabilities and against the obligations of the undersigned to the Lender and any Participant.       14-16.    Maximum Interest Rate. Regardless of any provision of any Loan Document, the Lender shall never be entitled to contract for, charge, receive, collect, or apply as interest on any Liability, any amount in excess of the maximum rate imposed by applicable law. Any payment which is made which, if treated as interest on a Liability would result in such interest's exceeding such maximum rate shall be held, to the extent of such excess, as additional collateral for the Liabilities as if such excess were "Collateral."       14-17.    Waivers.       (a)    The Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of the waivers included in Section (b), below, knowingly, voluntarily, and intentionally, and understands that the Lender, in entering into the financial arrangements contemplated hereby and in providing loans and other financial accommodations to or for the account of the Borrower as provided herein, whether not or in the future, is relying on such waivers.       (b)    THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:           (i)    Except as otherwise specifically required hereby, notice of non-payment, demand, presentment, protest and all forms of demand and notice, both with respect to the Liabilities and the Collateral.       (ii)    Except as otherwise specifically required hereby, the right to notice and/or hearing prior to the Lender's exercising of the Lender's rights upon default.       (iii)    THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF THIS AGREEMENT (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).       (iv)    The benefits or availability of any stay, stay, limitation, hindrance, delay, or restriction (including, without limitation, any automatic stay which otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code) with respect to any action which the Lender may or may become entitled to take hereunder.       (v)    Any defense, counterclaim, set-off, recoupment, or other basis on which the amount of any Liability, as stated on the books and records of the Lender, could be reduced or claimed to be paid otherwise than in accordance with the tenor of and written terms of such Liability.       (vi)    Any claim to consequential, special, or punitive damages.       14-18.    Receipt of Agreement. The Borrower acknowledges receipt of a completed copy of this Agreement.   Westerbeke Corporation ("Borrower")   /s/ Carleton F. Bryant III Carleton F. Bryant, III Executive Vice President, Treasurer and Secretary   Brown Brothers Harriman & Co. ("Lender")   /s/ Timothy T. Telman Timothy T. Telman Vice President EXHIBITS       An EXHIBIT's number refers to the Section of this Agreement in which that EXHIBIT is principally described or referred to. Any EXHIBIT referred to herein which is not annexed hereto shall be deemed to read "None" or "Not Applicable". EXHIBIT : 1 : Excluded Equipment 2-9(a) : Renewal/Conversion Notice 2-6 : Revolving Credit Note 5-2 : Related Entity 5-4 : Trade Names; legal status; etc. 5-6 : Locations 5-7 : Encumbrances 5-8 : Indebtedness 5-9 : Insurance Policies 5-10 : Licenses, Distributor, and Franchise Agreements 5-11 : Leases 5-14 : Taxes 5-20 : Loans  

QuickLinks -- Click here to rapidly navigate through this document AMENDMENT NUMBER 2 Dated and Effective October 31, 2000 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AMONG WESTERN POWER & EQUIPMENT CORP., A DELAWARE CORPORATION, AND WESTERN POWER & EQUIPMENT CORP., AN OREGON CORPORATION AND DEUTSCHE FINANCIAL SERVICES CORPORATION AS ADMINISTRATIVE AGENT AND A LENDER and THE OTHER LENDERS     In consideration of the mutual agreements herein and other sufficient consideration, the receipt of which is hereby acknowledged, WESTERN POWER & EQUIPMENT CORP., a Delaware corporation, WESTERN POWER & EQUIPMENT CORP., an Oregon corporation (separately and collectively, "Borrower"), DEUTSCHE FINANCIAL SERVICES CORPORATION, as Administrative Agent for itself and the other Lenders ("Administrative Agent"), and the other Lenders, hereby enter into this Amendment Number 2 dated and effective as of October 31, 2000 (this "Amendment") to the Amended and Restated Loan and Security Agreement between them effective as of June 30, 1999, as amended by Amendment Number 1 thereto dated as of June 5, 2000 (as it may be amended, restated, extended, renewed and/or otherwise modified from time to time, the "Loan Agreement"), as follows: 1.  Definitions.  Capitalized terms used and not otherwise defined herein have the meanings given them in the Loan Agreement. 2.  Waiver of Defaults.  Borrower hereby acknowledges that (i) a Default has occurred under Sections 9.3.1(a) and 9.3.1(d) of the Loan Agreement, due to a breach by Borrower of the covenants contained in Section 9.3.1(a) and 9.3.1(d) of the Loan Agreement pertaining to required Minimum Tangible Net Worth and required Minimum Ratio of EBITDA to interest expense for Borrower's fiscal quarter ending April 30, 2000, and (ii) a Default has occurred under Sections 9.3.1(a), 9.3.1(b), 9.3.1(c) and 9.3.1(d) of the Loan Agreement, due to a breach by Borrower of the covenants contained in Section 9.3.1(a), 9.3.1(b), 9.3.1(c) and 9.3.1(d) of the Loan Agreement pertaining to required Minimum Tangible Net Worth, required ratio of Debt to Tangible Net Worth, ratio of Debt to EBITDA, and required Minimum Ratio of EBITDA to interest expense for Borrower's fiscal quarter ending the fiscal quarter ending July 31, 2000. Subject to the terms and conditions contained herein, Lender hereby waives the Defaults described in the preceding sentence; provided, however, that such waiver shall not constitute or be deemed to be a waiver of any subsequent Defaults under such Sections, or of any other existing or future Defaults under the Loan Agreement or the other Loan Documents at any time. Upon any further Defaults, including, without limitation, any Default arising as a result of Borrower's financial performance for the reporting periods ending January 1, 2001 or July 1, 20001, all rights and remedies of Lender with respect to such Defaults, whether pursuant to the Loan Agreement, the other Loan Documents, or available at law or equity, shall be available to Lender, including without limitation the right to terminate the Commitments, accelerate the Loan Obligations, and foreclose on any or all Collateral. Borrower and Lender each agree that the waivers granted herein do not apply to the breach of any other term, provision, covenant, representation or warranty of the Loan Agreement or the other Loan Documents or the breach of the covenants described above for any periods other than the periods specifically described above. -------------------------------------------------------------------------------- 3.  Amendments to Loan Agreement.  The Loan Agreement is hereby amended as follows:     3.1.  New Definitions.  The following definitions are hereby inserted in alphabetical order into Section 2 of the Loan Agreement: "Adjusted LIBOR Rate" shall mean the LIBOR Rate (which will fluctuate as described herein) plus the applicable LIBOR Increment determined from time to time as provided in Section 3.18.2. "LIBOR Increment" shall have the meaning set forth in Section 3.18.2 hereof. "LIBOR Rate" shall mean for any Business Day, the London Interbank Offered Rate (LIBOR) for deposits in U.S. Dollars for thirty (30) day maturities: (a) as published in The Wall Street Journal on such Business Day, or (b) if not published in The Wall Street Journal on such Business Day, then for such Business Day the LIBOR Rate shall be such rate that appears in The Dow Jones Telerate Service, Bloombergs or similar service, as determined by Administrative Agent in its sole and absolute discretion."     3.2.  Aggregate Loan Commitment Commitment.  Section 3.1 of the Loan Agreement is hereby amended by inserting the words "as it may be reduced as provided in this Section 3.1 below" after the words "Seventy Million Dollars ($70,000,000.00)" in the first sentence. Section 3.1 of the Loan Agreement is hereby further amended by inserting the following at the end of Section 3.1: "The Aggregate Loan Commitment will automatically be permanently reduced on the following dates by the amounts opposite such dates in the following table: Date of Reduction in Aggregate Loan Commitment --------------------------------------------------------------------------------   Amount of Reduction in Aggregate Loan Commitment --------------------------------------------------------------------------------   Amount of Aggregate Loan Commitment After Giving Effect to Reduction -------------------------------------------------------------------------------- December 31, 2000   $ 13,000,000.00   $ 57,000,000.00 March 31, 2001   $ 7,000,000.00   $ 50,000,000.00 July 31, 2001   $ 10,000,000.00   $ 40,000,000.00 December 28, 2001   $ 10,000,000.00   $ 30,000,000.00 In the event that the outstanding balance owed by Borrower hereunder is in excess of the reduced Commitment, on such date, then Borrower shall immediately pay to Administrative Agent such excess."     3.3.  Prime Increment.  The table in Section 3.6 of the Agreement is deleted and replaced with the following: Debt minus Subordinated Debt to EBITDA --------------------------------------------------------------------------------   Prime Increment, expressed as a percentage (%) --------------------------------------------------------------------------------   greater than or equal to 6.0:1.0   0.25 % less than 6.0:1.0 but greater than or equal to 5.0:1.0   0.00 % less than 5.0:1.0 but greater than or equal to 4.0:1.0   -0.25 % less than 4.0:1.0 but greater than or equal to 3.0:1.0   -0.50 % less than 3.0:1.0   -0.75 %     3.4.  Appraisal Fees.  Section 3.7.1.2 of the Agreement is amended by adding the following sentence to the end of such section as if originally set forth therein: "Notwithstanding the foregoing, Borrower's obligation to reimburse such appraisal costs shall not exceed Thirty Thousand Dollars ($30,000) per year."     3.5.  Review Fees.  Section 3.7.1.3 of the Agreement is amended by deleting the first sentence thereof and substituting the following as if originally set forth therein: "Borrower shall pay Administrative Agent, for its sole benefit, a review fee equal to Five Thousand Dollars ($5,000) per calendar quarter plus Administrative Agent's actual out-of-pocket costs and expenses associated with audits, examinations and other reviews conducted by Administrative Agent." --------------------------------------------------------------------------------     3.6.  Compensation.  The following sentence is hereby added to the end of Section 3.16.2 of the Agreement: "Any compensation payable to Administrative Agent under Subsection 3.6.3 hereof shall be payable without regard to whether Administrative Agent or any Lender has funded any Loan through the purchase of deposits in an amount or of a maturing corresponding to the deposits used as a reference in determining any LIBOR Rate in this Agreement."     3.7.  Interest.  A new Section 3.18 is hereby added to the Loan Agreement as follows: "3.18.  LIBOR Interest. 3.18.1.  LIBOR Rate.  Notwithstanding anything contained herein to the contrary, Borrower shall be required to request all Loans be Loans bearing interest at the Adjusted LIBOR Rate, unless, as determined by the Administrative Agent's sole and absolute discretion, the London Interbank Offered Rate (LIBOR) for deposits in U.S. Dollars for thirty (30) day maturities is not published in The Wall Street Journal, Dow Jones Telerate Service, Bloombergs or similar service used by Administrative Agent. In such event, there shall be no Adjusted LIBOR Rate available until Administrative Agent otherwise determines, in its sole and absolute discretion, that the LIBOR Rate is available, and all existing and future Loans shall bear interest at rates based on the Prime Rate as set forth herein until the LIBOR Rate is available as determined by Administrative Agent in its sole and absolute discretion. 3.18.2.  Adjusted LIBOR Rate.  The "Adjusted LIBOR Rate" shall be the LIBOR Increment plus the LIBOR Rate on any day. On the Effective Date and quarterly thereafter based upon the ratio of the Dollar amount of Borrower's Debt minus Subordinated Debt to Borrower's EBITDA as reflected in Borrower's Financial Statements for its fiscal quarter most recently ended: Debt minus Subordinated Debt to EBITDA --------------------------------------------------------------------------------   LIBOR Increment, expressed as a percentage (%) --------------------------------------------------------------------------------   greater than or equal to 6.0:1.0   3.00 % less than 6.0:1.0 but greater than or equal to 5.0:1.0   2.75 % less than 5.0:1.0 but greater than or equal to 4.0:1.   2.50 % less than 4.0:1.0 but greater than or equal to 3.0:1.0   2.25 % less than 3.0:1.0   2.00 % Any change in the LIBOR Increment shall become applicable as determined by Administrative Agent on the first Business Day of the first calendar month following the last day on which Borrower delivers to Administrative Agent both its quarterly Financial Statements for the fiscal quarter most recently ended as required in Section 9.1.10 and the covenant compliance certificate required by Section 9.3.2. If Borrower does not deliver its quarterly Financial Statements to Administrative Agent within the period required by Section 9.1.10, then the applicable LIBOR Increment shall be that shown for Debt minus Subordinated Debt to EBITDA of greater than or equal to 6.0 : 1 until Borrower shall deliver such Financial Statements. Interest will be computed based on a 365 day year. Interest will be calculated with respect to each day by multiplying the Daily Contract Balance by the lesser of (i) the highest rate from time to time permitted by applicable Law (and any amounts received from Borrower in excess of such highest rate from time to time permitted by applicable Law will be considered reductions to principal to the extent of any such excess), and (ii) Adjusted LIBOR Rate, and interest will accrue as provided in Section 3.8. 3.18.4.  LIBOR Costs.  If, after the date hereof, the adoption of any applicable Law or any change in any applicable Law or any change in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by -------------------------------------------------------------------------------- Administrative Agent or any Lender with any request or directive (whether or not having the force of Law) of any such governmental authority, central bank, or comparable agency: 3.18.4.1  shall subject Administrative Agent or such Lender to any Tax with respect to any Loans bearing interest at rate based on the LIBOR Rate or its obligation to make Loans bearing interest at rate based on the LIBOR Rate, or change the basis of taxation of any amounts payable to Administrative Agent or such Lender under this Agreement in respect of any Loans bearing interest at rate based on the LIBOR Rate (other than Taxes imposed on the net income of such Lender by the jurisdiction in which Administrative Agent or such Lender has its principal office); 3.18.4.2  shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the reserve requirement utilized in the determination of the LIBOR Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, Administrative Agent or such Lender, including the Commitment of such Lender hereunder; or 3.18.4.3  shall impose on Administrative Agent or such Lender or on the United States market for certificates of deposit, treasury bills or the London interbank market any other condition affecting this Agreement, its Commitments or its Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to Administrative Agent or such Lender of making, converting into, continuing, or maintaining any Loan or to reduce any sum received or receivable by Administrative Agent or such Lender under this Agreement or its Notes with respect to any Loan, then the Borrower shall pay to Administrative Agent or such Lender on demand such amount or amounts as will reasonably compensate Administrative Agent or such Lender for such increased cost or reduction. 3.18.5.  LIBOR Rate and Prime Rate—Generally.  All Loans whether bearing interest at the Modified Prime Rate or the Adjusted LIBOR Rate shall be paid on the dates provided for herein, and shall be computed as provided for herein. 3.18.6.  Limitation on Types of Loans.  If on or prior to the making of any Loan bearing interest at any rate based on the LIBOR Rate: 3.18.6.1.  the Administrative Agent reasonably determines that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate; or 3.18.6.1.  the Required Lenders reasonably determine and notify the Administrative Agent that the LIBOR Rate will not adequately and fairly reflect the cost to the Lenders of funding Loans bearing interest at any rate based on the LIBOR Rate; then the Administrative Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, neither the Administrative Agent nor the Lenders shall be under any obligation to make additional Loans bearing interest at any rate based on the LIBOR Rate, or continue Loans bearing interest at any rate based on the LIBOR Rate and all Loans bearing interest at any rate based on the LIBOR Rate shall immediately convert to Loans bearing interest based on the Prime Rate in accordance with the terms of this Agreement and at the rates set forth in this Agreement. 3.18.7.  Illegality.  Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for Administrative Agent or any Lender to make, maintain, or fund Loans bearing interest at any rate based on the LIBOR Rate hereunder, then Administrative Agent or such Lender shall promptly notify the Borrower thereof and Administrative Agent or such Lender's obligation to make or continue Loans bearing interest at any rate based on the LIBOR Rate shall be suspended until such time as Administrative Agent or such Lender may again make, maintain, and fund Loans bearing interest at any rate based on the LIBOR Rate. -------------------------------------------------------------------------------- 3.18.8.  Treatment of Affected Loans.  If the obligation of any Lender to make a Loan bearing interest at any rate based on the LIBOR Rate shall be suspended as set forth in this Agreement (such Loans being herein called "Affected Loans"), such Affected Loans shall be automatically and immediately be converted into Loans bearing interest at any rate based on the Prime Rate and: (a)  to the extent that such Affected Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Affected Loans shall continue to be made and applied as provided for herein; and (b)  all Loans that would otherwise be made or continued by as Loans bearing interest at any rate based on the LIBOR Rate shall be made or continued instead as Loans bearing interest at any rate based on the Prime Rate."     3.8.  Maturity Date/Termination.  Each reference to August 18, 2000 in Section 4.1 of the Loan Agreement is deleted and replaced with December 31, 2001.     3.9.  Financial Covenants.  For all periods from and after October 31, 2000, Section 9.3.1(a), (b), (c) and (d) are hereby deleted and replaced with the following: "(a)  Tangible Net Worth plus Subordinated Debt in the combined amount of not less than (i) for the January 31, 2001 reporting date, Fifteen Million Dollars ($15,000,000.00), and (ii) for the July 31, 2001 reporting date, Nineteen Million Dollars ($19,000,000.00); (b)  a ratio of Debt minus Subordinated Debt to Tangible Net Worth plus Subordinated Debt of (i) for the January 31, 2001 reporting date, not more than 7.4:1.0, and (ii) for the July 31, 2001 reporting date, not more than 5.6:1.0; (c)  a ratio of Debt to EBITDA for the prior four (4) fiscal quarters, (i) for the January 31, 2001 reporting date, in an amount of not greater than 6.9:1.0, (ii) for the July 31, 2001 reporting date, in an amount of not greater than 5.3:1.0; and (d)  a ratio of EBITDA for the then ending fiscal quarter to the interest expense of Borrower for such quarter, (i) for the January 31, 2001 reporting date, in an amount of not less than 2.3:1.0, and (ii) for the July 31, 2001 reporting date, in an amount of not less than 2.5:1.0."     3.10.  Use of Term "Event of Default".  Each reference in the Loan Agreement to "Event of Default" is deleted and replaced with the term "Default." 4.  Conditions Precedent to Effectiveness of this Amendment.  This Amendment shall become effective as of October 31, 2000, but only if this Amendment has been executed by Borrower and Lender, and only if all of the documents listed on Exhibit A to this Amendment have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Lender, and all of the requirements described in Exhibit A shall have been met on or before October 31, 2000. 5.  Representations and Warranties of Borrower.  Borrower hereby represents and warrants to Administrative Agent and the Lenders that (i) this Amendment has been duly authorized by Borrower's Board of Directors, (ii) no consents are necessary from any third parties for Borrower's execution, delivery and performance of this Amendment, (iii) this Amendment constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws related to creditors rights generally or by the application of equity principles, (iv) except as disclosed on the disclosure schedule attached hereto as Exhibit A, all of the representations and warranties contained in Section 8 of the Loan Agreement, as amended by this Amendment, are true and correct in all material respects with the same force and effect as if made on and as of the effective date of this Amendment, (v) there is no Default which is continuing, and (vi) the Loan Agreement (as modified by this Amendment) and the other Loan Documents represent the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their terms, except to the extent that the enforceability thereof -------------------------------------------------------------------------------- against Borrower may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditor's rights generally or by equitable principles of general application (whether considered in an action at law or in equity). 6.  Effect of Amendment.  Except as specifically set forth in Section 2 above, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lenders or Administrative Agent under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement, any of the other Loan Documents or any existing Default, nor act as a release or subordination of the security interests or Liens of Lender or Administrative Agent under the Loan Documents. Each reference in the Loan Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like import, shall be read as referring to the Loan Agreement as amended hereby. 7.  Reaffirmation.  Borrower hereby acknowledges and confirms that (i) the Loan Agreement, as amended hereby, is in full force and effect, (iii) Borrower has no defenses to its obligations under the Loan Agreement and the other Loan Documents, (iv) the security interests and Liens of Administrative Agent created under the Loan Documents continue in full force and effect, and have the same priority as before this Amendment, and (v) Borrower has no claim against Lenders arising from or in connection with the Loan Agreement or the other Loan Documents. 8.  Governing Law.  This Amendment has been delivered in St. Louis, Missouri, and shall be governed by and construed under the law of the State of Missouri without giving effect to choice or conflicts of law principles thereunder. 9.  Section Titles.  The section titles in this Amendment are for convenience of reference only and shall not be construed so as to modify any provisions of this Amendment. 10.  Counterparts; Facsimile Transmissions.  This Amendment may be executed in one or more counterparts and on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures to this Amendment may be given by facsimile or other electronic transmission, and such signatures shall have the same binding effect as an original signature on an original document. 11.  Incorporation By Reference.  Lender and Borrower hereby agree that all of the terms of the Loan Documents are incorporated in and made a part of this Amendment by this reference. 12.  Statutory Notice.  The following notice is given pursuant to Section 432.045 of the Missouri Revised Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents: ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.     [the next page is the signature page] --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first above written.   WESTERN POWER & EQUIPMENT CORP., a Delaware corporation       By:  -------------------------------------------------------------------------------- Print Name:  -------------------------------------------------------------------------------- Title:  --------------------------------------------------------------------------------       WESTERN POWER & EQUIPMENT CORP., an Oregon corporation       By:  -------------------------------------------------------------------------------- Print Name:  -------------------------------------------------------------------------------- Title:  --------------------------------------------------------------------------------       DEUTSCHE FINANCIAL SERVICES CORPORATION, as Administrative Agent and as the sole Lender       By:  -------------------------------------------------------------------------------- Print Name:  -------------------------------------------------------------------------------- Title:  -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT A DISCLOSURE SCHEDULE     None, if nothing listed. -------------------------------------------------------------------------------- EXHIBIT B Documents and Requirements 1.An original First Amendment to Loan Agreement. 2.Payment of Lender's reasonable legal fees and expenses incurred in connection with the Second Amendment to Loan Agreement -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT NUMBER 2 Dated and Effective October 31, 2000 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AMONG WESTERN POWER & EQUIPMENT CORP., A DELAWARE CORPORATION, AND WESTERN POWER & EQUIPMENT CORP., AN OREGON CORPORATION AND DEUTSCHE FINANCIAL SERVICES CORPORATION AS ADMINISTRATIVE AGENT AND A LENDER and THE OTHER LENDERS EXHIBIT A DISCLOSURE SCHEDULE EXHIBIT B Documents and Requirements